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Credit Suisse (CS) Under Justice Dept. Probe

Legal hassles continue for Credit Suisse Group AGCS as the Swiss banking giant is under Justice Department scrutiny for its operations in Israel. US regulators are investigating the Zurich-based banking giant's procedures relating to handling of American clients.

The Justice Department is enquiring whether Credit Suisse has helped dual Israeli and US citizens in evading American taxes. Notably, per the newly-implemented US Foreign Account Tax Compliance Act (FATCA), information of foreign banks' American clients should be submitted to U.S. tax authorities.

Amid international pressure on Switzerland's secrecy laws, Swiss banks have been under the scanner due 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.

The plea agreement required Credit Suisse to take several steps, which included full disclosure of its cross-border operations, cooperation in treaty requests regarding account information and revealing detailed information concerning other banks that moved funds into secret accounts. Credit Suisse is also required to take measures in all its present and future transactions with U.S. clients in order to ensure compliance with U.S. laws including FATCA and other related tax treaties.

Further, Credit Suisse is being monitored by the New York Department of Financial Services related to its dealings with U.S. customers. Therefore, the supervisor scrutinizing the bank has been informed about the recent investigation.

"We aim to operate going forward at the highest levels of compliance," Chief Executive Tidjane Thiam of Credit Suisse said at a recent news conference. "From the past you can find all kinds of legacy issues." Moreover, Credit Suisse is conducting internal investigation after coming under the purview of the new investigation in Israel. Following such a move, five employees have been sent on leave.

"The investigation is not linked to potentially fraudulent behavior to the detriment of clients," the bank said in a statement. "Credit Suisse is committed to running its business in a tax-compliant manner. It conducts its banking business in strict compliance with all applicable laws, rules and regulations in the markets in which it operates."

In Feb 2016, the Swiss banking giant was reportedly under investigation by Milan prosecutors to ascertain whether the bank was engaged in money laundering and helped clients in tax evasion. The probe involved billions of euros worth of insurance policies sold to Italian clients to hide funds from authorities (Read more: Credit Suisse Under Probe Over Money Laundering in Italy ).

Regulatory authorities are determined to put forward a landmark judgment to terminate wrong practices in the future, bringing justice to the sufferers and punishing the wrongdoers. While the settlement of such issues will put to rest a long-drawn investigation and bring reprieve to the banks, these are also likely to come as a huge blow to the banks' financials.

Credit Suisse currently carries a Zacks Rank #4 (Sell). Some better-ranked foreign banks include Bank of Montreal BMO , Canadian Imperial Bank of Commerce CM and DBS Group Holdings Ltd DBSDY . All three of this banks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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