PARIS – UBS, the largest Swiss bank, was placed under formal investigation by the French authorities on Wednesday and ordered to post bail of more than $1 billion in the kind of tax-evasion case that ensnared it in the United States several years ago.
The bank, based in Zurich, faces charges of money laundering and tax fraud for helping French clients hide funds from the national tax administration from 2004 to 2012, an official in the Paris prosecutor’s office said. The official cannot be identified, in keeping with the rules of the office.
UBS has also been ordered to post bail of 1.1 billion euros (about $1.5 billion), the official said. The bank did not respond to requests for comment.
The news, first reported Wednesday by Agence France-Presse, was not entirely unexpected. A whistle-blower’s tip had led the authorities to the Swiss bank, and UBS was last year placed under formal investigation on suspicion that it illegally sold banking services to French citizens to enable them to move money offshore. It was ordered to pay a 10 million euro fine in that case over lax internal controls.
UBS has been entangled in tax cases with major governments for several years. Most notably, in 2009 it reached an agreement with the United States Justice Department to disclose client names and pay $780 million to avoid criminal prosecution. The bank acknowledged having defrauded the Internal Revenue Service by helping wealthy Americans evade taxes.
Credit Suisse, UBS’s cross-town rival, announced on Wednesday a second-quarter loss of $779 million after agreeing in May to plead guilty to conspiring to help Americans evade taxes and paying $2.6 billion in penalties.
UBS bankers in France used the same approach to tap wealthy investors that they used in the United States, according to French news reports, attending prestigious cultural and sporting events and seeking to mingle with high net-worth individuals through their social networks.
Under the French system, formal investigation suggests prosecutors believe there is sufficient evidence to suggest criminal charges may be warranted, but there is no certainty that the bank will ever face trial, and such cases often drag on for years only to be dropped.
President François Hollande has made the pursuit of tax cheats a priority after his former budget minister, Jérôme Cahuzac, was discovered to be hiding funds in Switzerland and Singapore.
At the global level, the movement to rein in tax havens has also been gathering momentum recently, with the Organization for Economic Cooperation and Development announcing this week standardized rules for improving banking transparency in tax matters.
But despite giving some ground to maintain its relations with the United States financial system, Switzerland, continues to hold stubbornly to its banking secrecy laws.