UBS is victim of own success in bid to cut $4.4bn fine

Bloomberg

A ruling slashing a record French fine against a bank seemed to bode well for UBS Group AG as it fights an even larger 3.7 billion-euro ($4.4 billion) penalty in front of the same judges. But the Swiss lender might be a victim of its own success.
According to details of the April 6 decision only revealed earlier this week, the Paris appeals court said it had shown leniency to Latvia’s Rietumu Banka simply because its revenue had plunged by two thirds since first being convicted in 2017.
“UBS can hardly argue it’s facing similar circumstances,” said Marion Lambert-Barret, a Paris lawyer at Aldébaran who isn’t involved in the case. UBS finished off 2020 strongly, with fourth-quarter net income of $1.7 billion, meeting or beating all its targets for the year.
UBS is already on track to get a significant reduction to the 3.7 billion-euro penalty it got two years ago but not because its finances are in disarray. French prosecutors conceded during hearings last month that fresh guidance from the country’s top court in September 2019 forced them to seek only 2 billion euros on appeal.
UBS representatives declined to comment on the Rietumu ruling, in a case where the bank has been accused of helping French citizens avoid taxes.
Rietumu’s fine, which was a record at the time, was cut by 75% to 20 million euros from 80 million euros. The Latvian bank said after the ruling that it remained “convinced of its innocence” and was considering a further appeal.
In both cases, the banks faced two opponents in court: prosecutors and the French government as plaintiff.
The government is seeking 1 billion euros in damages from UBS in addition to any court imposed fines.
In the two cases, the state also supplied data to determine the amount of taxes avoided as a basis to calculate a fine and the Paris judges’ willingness to trust the data enough to discard Rietumu’s objections is unlikely to reassure UBS.
UBS lawyers had claimed during court hearings last month that the database was full of errors and can’t be relied upon to calculate a fine.
On a more positive note for UBS, judges last week explicitly cited the September 2019 top court guidance in their Rietumu decision, showing they are
well-aware of the limits it sets.
The 2019 ruling from France’s Cour de Cassation specified that fines in money-laundering cases shouldn’t be based on the amount hidden from tax authorities — as lower judges did two years ago to calculate UBS’s 3.7 billion-euro fine — but rather what was owed.
“That’s an unambiguous application of the top court’s case law and good news for UBS,” Paris lawyer Lambert-Barret said.