Swiss Bank UBS has been fined a record 4.5 billion euros ($5.1 billion) by a French court, effectively wiping out the bank’s entire profits for 2018. The Paris criminal court found that the bank had unlawfully provided its clients with services to hide assets from French tax authorities. UBS have said they will appeal the ruling.
“The court can only conclude that (UBS) consistently put its own financial interests over the sovereign rights of the French state,” Court President Christine Mee said in her ruling. “The crimes are exceptionally serious.”
The penalties included a 3.7-billion euro ($4.2 billion) fine and additional damages of 800 million euros ($907.32) payable to the French government. But UBS won’t be paying anything yet: an appeal could see this case drag on for years.
“This decision is incomprehensible,” UBS General Counsel Markus Diethelm told reporters outside the courtroom. “We have seen no facts and no evidence.”
The penalties are a record for France and more than double the $2.46 billion set aside by UBS to cover potential losses from litigation. The bank had previously rejected a settlement offer of 1.1 billion euros ($1.25 billion).
The French ruling follows a series of similar cases in other jurisdictions. UBS agreed a $780 million settlement with the US in 2009 and paid a 300-million euro ($340.3 million) German fine in 2014.
“This is a clear signal to all financial intermediaries: you will be punished severely if you don’t behave,” banking law professor Thierry Bonneau from Paris Pantheon Assas University told Reuters. “They will have to be excessively prudent on all these questions of tax fraud.”
French investigators claimed UBS enticed clients to use their banking services to avoid taxes by hosting golf tournaments, hunting outings and art exhibitions, mirroring similar claims of tax fraud and money laundering brought in Belgium.
Bradley Birkenfeld, the UBS whistleblower who helped the US uncover the scheme, told Forbes’ Walter Pavlo, “UBS is finally facing French justice and the decades-long economic espionage UBS has inflicted on the French people is now being rightfully corrected. Why would UBS shareholders around the world accept this type of behaviour?”
Birkenfeld spent two and a half years in a US prison for conspiring with a California developer to evade taxes but received a $104 million reward for revealing secrets of the Swiss banking system that critics said was used by the world’s wealthy to hide their income. French officials estimate that UBS assisted in hiding 10 billion Euro ($11.34 billion) from the country’s tax inspectors.