UBS staff members in France are under investigation for allegedly supporting wealthy clients in using the Swiss bank’s services to evade taxes.
According to reports that have emerged over the weekend, at least three staff members from UBS France are under investigation by magistrates, in a case due to which the bank’s chief in the country, Jean-Frederic de Leusse, has been questioned as part of the decision to investigate.
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On 31 May, UBS’ offices in Paris were, reportedly, raided by investigators, and the unit in the country was put under investigation formally.
Administrators have, reportedly, been sent to study the bank’s operations as part of the investigation. The officials are expected to look into how the staff in the accused unit were paid, UBS’s business practices, and the structure of its bonuses.
Pay scales and strategy
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By GlobalDataIn March 2013, UBS implemented changes to its compensation scheme following consultation with shareholders and changes outlined last year. The bank claimed the changes aim to promote a stronger pay-for-performance culture and discourage excessive risk-taking.
UBS CEO Sergio Ermotti earned CHF8.9m in compensation in 2012 of which CHF6.1m was a performance bonus. He was the highest paid among the group executive last year.
On 31 May it was reported that UBS is set to raise base salaries for bankers and traders in its investment banking unit by an average 9% to align with rivals and retain employees. Reports claimed the Swiss bank could hike salary by as much as 25% for client-facing investment bankers, while other front-office staff may receive no pay rise.
Under pressure
The alleged drive to persuade clients to open accounts to dodge tax is believed to date back around 10 years.
French authorities are among several who are cracking down on tax evasion as governments’ own finances are under pressure.
The budget minister in France, Jerome Cahuzac, stood down in April 2013, after lying to Julius Baer about money hidden in Swiss bank accounts.
In the line of fire
In early April, UBS alongside another Swiss private bank Credit Suisse, were named in a wide-spread investigation by The International Consortium of Investigative Journalists (ICIJ) into offshore tax evasion. The ICIJ said documents showed how UBS and Credit Suisse-owned Clariden Leu worked with Singapore-based Portcullis TrustNet to provide their customers with secrecy-shielded companies in the British Virgin Islands and other offshore centres.
The ICIJ released emails where a TrustNet employee said Clariden was involved in seeking high levels of confidentiality for some clients. The TrustNet official described the bank’s request as "’the Holy Grail’ of offshore entities — a company so anonymous that police and regulators would be "met with a blank wall" if they tried to discover the owners’ identities."
Several high-profile politicians were named and potentially shamed through the report, including a dictator’s daughter and a friend of French President Francois Hollande, all escaping taxes in their own countries.
