Analysis
21 November 2022

Judicial Agreement of Public Interest for aggravated tax fraud laundering and illegal canvassing

Credit Suisse escapes prosecution and agrees to pay a public interest fine of 123,000,000 euros under the 13th deferred prosecution agreement concluded by the National and Financial Prosecutor's Office.

 

On October 21, 2022, the National and Financial Prosecutor’s Office (“PNF”) concluded its thirteenth Judicial Agreement of Public Interest (“CJIP”), the sixth in the field of tax offenses.

This agreement, approved by the President of the Paris Judicial Court on October 24, 2022, provides for the payment by the Swiss bank of a public interest fine of 123,000,000 euros for illegal canvassing[1] carried out by the Swiss bank’s sales representatives on French territory and for tax fraud laundering[2] due to the concealment of assets held by French taxpayers from the French Public Treasury. It also stipulates that Crédit Suisse must pay 115,000,000 euros in compensation to the French Public Treasury for the damage suffered by the French State as a result of the undeclared amounts.

 

I. Facts

This agreement stems from a preliminary investigation opened by the PNF in April 2016 following the receipt by the PNF, as part of a mutual assistance agreement, of a list of thousands of names of French taxpayers who held bank accounts with Credit Suisse.

The information thus communicated referred to “an organized system of assistance to tax evasion and money laundering” set up by Credit Suisse, in particular through the canvassing of French clients by Swiss sales representatives.

The PNF considered that the investigations allowed it to determine that the assets concealed from the French Public Treasury represented 2 billion euros held by 4,999 French clients with bank accounts at Crédit Suisse.

It was indicated that the investigation had also highlighted that the bank accounts of these French clients were denominated “RET”, in order to indicate that no documents (e.g. bank statements) were to be communicated to their holders in France, so that the banking documentation remained on Swiss territory, unless expressly requested by the client.

Finally, the PNF noted that the investigations had made it possible to identify the presence of unauthorized sales representatives on French territory who made discreet home visits in order to meet future clients, as well as the use of intermediaries to set up off-shore structures.

The PNF therefore considered that this constituted aggravated laundering of tax fraud and illegal canvassing.

 

II. The public interest fine

Without admitting the facts, Crédit Suisse agreed, through this CJIP, to pay, in addition to the compensation of the French Public Treasury of 115,000,000 euros, the sum of 123,000,000 euros as a public interest fine.

It should be recalled that the French Criminal Code provides for a maximum fine of 750,000 euros for the offence of aggravated tax fraud laundering[3] and a maximum fine of 375,000 euros for illegal canvassing.[4] However, with regard to aggravated tax fraud, Article 324-3 of the French Criminal Code provides that the fine may amount to half the value of the property to which the laundering related. In 2019, the Court of Cassation also specified that the calculation method corresponded to the amount of the evaded duties and not to the amount of the concealed assets.[5] This calculation method was confirmed by the Paris Court of Appeal in the UBS case for facts similar to those of the present case.[6]

Article 41-1-1 of the French Code of Criminal Procedure provides that the public interest fine is determined based on the benefit derived from the offence and may reach up to 30% of the average annual turnover over the last three years; thus, in this case, the fine could be 6,377,000,000 euros.

In the context of this CJIP, the method for calculating the public interest fine is not detailed, but the PNF specifies that out of the 123,000,000 euros:

  • 65,600,000 euros represent the profits from the offences;
  • And 57,400,000 are part of an additional fine justified by the habitual nature of the acts and their duration.

It is further specified that the calculation of the fine also takes into account minor factors, such as the cooperation of Credit Suisse in the investigations, the age of the facts, the corrective measures taken by the bank and the indemnification of the tax authorities.

Once again, the fine approved by the Judicial Court, which may seem moderate in relation to the limit set by the law, the proceeds of the offence and the turnover of the Swiss bank, nevertheless demonstrates the effectiveness of the CJIP mechanism, which allows the tax authorities to recover, undoubtedly more quickly than through prosecution and the courts, significant amounts of money.

 

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