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
9 June 2023
Press review – Week of 5 June 2023
This week's press review details the suspicions of favoritism hanging over Olivier Dussopt, Minister of Labor, Employment and Integration, and...
Press review
Press review
2 June 2023
Press review – Week of 29 May 2023
This week, the 32nd chamber of the Paris judicial court handed down its first conviction for price manipulation against Thierry...
Press review
press review
26 May 2023
Press review – Week of 22 May 2023
This week, the Parquet national financier (PNF - National Financial Prosecutor's Office) signed its 16th and 17th Convention Judiciaire d'Intérêt...
23 May 2023
The French Minister for Public Accounts announces a plan to fight tax fraud
During a senatorial debate, after the publication by the Finance Commission of a report on the fight against tax fraud,...
Press review
press reveiw
15 May 2023
Press review – Week of 15 May 2023
This week in the news, the ECHR validated the sharing of phone taps from the prosecutor to the antitrust authority...
Press review
press review
12 May 2023
Press review – Week of 8 May 2023
This week in the news, François Ruffin was dismissed by the ECHR, and a judicial investigation was opened for suspicions...
Press review
White Collar Crime Compliance Press review
5 May 2023
Press review – Week of 01 May 2023
This week in the news, the Paris prosecutor's office signed a DPA with a Spanish bank, and Anticor is investigating...
Press review
Press review
28 April 2023
Press review – Week of 24 April 2023
In this press review, the National Financial Prosecutor’s Office (PNF) searched the premises of the Member of Parliament Pierre Morel-A-L’Huissier...
DPA ABA 2023
26 April 2023
Deferred Prosecution Agreements and how much do they shield from litigation and arbitration?
During the American Bar Association International Law Section 2023 conference, Stéphane de Navacelle will discuss Corporate criminal liability frameworks which...
Press review
Press review
21 April 2023
Press review – Week of 17 April 2023
In this week’s press review, on the international level, ecocide has been recognized by the European Parliament, the United States...
Press review
Press review Navacelle
14 April 2023
Press review – Week of 10 April 2023
In this week's press review, Anticor accuses the former president of EDF of illegal interest taking, a Swiss banker pleads...
Press review
10 April 2023
Press review – Week of 3 April 2023
This week's press review focuses on the publication by the CNIL of the 2023 edition of its guide on the...