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Coutts hit with £75m tax evasion penalties

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Coutts hit with £75m tax evasion penalties

Coutts has forked out £75 million to settle two separate tax evasion probes relating to its former Swiss private banking business.

The largest of the two penalties saw the 300-year old bank pay out $78.5 million (£56 million) to US prosecutors after it admitted assisting US clients to conceal assets in offshore accounts, which subsequently helped them evade tax.

Coutts is one of a number of banks to be penalised after the Department of Justice launched its programme back in August 2013 into the role Swiss banks played in helping US citizens evade tax.

Coutts was asked to conduct a review of its US related accounts and presented the results of the review to the DOJ on 23 December.

In a separate investigation, Coutts paid €23.8 million (£18.8 million) to German prosecutors after a tax evasion probe covering a 10-year period to 2014.

The German investigation had been revealed 12 months ago by Coutts owner Royal Bank of Scotland.  ‘Any situation like this we take seriously, it is the reputation of our business,' RBS chief Ross McEwan said at the time.

‘This is what has tarnished the banking industry and in my view private banks have taken far too long to catch up with the public’s expectations.’

Coutts has since sold its Swiss-based international operation to UBP.

The news was revealed in RBS’ full-year numbers, which showed its private banking business had a tough 2015.

Adjusted operating profit fell by 41% to £113 million, which the bank said reflected lower income and higher impairment costs.

Total income fell by £45 million to £644 million. Net interest income fell 4% primarily due to the lower net interest margin, while non-interest income fell 11% to £208 million due to lower transactional and investment activity.

Overall RBS, which is 73% owned by the tax payer, posted a £2 billion loss in 2015. While this was better than the profit fall of £3.5 billion in the previous year, it represented its eight consecutive annual loss.

The bank set aside an additional £3.6 billion to cover regulatory issues, which included £2.1 billion to cover expected legal action on US residential mortgage-backed securities. The bank has also stored an additional £600 million to cover the mis-selling of payment protection insurance.

Profits were also hit by the major restructuring programme initiated by chief executive McEwan at the start of last year.

‘RBS made progress again in 2015. We ended the year a simpler, stronger bank with a business anchored squarely in the UK and Ireland, focused on retail and commercial markets,’ McEwan told the market.

‘Year one of our plan in 2014 was about getting cost out and improving our capital position. This gave us the platform to go further, faster in 2015 by exiting more businesses that didn't fit our strategy, and accelerating improvements in our core bank. We delivered on both.’

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