UBS’ French banking subsidiary was fined €10m by the country’s regulator on Wednesday for “laxity” in its efforts to curb the risk of money laundering and cross-border fiscal fraud.
The Autorité de Contrôle Prudentiel, France’s banking regulator, said UBS France had been warned in late 2007 of the “serious risk” that inadequate internal checks could lead to disciplinary and judicial action but had done nothing about it for 18 months.
UBS France said it deplored “many debatable” aspects of the decision and an “out of proportion” penalty, which it planned to challenge via an appeal to the Council of State.
The €10m fine is the biggest imposed by the banking regulator. A penalty of €20m had previously been imposed on Caisse d’Epargne, the French mutual bank, in 2009 but was later nullified by the Council of State.
Jean-Frédéric de Leusse, chief executive of UBS France, said: “The climate is such that being a French subsidiary of a Swiss bank today means that no one has much regard for us. How can one not believe that the general climate might not have had an influence on [imposing] such a disproportionate penalty?”
The French unit said it was “pleased to note” that the regulator had acknowledged that the bank had put in place “appropriate steps to strengthen its compliance since 2009”.
The case centred on UBS’ practice of “asset transfer adjustment”, a scheme for calculating bankers’ bonuses based on referring business from one part of the bank to another.
The regulator deemed that the system was not well enough documented and therefore could have been open to abuse.
It also said that the unit had failed to conform with regulations regarding an intranet page hosted by UBS AG, its Swiss parent, regarding the opening of foreign bank accounts.
The French fine comes as countries around the world are ratcheting up the pressure on tax evaders, partly to plug holes in national budgets.
Last year, officials in Germany searched the properties of some UBS clients, following moves by German authorities to buy CDs containing client data. After analysis of one CD, a prosecutor alleged that German account holders at UBS had evaded about €204m in taxes.
UBS said at the time that it did not help clients evade taxes and that since 2009 it had carefully examined its cross-border business and tightened its rules.
Separately, UBS has been placed under investigation in France over claims that it solicited French clients to open accounts designed to evade taxes.
The judicial case and the banking regulator’s investigation stem from material provided by a former UBS employee who had been dismissed in 2009.
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