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UBS on trial in France for facilitating tax evasion

Chris Hamblin, Editor, London, 21 March 2017

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French judges have issued UBS, the world's largest private banking giant, with a committal for trial for allegedly deploying its organisational skills to help its French clients hide funds from the taxman.

A UBS spokesman told Compliance Matters: "UBS AG and UBS France were informed about the decision of the investigative judges to issue, after an investigation that has lasted for more than five-and-half years, an ordonnance de renvoi which sets out the charges for which UBS AG and UBSF will be tried.

"We will now have the possibility to respond in detail in a court of law. UBS has made clear that the bank disagrees with the allegations, assumptions and legal interpretations being made. We will continue to strongly defend ourselves and look forward to a fair proceeding."

The Swiss bank has refused to sign an agreement (involving a fine) to avoid prosecution, thereby ending its negotiations with the national financial prosecutor. The French press has referred to the impending trial as a game of poker between Eliane Houlette, head of the national financial prosecutor's office and the magistrate who launched a probe into a famous French politician called François Fillon, and Switzerland's Markus Diethelm, the director of UBS's legal arm. Fillon is one of the candidates for the French presidency in the upcoming elections and has sustained a barrage of criticism for allegedly paying his wife and children thousands of taxpayers’ euros - €1 million, according to the national weekly Canard Enchaîné - for work that they did not do for him. Fillon's party, Les Républicains, is no stranger to financial scandal; former President Nicolas Sarkozy, another member, was indicted recently for “illegal financing of an electoral campaign,” having taken part in a presidential campaign in 2012 that spent €20 million over the legal limit, which at the time was €22½ million.

According to the website lejdd.fr, the prosecutor asked the Swiss bank top pay €1.1 billion in settlement, down from its first offer of €2.2 billion. The website quotes Markus Diethelm as saying that "such a sum is unthinkable vis-à-vis our shareholders...this is not at all the market price."

The tax fraud scheme that UBS allegedly set up is said to have been an extensive one and the bank is to be charged with both illegal banking practices and tax fraud/money laundering. Its French arm is going on trial for complicity as well. Five very senior UBS managers are also facing trial, among them Raoul Weil, the former third-in-command at UBS who was its chairman and CEO of global wealth management and business banking. He left the bank under a cloud after the US Department of Justice charged him with offering to help American customers dodge their taxes. He was eventually found not guilty in an American court in 2014. He later claimed to have been a 'political scapegoat.' Meanwhile, a so-called 'guilty plea' procedure has been introduced for Patrick de Fayet, the former second-in-command at UBS France.

In 2009 UBS admitted to helping US taxpayers hide accounts from the Internal Revenue Service and signed a Deferred Prosecution Agreement with the DoJ in which it agreed to identify those customers and pay a $780 million penalty. In 2014, it reached a similar €300 million settlement with the Germans.

This is to be the first trial of a bank for tax fraud on this scale. French Government agencies estimate the fraud to come to a total of €9.76 billion. The French criminal code, according to one report, envisages a fine equal to half the total in the event of a verdict of guilty. The bank is also accused of setting up two parallel sets of accounts, the better to mask transactions that occurred between France and Switzerland.

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