UBS, the largest Swiss bank, was placed under formal investigation by the French authorities on Wednesday and ordered to post bail of more than $1 billion in the kind of tax-evasion case that ensnared it in the United States several years ago.
The bank, based in Zurich, faces charges of money laundering and tax fraud for helping French clients hide funds from the national tax administration from 2004 to 2012, an official in the Paris prosecutor’s office said. The official cannot be identified, in keeping with the rules of the office.
UBS has also been ordered to post bail of 1.1 billion euros (about $1.5 billion), the official said. The bank did not respond to requests for comment.
The news, first reported Wednesday by Agence France-Presse, was not entirely unexpected. A whistle-blower’s tip had led the authorities to the Swiss bank, and UBS was last year placed under formal investigation on suspicion that it illegally sold banking services to French citizens to enable them to move money offshore. It was ordered to pay a 10 million euro fine in that case over lax internal controls.
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UBS bankers in France used the same approach to tap wealthy investors that they used in the United States, according to French news reports, attending prestigious cultural and sporting events and seeking to mingle with high net-worth individuals through their social networks.
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At the global level, the movement to rein in tax havens has also been gathering momentum recently, with the Organization for Economic Cooperation and Development announcing this week standardized rules for improving banking transparency in tax matters.
But despite giving some ground to maintain its relations with the United States financial system, Switzerland, continues to hold stubbornly to its banking secrecy laws. Addendum 7/26/14 10:00 am:
David Jolly, UBS Lashes Out at French Prosecutors (NYT DealBook 7/24/14), here. UBS denies that it did anything wrong -- at least denies that it should be punished as much and claims that the prosecution is political. Here is an excerpt:
UBS has ‘‘taken significant and broad steps to ensure tax compliance of our clients and will continue to do so,’’ according to the statement cited by Mr. Steiner. ‘‘It is not acceptable to us that this has become a highly politicized process.’’
In the French system, formal investigation indicates prosecutors believe there is sufficient evidence to suggest criminal charges may be warranted. But there is no certainty that the bank will ever face trial, and such cases often drag on for years only to be dropped.My only comment is how is it political that a sovereign nation (France, the U.S. or any other country) would object to Swiss banks (or any other banks or persons) enabling with great reward massive raids on their respective treasuries? Is it political for that sovereign country to redress violations of their laws? Of course not.