Movement in the US Tax Dispute

After Credit Suisse agreed to pay a whopping $2.8 billion fine to American authorities in May 2014, not much else has happened in the U.S. tax dispute. On Tuesday, the Israeli Bank Leumi was the first of the Group 1 banks to settle the dispute with the U.S. authorities — by paying an increased fine of $400 million. Is there more movement to come in this matter? Leading observers presume that Bank Leumi had been a kind of “test case” to see how things might pan out for the other Group 1 banks and that events in 2015 could proceed more quickly. Some fines for the remaining banks could, indeed, be increased. In any event, only a limited number of conclusions can be drawn from the Leumi case.

Mumblings in the financial center report that Benjamin Lawsky and the New York State Department of Financial Services have stalled any further progress in the tax dispute in order to be taken into account accordingly alongside the fines. This approach, in principle, speaks volumes for the fact that as the dispute draws on, the fines could end up being greater than expected. This is also evident in the harsh actions taken by U.S. authorities against Credit Suisse, who had to dig much, much deeper into their pockets than [Swiss international bank] UBS did in order to pay its fine. In 2009, UBS had to pay a comparatively “lower” fine of $780 million.

Observers presume that after the Leumi decision, the Group 1 banks could be affected at least as harshly as those in Group 2. This case does not mean that it is set in stone just how much money the affected Swiss banks will have to fork out in fines. Each bank’s willingness to cooperate and possible admissions of guilt, as well as the volume of monies owed and the time elapsed, could all play a role. Whether or not the bank has surrendered data about its customers could also have an impact on the fines — if this is the case, it could have a mitigating effect on them. Just how successful the banks have been in gathering information about their clients’ tax situations could also be of some importance, as the more correctly they have done so and the better it is documented, the lower the fines could be. Observers also believe that the extent of the fines could strongly depend upon whether the banks have done what’s necessary to make their customers go public or turn themselves in.