Analysis
15 December 2021

Illegal banking solicitation and laundering of aggravated tax fraud: new step in the UBS file

The long-awaited judgment in the UBS case was delivered by the Paris Court of Appeal. The historic penalty of € 4.5 billion gives way to a more measured sanction, and the #laundering of aggravated tax fraud is discarded, ending (for how long?) the suspense of whether UBS did the right thing by refusing a CJIP (French DPA) and a negotiation with the PNF. Navacelle looks back at this case and analyzes the main points of this decision.

 

Swiss bank UBS, accused of having setup, between 2004 and 2012, an occult system to encourage French citizens to invest their money in Switzerland[1],  appeared before the Paris Court of Appeal after being ordered to pay the unprecedented sum of € 4.5 billion in sanctions at first instance for illegal banking solicitation and laundering of aggravated tax fraud. This sum was eventually considerably reduced to € 1.8 billion.

It is rare for a stock price to rise after the announcement of a judicial conviction. However, following UBS’s condemnation by the Paris Court of Appeal with sanctions totaling € 1.8 billion, the Swiss bank’s stock price briefly surged by 2.7% [2]. This reaction illustrates a form of relief following this long-awaited judgement.

With a record-breaking penalty of € 4.5 billion, the judgment of first instance pronounced by the Paris Criminal Court was held up as an example of the severity and increasing criminalization of tax law [3]. Some saw this judgment as a message to companies facing prosecution in favor of a negotiated justice. Indeed, the first instance UBS’s conviction followed its referral to court after negotiations for the possible conclusion of a Judicial Public Interest Agreement (CJIP) failed. During these negotiations, the prosecution proposed UBS a penalty closer to € 1 or € 2 billion [4]. The bank refused, probably considering it too high and preferring to present its arguments and defense during a trial.

 

I. A foreseeable reduction of the penalty

While the public prosecutor’s office was initially followed at first instance in its demands amounting to € 3.7 billion (the remainder of the penalty representing the damage suffered by the State), the requisitions of the public prosecutor on appeal were lower, at € 2 billion. This change in the prosecution’s position can probably be explained by a judgment dating back from 2019 [5] in which the Court of Cassation had the opportunity to clarify the basis for calculating the penalty. It is now based not on the object of the offence but on its proceeds, i.e. the amount evaded from taxation (and not the money concealed).

This method of calculation was probably also considered by the Paris Court of Appeal. Indeed, in addition to the € 800 million paid to the State as damages, a fine of € 3.75 million was ordered, compared to the € 3.7 billion initially imposed by the court of first instance, as well as the confiscation of € 1 billion. In total, UBS will have been fined € 1.8 billion. This amount must be put into perspective with the fines negotiated by UBS with the American ($ 230 million) and German (€ 302 million) justice [6][7].

As for the sentences pronounced against the natural persons, UBS executives, these were also slightly reduced. Four of these executives were sentenced, as opposed to five at first instance, to sentences of up to one year’s suspended imprisonment and a fine of € 300 000 [8].

 

II. A partial success of UBS’s strategy

The fine ordered at first instance made believe in the hardening of tone vis-à-vis the banking community. Conversely, the amount retained on appeal appears to be more in line with the range of sentences usually pronounced.

However, it is questionable whether UBS’s strategy of refusing a negotiated outcome to defend itself before the criminal courts was appropriate as the appeal conviction is close to the amounts mentioned by the CJIP which was considered for a time.

It seems that UBS chose a more traditional and principled defense since it announced through its counsel that it would not exclude an appeal to the Cour de cassation (French Supreme Court) [9]. The refusal of negotiated justice may thus be more a willingness to defend its rights than a financial strategy.

The initial enthusiasm of the stock price was quickly erased by investors concerned about a possible appeal by the French State [10].

Related content

Press review
Press review - Week of 23 january 2023
27 January 2023
Press review – Week of 23 January 2023
In this week’s press review, you will find two cases which were dismissed, one concerning the defective management of the...
Press review
Week of 16 January 2023
20 January 2023
Press review – Week of 16 January 2023
This week press review includes the latest news on criminal law, business criminal law and criminal procedure. Thus, this review...
Press review
Press review - Week of 9 january 2023
13 January 2023
Press review – Week of 9 January 2023
This week in the press review, a dismissal of the Chlordecone case in the French West Indies and a $17.2...
Press review
Week of 2 January 2023
6 January 2023
Press review – Week of 2 January 2023
This week in the press review, two Members of the European Parliament have been subjected to immunity waiver proceedings in...
Press review
Press review - Week of 26 december 2022
30 December 2022
Press review – Week of 26 December 2022
In this week's news, there are several important events in criminal law. First, the criminal Charles Sobhraj, otherwise known as...
Press review
Press review - Week of 19 december 2022
23 December 2022
Press review – Week of 19 December 2022
This week's press review presents the outcome of an investigation by the Paris Bar Council against several lawyers for ethical...
Press review
Press review - Week of 12 december 2022
16 December 2022
Press review – Week of 12 December 2022
In this press review, from a judicial point of view, there are several important events: The Court de Cassation ruled...
Press review
Week 5 December 2022
9 December 2022
Press review – Week of 5 December 2022
In this press review, you will have the opportunity to discover two court decisions. The first one, is issued by...
News
ABA
6 December 2022
Launch of the international guide to corporate internal invgestigations
NAVACELLE co-hosted the launch of the ABA guide in Dubai along with Al Tamimi & Company, Bär & Karrer and...
Press review
2 December 2022
Press review – Week of 28 November 2022
In this press review, you will discover several important judicial events: the French Supreme Court clarified the status of victim...
Press review
Week of 21 November 2022
25 November 2022
Press review – Week of 21 November 2022
In this press review, you will discover the opening of a preliminary investigation by the French National Financial Prosecutor’s Office...
Analysis
21 November 2022
Judicial Agreement of Public Interest for aggravated tax fraud laundering and illegal canvassing
Credit Suisse escapes prosecution and agrees to pay a public interest fine of 123,000,000 euros under the 13th deferred prosecution...