France Goes after French Depositors in Swiss Banks and the Swiss Banks Also (6/12/14)

This report has familiar resonances, although the events have been stewing for a while:  Giles Broom, Geneva’s French Ties Fray as Banks Warn Offshore Clients (Bloomberg 6/11/14), here.  Some excerpts:

"Paris prosecutors investigate Switzerland’s largest lender UBS AG (UBSN) and London-based HSBC Holdings Plc over whether they helped clients hide wealth in Swiss accounts.  Already bruised by battles with the U.S., Geneva bankers are pressing French clients to “regularize,” a polite way of saying they must come clean on undeclared funds. Failure to do so will result in account closings, clients were told." 

Banks are “very scared,” said Remi Dhonneur, a Paris-based tax lawyer at Kramer Levin Naftalis & Frankel LLP. “Clients are being kicked out or pushed to regularization.” 

Adding weight to the threat, banks are combing through tens of thousands of accounts to identify potential tax cheats, a caseload that spans three or four generations of wealth deposited offshore by affluent French families, he said. 

French families have at least 250 billion euros ($339 billion) parked in offshore accounts, more than half of which are probably undeclared, according to a Geneva-based banker who asked not to be named, saying the figures were supplied confidentially by a consulting company. 

* * * * 

France is investigating UBS after the country’s banking regulator fined the Swiss lender 10 million euros last year for deficient controls against tax fraud and illegal sales practices. Tax investigators searched the bank’s offices in Paris, Lyon and Strasbourg. 

With HSBC’s private bank, which is suspected of helping 3,000 French customers avoid paying more than 4 billion euros of tax, investigating judges “clearly” want to bring charges, Le Monde said on June 10. The government built its case from a client list of leaked from the bank’s Geneva unit by a former software technician. HSBC declined to comment on the report. 

* * * * 

Bank Initiative 

“I’m dealing at the moment with an enormous number of cases of regularization,” said Nicolas Marguerat, a Paris-based lawyer and academic. “Most clients came to me due to the initiative of the bank, because the bank contacted them six months ago and told them: ’You must regularize. If you haven’t done this by March 31, 2014, we will throw you out and give you a check.’” 

* * * * 

Some have tried to shift assets to Dubai or the Bahamas or use safes in Switzerland that aren’t connected to bank systems, according to Dhonneur, who says he advises against this. 

* * * * 

Hollande’s Reign 

More recently, taxes put in place by Socialist President Francois Hollande after his 2012 election prompted some wealthy French to leave the country. Billionaire Bernard Arnault, chief executive officer of LVMH Moet Hennessy Louis Vuitton SA, applied for Belgian citizenship, though he said he would continue to pay French taxes. The application was turned down. 

Banks have a responsibility to encourage customers to put their tax affairs in order by cooperating with governments where they are domiciled for tax, the Swiss Bankers Association told more than 300 members in a letter on Nov. 29. 

Swiss banks “are doing as much as they can” to guide French clients through their country’s “costly” and “complicated” disclosure program, Patrick Odier, chairman of the association and Senior Partner at Cie. Lombard, Odier SCA, said in an interview with L’Agefi newspaper on May 8.