In recent years, Switzerland’s strict bank secrecy laws have made assets in the country a target of investigation for tax authorities around the world. This week, the Swiss Federal Tax Administration ordered UBS AG to report account information regarding current and former clients to tax authorities in France. French tax authorities filed an international administrative request for assistance from Switzerland, asking for account numbers of former and current French UBS clients.
The French request stemmed from information provided to them by German tax authorities who have been conducting a series of investigations in recent years into undisclosed assets by German citizens. The information gathered by Germany was shared amongst other European countries. Representatives from UBS state that they likely expect more requests for information, like the French one, from other European countries.
French authorities have faced an uphill battle to gather any information from UBS and have not been able to garner the same compliance from UBS as the U.S. Justice Department has. In 2009, UBS agreed to pay $780 million in fines in a settlement with the U.S. Justice Department in an effort to avoid criminal prosecution for tax evasion. While a taxation treaty between France and Switzerland obligates Swiss authorities to cooperate with French authorities, Elaine Houlette, the head of France’s national financial prosecutor’s office, has said that Swiss authorities have been dragging their feet on issues of tax compliance. As the result of various investigations, UBS already faces billions of dollars in potential fines in France and in 2014 was ordered to put up over a 1 billion euro bail to cover potential criminal charges in a case involving alleged money laundering and tax fraud. In February of 2016, judges concluded a 19-month investigation into whether UBS helped French clients hide their assets from the national tax authority, resulting in Ms. Houlette’s office recommending UBS and its French affiliate face trial for tax evasion and illegally prospecting French clients.
UBS continues to hold its ground and abide to Switzerland’s bank secrecy laws. They’ve stated that the majority of the client’s information French authorities have requested are for closed accounts and believe that the legal grounds for France’s request are “ambiguous at best.” UBS has said that they have taken steps to inform their affected clients about their procedural rights and that to “ensure legal clarity,” UBS will have the admissibility of the French request evaluated by the Swiss Federal Administrative Court.