Credit Suisse Under Probe Over Money Laundering in Italy

Credit Suisse
Credit Suisse

Legal hassles mount at Credit Suisse Group AG (CS  Snapshot Report) as the Swiss banking giant is reportedly under investigation by Milan prosecutors to ascertain whether the bank was engaged in money laundering and helped clients in tax evasion. According to a release by Bloomberg, the probe involves billions of euros of insurance policies sold to Italian clients to hide funds from authorities.

Citing people familiar with the matter, the release stated that beginning 2005, Credit Suisse allegedly helped around 4,000 clients to hide €8 billion of funds that were earned illegally, primarily as income that was undeclared to Italian tax authorities.

Credit Suisse sold insurance policies to its Italian clients through its subsidiaries in Lichtenstein and Bermuda. The arrangement helped them evade a Swiss withholding tax on deposits in foreign-held accounts. At the same time, such clients retained access to their cash that could be managed from Swiss accounts.

The Italian probe in Credit Suisse that began around two years ago, led to the detection of 13,000 private and corporate clients with billions of euros of funds in Swiss accounts including clients who purchased €8 billion insurance policies.

Without commenting on the investigation, the bank noted “Credit Suisse’s business with private clients is systematically focused on declared assets and we have clear internal rules and processes in place to ensure that we conduct our business in accordance with the applicable laws in Italy.”

Notably, the bank could face penalties including fines or suspension of business in Italy in the event the accusations are proved.

Separately, Italy’s tax agency and financial police are reviewing whether the clients, who followed the procedures as recommended by Credit Suisse, dodged taxes.

Amid international pressure on Switzerland’s secrecy laws, Swiss banks have been under investigation related to their transactions with wealthy clients and hidden offshore accounts. Regulatory authorities have claimed billions as settlements and fines from several banks. Notably, in May 2014, Credit Suisse pleaded guilty to criminal charges of assisting its U.S. clients to evade taxes and shelled out $2.8 billion as settlement charges to the U.S. authorities. In 2009, another Swiss banking behemoth UBS Group AG (UBS  Analyst Report) paid $780 million to regulators as settlement related to U.S. criminal and civil investigation and admitted that it had helped clients evade taxes.

Credit Suisse currently carries a Zacks Rank #5 (Strong Sell). A couple of better-ranked foreign banks include Banco Macro S.A. (BMA  Snapshot Report) and Nordea Bank AB (publ) (NRBAY  Snapshot Report), each sporting a Zacks Rank #2 (Buy). – See more at: http://www.zacks.com/stock/news/208352/credit-suisse-under-probe-over-money-laundering-in-italy#sthash.WEJlOiJV.dpuf

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