In the case between the largest Swiss bank, UBS, and the French State, the Paris Court of Appeal will issue its verdict next Monday. Prosecuted for aggravated tax fraud laundering and illegal canvassing, the bank was sentenced almost two and a half years ago in first instance to a record fine of 3.7 billion euros ($4.3 billion).
UBS was found guilty of illegally sending sales staff to France between 2004 and 2012 to “chase” wealthy clients of its subsidiary, during receptions, sporting events, or concerts, to convince them to open undeclared accounts in Switzerland.
The fine is accompanied by an 800 million euro ($936 million) compensation. In the first instance, the Criminal Court of Paris imposed in February 2019 the heaviest penalty ever imposed by the French justice system in a case involving tax evasion on Switzerland’s number one bank and world’s leading wealth manager.
Defendants pleaded for acquittal stating that no act of canvassing had been established and that there was no evidence to indicate that the defendants had violated the rules in effect at the time of the facts.
About 4000 “repentant” clients of UBS who had hidden funds in Switzerland had regularized their situation with the “disgorgement” cell opened in France at the end of 2015, and 3.7 billion euros had been recovered. An estimated 10 billion euros had been hidden from French tax authorities over the period in question, according to the prosecution.
The public prosecutor’s office requested “at least” two billion euros in fines on appeal. In addition, the prosecution sought confirmation of a 15 million euro penalty for UBS France, prosecuted for complicity, as well as prison sentences and fines for five former executives, as well as the conviction of one more, who was released from jail on initial trial.
Towards the Court of Cassation
The reduction in the fine is due to a decision made by the Paris Court of Cassation in September 2019. Its judges determined that the financial penalties should be calculated on the basis of the taxes actually evaded as opposed to the amounts hidden from the tax authorities.
UBS will pay a very heavy financial penalty in first instance, a total of nearly 4.5 billion francs, which accounts for more than 80% of its net profit in 2020, which amounted to 6.6 billion dollars (6.04 billion francs). The bank has so far set aside 450 million euros for the appeal, which will need to be increased significantly if the bank loses.
The case is very likely to continue before the highest court, the Court of Cassation, regardless of Monday’s verdict. Thus, the case could be prolonged for a few more years, while Sergio Ermotti, the former CEO of UBS, wanted it to be concluded during his tenure.