why the conviction of the UBS bank is historic


    , February 21, 2019

"It looks like justice is moving a little! Effect Vests yellow?" Some yellow vests, whose representatives demand greater fiscal justice, welcomed the condemnation on Wednesday of the Swiss bank UBS to a record fine of 4.5 billion euros for illegal banking and laundering tax fraud. In detail, UBS was fined 3.7 billion euros plus 800 million euros due to the French State for damages. The first private bank in the world has announced an appeal, which results in a suspension of the conviction pending the next instance.

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But the essential is elsewhere. This conviction is first unprecedented for the French justice: it is the biggest fine ever pronounced by a court. But it is especially a turning point in the history of the fight against tax fraud, the judgment denouncing, for the first time, the systemic nature of fraud. This leads to a decisive legal precedent.

The culmination of an extraordinary dossier

On April 12, 2012, after the United States and Germany, the Paris prosecutor's office opens a judicial investigation against UBS for suspicion of tax evasion. In December 2013, when it was created, the National Finance Prosecutor's Office (PNF) retrieved the file and began a lengthy procedure, peppered with a dozen indictments.

UBS is alleged to have secretly solicited wealthy French to whom his commercial would have offered to open unregistered accounts in Switzerland in the early 2000s. According to the elements of the investigation, the Swiss bank would have systematized fraud through a double accounting, concealed, according to the accusation, by "a tool for evaluating the performance of bankers".

For its part, UBS ensures however never to have crossed the red line and evokes a tax optimization. On June 24, 2016, the ex-number 2 of UBS France Patrick de Fayet, indicted, however, acknowledged in a letter to the judge, guilty of unlawful soliciting of French customers.

Read our survey published in 2015: The Cash Road from Switzerland to France

From the beginning, the PNF attempted to characterize the principle of a "system" of corruption for tax fraud. The magistrates wanted at all costs to avoid that there is a file per French client. The UBS trial was therefore a whole "system". And it is for this reason that Wednesday's conviction is unprecedented.

The signal sent: zero tolerance for tax evasion

In its judgment rendered on Wednesday, the district court of Paris followed the will of the PNF by condemning not every isolated case of tax evasion, but the whole system. "The fraud is rooted in a vertically structured, systematic and ancient organization," said court president Christine Mée.

In other words, it is no longer necessary to provide evidence of tax evasion, especially if it is part of a system that can only lead to tax evasion. Through Wednesday's ruling, magistrates have developed case law that will allow them to tackle, beyond fraudulent clients, intermediaries who facilitate – even propose – to defraud.

The tribunal de grande instance of Paris did not fail to extend its sentence Wednesday to individuals, to better empower decision makers. Five ex-executives of UBS have indeed received penalties ranging from 6 to 18 months suspended sentence with fines between 50,000 and 300,000 euros. The French subsidiary of the Swiss bank was also fined for complicity of 15 million euros.

Read also – In Switzerland, "thousands" of accounts "not declared" to the French tax authorities

The other strong signal sent on Wednesday is the record amount of the fine. France takes the example of the United States whose justice, following the financial crisis of 2008-2010, made very strong and not only symbolic decisions. In August 2014, the Bank of America was fined a record $ 16.65 billion (14.68 billion euros).

There is, however, an economic setback to this judicial struggle against the excesses of the financial system: to condemn too much the banks, they can be weakened again. When the United States fined BNP Paribas $ 8.9 billion (7.85 billion euros) for violating US embargoes, the French bank had to handle the case with the French government – Francois Hollande had tried to defend, in vain, the BNP with Barack Obama – to avoid repercussions on the French economy.

To limit the economic turbulence related to court decisions, the French government has set up, in the Sapin II law of 2016, a new settlement mechanism (the CJIP, the Judicial Convention of public interest), allowing institutions financial institutions to negotiate directly with the PNF.

According to Les Echos, UBS and the PNF had tried to negotiate, but the Swiss bank estimated that the 2 billion euros claimed by the prosecution was disproportionate. UBS was finally fined 4.5 billion euros.