UBS Penalties Slashed by Around $3 Billion in French Tax Case

The bank’s shares jumped around 2% Monday on the news.

“We’re not happy about the guilty verdict. We still believe that we didn’t commit any wrongdoing, and that the law is in our favor,” said Denis Chemla, a lawyer from the firm Allen & Overy who represented UBS. He said it was too early to say whether the bank would appeal the case in France’s highest court.

The case has hung for years over UBS, one of the world’s biggest wealth managers. The original 2019 verdict was large enough to threaten its financial health and reputation as an institution entrusted with helping rich people care for their wealth.

The legal battle stemmed from visits more than a decade ago by Switzerland-based UBS bankers to France where prosecutors said they were unauthorized to do business.

Bankers wooed clients on hunting trips, at the opera and at sporting events such as the French Open tennis tournament to open accounts in Switzerland and avoid paying tax, prosecutors alleged at the initial trial. Judges hearing the case in Paris were told the bankers used James Bond-like tactics to travel surreptitiously to France.

The judges found UBS guilty in 2019 of illegally recruiting clients in France and helping them to launder money that wasn’t declared to French authorities.

UBS has denied wrongdoing and said the initial conviction wasn’t supported by any concrete evidence. It has said some Switzerland-based bankers met with clients in France at social events, but it disputes that the contact established there was unlawful solicitation for business. The bank took a 450 million euro provision against the matter in 2018 and cut its bonus pool in 2019.

An appeals court heard the case in March, rescheduled from June 2020 because of the pandemic. Prosecutors said they wanted at least a 2 billion euro fine, while the French government asked for 1 billion euros in damages and interest. The prosecutors lowered their earlier request to reflect penalties calculated on tax not withheld rather than the total amount of client funds involved, a point UBS had contested in the 2019 case.

French authorities began investigating cross-border activities of some UBS staff in 2011, drawing on whistleblowing allegations by four former or current employees.

The case emerged at a time when authorities on both sides of the Atlantic were cracking down on tax evasion, especially by financial institutions who used Switzerland’s banking secrecy laws to hide wealth. UBS in 2009 admitted wrongdoing in helping Americans evade taxes, reaching a settlement to pay $780 million and turn over the names of thousands U.S. taxpayers with secret accounts, to avoid criminal charges.

The French investigation was later broadened to include all UBS Swiss accounts held by French clients who allegedly committed tax fraud. In a 2017 trial order, the bank was charged with unlawful solicitation of clients, laundering the proceeds of tax fraud, and aiding and abetting both those activities.

Write to Margot Patrick at [email protected] and Nick Kostov at [email protected]