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UBS Unit Fined $13 Mln, Reprimanded by French Regulator

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UBS Unit Fined 10 Million Euros by French Regulator on Controls
UBS and its French unit are under a formal investigation by Paris prosecutors as France steps up efforts to combat tax evasion. Photographer: Valentin Flauraud/Bloomberg

UBS AG’s French unit was fined 10 million euros ($13.1 million) by the nation’s banking regulator and reprimanded for a lack of controls that may have enabled some clients in France to dodge taxes.

The unit of Switzerland’s largest bank was alerted to “grave suspicions” by the fall of 2007 on its sales force’s possible involvement in illicit marketing and the covering up of tax fraud, and waited more than 18 months before setting up the necessary controls, the regulator said in a statement today.

That delay “is an especially grievous failure,” France’s banking regulator said in a report dated yesterday that described UBS’s control lapses.

The fine is more than twice the 4 million-euro penalty the regulator demanded from Societe Generale SA in 2008 because of internal-control shortcomings related to Jerome Kerviel’s multi-billion-euro trading loss. The UBS unit also failed to control its sales force’s potential access to computer files shared with the parent company that could have been used to identify prospective clients for accounts outside France, the regulator said today.

“We disagree with many of the disciplinary commission’s conclusions,” Zurich-based UBS said in an e-mailed statement today, adding that it will consider whether to appeal the decision. “UBS does not tolerate any activities intended to help its clients circumvent their tax obligations.”

UBS and its French unit are under a formal investigation by Paris prosecutors as France steps up efforts to combat tax evasion. French tax investigators last year searched UBS offices in cities including Strasbourg, Lyon and Paris. Three individuals were also put under formal investigation last year.

UBS rose 1.5 percent to 16.09 Swiss francs by 12:16 p.m. in Zurich trading, bringing the gain this year to 13 percent.

“This is an issue from the past and we are pleased to note that the disciplinary commission acknowledges in its report that UBS France SA has taken appropriate steps to strengthen its compliance framework since 2009,” UBS said.

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