U.S. Prosecutors, the Internal Revenue Service (the “IRS”), and the New York State Department of Financial Services are probing whether Credit Suisse Group AG (the “Bank”) aided citizens of the United States to evade paying taxes on income earned on foreign accounts. The Justice Department’s probe concerns whether the Bank’s employees in Israel helped clients hide assets.

In February 2014, the U.S. Senate investigated whether the Bank helped American customers hide as much as $10 billion in assets from the IRS. In May 2014 the Bank pleaded guilty and paid a $2.6 billion fine, admitting that hundreds of bank employees handled American accounts, both declared and undeclared to the IRS. In its plea agreement, the Bank pledged to help identify U.S. accounts not declared to the IRS.

The latest probe began in 2014 when the government discovered that an American professor, Dan Horsky, was hiding money in his bank accounts managed by the Bank’s Israel desk. Horsky, a citizen of the U.S. and Israel, pleaded guilty in November 2016 to conspiring to defraud the IRS and was sentenced to seven months in prison. It is reported that Horsky has been cooperating for more than a year with investigators examining whether the Bank helped clients with ties to Israel evade U.S. taxes. The latest investigation is just another example of the government’s aggressive enforcement efforts against financial institutions and other actors who they believe may have aided U.S. persons attempting to hide money in offshore accounts.

Bank Secrecy Act 

The Bank Secrecy Act requires U.S. persons who own a foreign bank account, brokerage account, mutual fund, unit trust, or other financial account to file a Report of Foreign Bank and Financial Authority (“FBAR”), if:

  • The person has financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
  • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Immediate Action Steps

A U.S. person includes a citizen or resident of the United States, or any domestic legal entity such as a partnership, corporation, estate, or trust. U.S. persons who have failed to file a past FBAR or declare income from a foreign account may seek to enter into the IRS’s voluntary disclosure program. U.S. persons who have Israeli or other foreign bank accounts that may be unreported should contact legal counsel to discuss their matters and appropriate options.

Banks with accounts held by U.S. persons in foreign jurisdictions, including Israel, should invest resources and proactively review and monitor their procedures to identify such accounts and, if need be, close such accounts if the U.S. customer declines to provide appropriate documentation.