In recent years, banks across the globe have been placed under a microscope as authorities seek to curb cross-border tax evasion. Many organizations have faced penalties, fines and reputational damage as a result of this crackdown.
In the latest case, one multinational bank’s operations in Switzerland helped numerous wealthy individuals evade taxes. This revelation came as a result of leaked documents obtained by the International Consortium of Investigative Journalists, The Guardian and other news outlets. Several governments have had access to these documents for at least four years, and now that the information is public, The Guardian reported it adds more fuel to the fire for the global effort to end cross-border tax evasion.
Shutting down illegal operations
Since the bank division’s underhanded dealings came to light, the parent company has seen its stock values decline and paid large sums in back taxes, according to The New York Times. Many other large banks have faced similar consequences in the past, indicating no institution is exempt from additional scrutiny.
In 2014, one major Swiss bank paid billions to the U.S. for helping American account holders evade taxes. The total $2.6 billion penalty included back taxes, settlements and a fine.
Another Swiss bank faced similar action from U.S. authorities in 2013. This bank helped at least 100 Americans avoid their tax compliance obligations, leading to $1.2 billion in unpaid taxes, according to BBC News. At the time, Preet Bharara, a U.S. attorney, said the result was a symbolic moment, indicating no individuals or financial institutions would get away with tax evasion.
The increased oversight not only applies to banks helping individuals avoid taxes, but also relates to cases where the financial institutions themselves are evading taxes. The Guardian reported one multinational bank came under fire after documents revealed it didn’t pay enough taxes for the amount of revenue it was pulling in.
Keeping up with the times
Global collaboration to enforce taxes is part of today’s financial climate. With the Foreign Account Tax Compliance Act (FATCA) and Organization for Economic Cooperation and Development’s (OECD) Common Reporting Standard (CRS) facilitating multilateral agreements to share tax information, banks should expect further scrutiny as more cases like the aforementioned examples support the need for additional legislation to curb cross-border tax evasion. Not only do they face the risk of extensive penalties and other legal action, but they also must sometimes contend with irreparable damage to their reputations.
