A French court ordered UBS to pay a fine of more than €4.5 billion ($5.1 billion) today, after finding the Swiss bank guilty of illegally soliciting wealthy French clients to help them evade tax. Of that total, €800 million in damages go directly to the French government, which intends to seek further penalties. Following the verdict, shares of UBS fell by more than 3%, a decline worth about $2 billion in market capitalization.
It is the heaviest penalty ever imposed on a Swiss bank. The culmination of long-running negotiations over the case, during which UBS turned down smaller settlement deals, may also be seen as a warning to other financial institutions. UBS has set aside the equivalent of around $2.5 billion in provisions for legal fines, which would be entirely consumed (and then some) by the fine, putting a big dent in its 2019 profit. The bank’s spending on legal matters had been drifting down in recent years.
The tactics employed by UBS are somewhat cinematic: Swiss bankers would allegedly be dispatched over the border to star-studded events such as concerts, tennis tournaments, and hunting parties (link in French). There, they targeted wealthy French residents who might have an interest in shielding their assets in Switzerland.
Between 2004 and 2012, the bank is accused of illegally concealing some €10 billion in funds belonging to French clients. “The criminal wrongdoings were of an exceptionally serious nature,” said judge Christine Mee. “These acts were committed behind the veil of opacity.”
Whether the bank pays up is another question. UBS intends to appeal the ruling, saying in a statement that “the charges of laundering the proceeds of tax fraud are without merit.” The appeal suspends the judgment of the court, under French law, and sends it up to the Court of Appeals for a retrial.