UBS fails to overturn guilty verdict in French tax evasion case

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UBS failed to overturn a guilty verdict for its role in a long-running French tax evasion case on Wednesday, although the country’s top court said the €1.8bn of penalties the bank received two years ago could be reduced.

Judges at France’s supreme court upheld UBS’s 2021 conviction for money laundering, but ordered a fresh trial and for the lower court to recalculate a €1bn confiscation order and €800mn of damages awarded to the French state based on new legal guidance.

The case, which has dogged the Swiss lender for a decade, is set to continue and adds to a long list of legal disputes for the bank, many of which are tied to its rescue of Credit Suisse earlier this year.

French authorities began investigating UBS and some local employees in 2013 over their role in helping rich clients avoid tax.

In 2019, UBS was found guilty of illegal solicitation and laundering the proceeds of tax fraud following a landmark trial in Paris. The bank was ordered to pay €4.5bn, made up of a then-record fine of €3.7bn and an additional €800mn in damages, in a decision that tainted Sergio Ermotti’s previous spell as chief executive.

UBS contested the decision and an appeals court reduced the penalty to €1.8bn in 2021. But even though UBS has paid €800mn in civil damages to the French state, the bank still appealed the penalty, a €1bn confiscation order and the guilty verdict. In the supreme court ruling, judges found that the €800mn in damages needed better justification.

The 2019 ruling was the result of a seven-year investigation by French authorities where the bank was accused of using James Bond-like tactics between 2004 and 2012 to solicit clients illegally and help them launder money.

Prosecutors argued that UBS bankers had used self-erasing hard drives, business cards without logos and evasive tactics to move about France in secret to enlist clients illegally at corporate events.

Whistleblowers alleged that UBS bankers solicited clients at operas, during hunting trips and at the French Open tennis tournament. UBS argued that while its bankers did go to France and attended social events, prosecutors lacked evidence of the solicitation.

In its third-quarter results last week, UBS booked €1.1bn of provisions in relation to the case, stating: “The wide range of possible outcomes in this case contributes to a high degree of estimation uncertainty and the provision reflects our best estimate of possible financial implications, although actual penalties and civil damages could exceed (or may be less than) the provision amount.” 

Ermotti returned for a second stint as UBS chief executive this spring after the bank agreed to rescue its former rival, Credit Suisse.

The takeover has already prompted $9bn of legal claims from former Credit Suisse investors who lost out on the deal. 

Since completing the purchase in June, UBS has set about trying to clear up a mountain of legal disputes in which Credit Suisse was involved dating back decades.

In a statement, UBS said it was disappointed the court did not overturn the guilty verdict. “UBS continues to maintain that it acted in accordance with all applicable laws and regulations at all times,” it said. “UBS will defend itself in the forthcoming trial.”