France: UBS hit by $5.1 bn fine
The Paris court ordered Switzerland’s largest bank, UBS, to pay 4.5 billion euros ($5.1 billion) in fines and damages for helping wealthy French clients evade tax authorities, wrapping up one of France’s biggest-ever tax evasion trials.
The French court convicted Zurich-based UBS on Wednesday of aggravated money laundering and illegal bank soliciting, issuing what French media called a record fine.
One of the world’s largest wealth management banks, UBS slammed the ruling and vowed to appeal.
It denied criminal wrongdoing, saying in a statement that the conviction was based on “unfounded allegations of former employees.” UBS suggested the ruling was based on French prejudice against Swiss tax practices and insisted that it was only offering “legitimate and standard services under Swiss law that are also common in other jurisdictions.”
The court ordered criminal fines of €3.7 billion ($4.2 billion) for UBS’ Swiss head office and €15 million ($17 million) for its French subsidiary, and civil damages of €800 million ($907 million). The executives were given suspended prison sentences.
Investigators say the Swiss bank sent employees to solicit wealthy executives or athletes during sport or music events in France, urging them to place their money in Switzerland. The assets illegally concealed by French clients in Switzerland in 2004-2012 allegedly amounted to some 10 billion euros ($10.75 billion).
French national financial prosecutors and UBS representatives initially sought a plea bargain, but UBS rejected the out-of-court settlement — reportedly 1.1 billion euros — as too pricey. UBS said at the time that it disagreed with “the allegations, assumptions and legal interpretations being made.”
UBS was accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where bankers would meet their “prospects” — something they were not allowed to do under French law.
UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” — amounts of money — were transferred to Swiss accounts.
Only one “milk ticket” was found during the inquiry, but prosecutors pointed to the roughly 3,700 French UBS clients who took advantage of an amnesty to regularise their tax declarations with the French authorities.
Former French Finance Minister Michel Sapin welcomed Wednesday’s court ruling, saying the size of the fine “takes into account the evolution of mentalities and international standards”.
“Until now one spoke of how banks were fined billions in the United States, but only a few million in France”, which has harmed France’s credibility in fighting fraud, Sapin said.
Tax fraud is a hot issue in France, where former budget minister Jerome Cahuzac, whose brief in government was to crack down on tax dodgers, was sentenced in 2018 to three years in jail for tax fraud and money laundering.
UBS has been embroiled in a series of similar cases, most notably in the United States, where authorities said the bank used Switzerland’s banking secrecy laws to help rich clients avoid taxes.
In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service.
The bank agreed to turn over information on hundreds of clients, severely denting Switzerland’s long tradition of shielding banking clients and their operations.