France wants UBS to pay $3.6bn for helping clients avoid taxation

Paris — French prosecutors and lawyers for the government said UBS Group should be ordered to pay €3bn — 33% less than the original judgment — for allegedly helping French clients hide money from the nation’s tax authorities.

Prosecutor Serge Roques asked a Paris court of appeals to impose a €2bn fine on UBS, acknowledging the limits set by recent guidance from France’s top court. The French state, which is a plaintiff in the case, is also seeking €1bn in damages from the bank in addition to any court-imposed penalties.

The request came as part of the company’s appeal of a February 2019 ruling requiring it to pay €4.5bn in fines and damages, a European record. It was emblematic of a French crackdown on tax evasion that has focused on big banks from HSBC Holdings to Credit Suisse Group, which investigators believed encouraged such behaviour by its citizens.

“For facts of an exceptional magnitude, it is necessary to apply an exceptional fine,” Roques said on Monday during closing arguments in the case that started earlier in March.

Roques called on the court to send a message despite the “restrictive” guidance from France’s top court, which prosecutors “regret”. “We are no longer in a settlement process,” Roques said. “We must change the scale” for the fine.

A €3bn penalty would still exceed any amount UBS may have paid if the bank had settled, but talks broke down in 2017 over the amount.

At the time, UBS had started by offering €180m, less than a fifth of the €1.1bn bond it had to post in the case. As French enforcers dismissed the UBS offer, which it had improved slightly, as unacceptable, the bank’s legal team decided to play hardball, pushing the case to trial in the hope of wringing out a smaller penalty.

Appeals in France take the form of a new trial in which judges are often free to cut or raise the penalty. The lower-court judgment has been put on hold pending the appeal and UBS has only set aside €450m in provisions for the eventual verdict.

In court, UBS’s lawyers have made it clear they plan to invoke the French top court ruling, which called into question calculations like those used to fine UBS two years ago.

Six months after UBS was slapped with the fine, France’s Cour de Cassation in September 2019 ruled that the penalty demanded from a man convicted of laundering undeclared funds in an unrelated case should be sharply cut. The top judges said it had been erroneously based on the amount hidden from tax authorities rather what was owed.

UBS’s hefty fine was similarly based on the undeclared wealth in the bank’s Swiss accounts that nearly 4,000 French clients belatedly admitted to and declared by 2015, rather than the tax they avoided.

With fresh data corresponding to the tax paid by nearly 17,000 French clients with UBS accounts in Switzerland who put their houses in order, Roques said the ceiling for a fine on appeal is about €2.2bn, in line with the top court guidance.

A ruling is expected in several months.

The bank was found guilty in 2019 of helping clients launder funds that should have been declared to French tax officials through numbered accounts and trusts. UBS was further convicted of covertly dispatching Swiss bankers across the border to encourage prospective clients to move money across the border.

Five former UBS bankers were also found guilty, as was the lender’s French unit.

Earlier on Monday, appellate judges expressed doubts about UBS’s arguments. Presiding judge François Reygrobellet voiced his exasperation after UBS invoked, yet again, Switzerland’s banking secrecy to remain evasive about a question that concerned client data.

“Foreign law cannot apply to facts that took place in France,” the judge said. That followed judge Hervé Robert being troubled by the way bank employees handled a prospective client in Bordeaux who had won €26m in the lottery.

Bloomberg