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People stand at a tram stop in front of the headquarters of Swiss bank Credit Suisse at the Paradeplatz square in Zurich July 11, 2012. Credit Suisse said it believed it was exempt from prosecution for helping Germans evade taxes following a deal last year, after a German newspaper reported that clients of the Swiss bank were being probed. (ARND WIEGMANN/REUTERS)
People stand at a tram stop in front of the headquarters of Swiss bank Credit Suisse at the Paradeplatz square in Zurich July 11, 2012. Credit Suisse said it believed it was exempt from prosecution for helping Germans evade taxes following a deal last year, after a German newspaper reported that clients of the Swiss bank were being probed. (ARND WIEGMANN/REUTERS)

France, Germany raid Swiss banks, clients on tax Add to ...

German tax authorities have launched raids into Credit Suisse clients and French officials searched the homes of UBS employees, part of crackdowns on foreigners suspected of evading taxes through the two largest Swiss banks.

Switzerland’s strict banking secrecy rules, which have helped build a $2-trillion offshore financial sector, have infuriated cash-strapped governments elsewhere as they try to stop tax evasion by wealthy citizens.

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Roughly 5,000 German clients of Credit Suisse are being probed on suspicion of tax evasion and some had their homes searched, a source at the bank said on Wednesday, as European tax officials broaden their investigation to clients from banks.

Meanwhile, the offices of UBS in Lyon, Bordeaux and Strasbourg were raided on Tuesday on suspicion of money-laundering and aiding tax evasion, according to a source at that bank.

The private homes of several high-ranking UBS employees in Strasbourg were also searched, the UBS source said.

UBS said it was co-operating with authorities. The French prosecutor’s office declined to comment because the investigation was continuing.

It was not immediately clear whether the raids in Germany and France were co-ordinated or in any way connected.

Credit Suisse said it was aware that German tax authorities were investigating its clients but gave no further comment.

The source at the bank said tax authorities in the German towns of Bochum and Duesseldorf were probing its clients over Bermuda-based life insurance products which may have been used to avoid tax. Tax officials in both towns declined to comment.

The Frankfurt prosecutor said one client was searched.

The German investigation comes against the backdrop of a deal reached with Switzerland to levy taxes on German assets stashed in Swiss bank accounts that is due to come into effect next year pending German parliament approval.

Peter V. Kunz, professor for business law at Berne University, said the new investigation into Swiss bank clients could add to skepticism over the deal, which German opposition politicians say is too lenient on tax evaders.

“I don’t think it will derail the agreement altogether, but it does simplify things for its opponents,” Mr. Kunz said.

Duesseldorf and Bochum are in the German state of North-Rhine Westphalia, where the Social Democrat-led regional government has been one of the most vocal opponents of the deal that would also end prosecutions of Swiss banks and employees.

“Our tax inspectors must be able to do their work unimpeded, which is to root out criminal evaders. No tax agreement should prevent that,” the region’s finance minister, Norbert Walter-Borjans, said in a statement.

North-Rhine Westphalia bought names of Swiss bank clients from an informant in 2010. Two sources told Reuters the targets for the latest investigation were culled in part from that information.

Germany has long been trying to crack down on tax evasion. In 2008, data leaked from Liechtenstein’s LGT bank revealed that wealthy citizens including former Deutsche Post chief Klaus Zumwinkel had stashed money in the tiny principality. Zumwinkel received a suspended jail sentence after admitting tax evasion.

Credit Suisse struck a deal with German tax authorities last September, agreeing to pay €150-million to end an investigation over allegations the bank and its employees helped Germans dodge taxes.

UBS was forced in 2009 to pay a fine and release the names of 4,500 clients to U.S. officials to end a damaging tax probe. U.S. authorities are still investigating Swiss banks including Credit Suisse and Julius Baer over tax offences.

Switzerland is trying to get the U.S. investigations dropped in exchange for the payment of fines and the transfer of names of thousands more U.S. bank clients.

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