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Swiss bank UBS faces tax fraud trial in France

Swiss banking giant UBS will go on trial in France for establishing a wide-ranging tax fraud scheme worth billions of euros, legal sources told AFP on Monday.

Swiss bank UBS faces tax fraud trial in France
Photo: Michael Buholzer/AFP
UBS will be charged with illegal banking practices and dissimulating tax fraud, the sources said, adding UBS's French subsidiary will also go on trial for complicity.
   
Five UBS top managers are also facing trial, including Raoul Weil, the former third-in-command at UBS.
   
The French subsidiary's former number two, Patrick de Fayet, has entered a plea bargain procedure, they said.
   
France opened a probe into UBS after former employees blew the whistle over the bank's alleged system of setting up dual bookkeeping to hide the movement of capital into Switzerland between 2004 and 2012.
   
The bank's staff allegedly approached French clients, from wealthy businessmen to sports stars, during receptions, golf tournaments or concerts to convince them to hide their money in Switzerland.
   
In total, at least 9.76 billion euros ($10.5 billion) were kept from the French tax man, according to the national financial crimes unit.
 
“My honour will finally be cleared,” said former UBS internal auditing chief Nicolas Forissier, one of the whistleblowers. “The company is going to have to face the truth.”
  
Forissier was summarily sacked by UBS in 2009 for “gross misconduct”.
 
'Aggravated laundering' 
 
In June last year, French prosecutors recommended that UBS face trial for “aggravated laundering of tax fraud proceeds” while its French branch be judged for complicity in these crimes.
   
The move followed failed negotiations over a plea bargain.
   
“Those negotiations failed in particular because prosecutors and the bank could not agree on the sum that the bank would have to pay,” said one source close to the case.
   
UBS has always denied any wrongdoing, saying there was no proof for its implication in any such alleged scheme.
   
On Monday, it said it rejected both “the allegations and the nature of the charges brought”, a UBS spokesman told AFP in Paris.
   
The trial will offer the bank “the possibility of responding to the accusations brought against it”, the spokesman said, adding UBS was hoping for a “fair trial”.
   
A lawyer for the bank, Denis Chemla, said the charges contained “no special surprises” and called them “unfounded”.
 
Five billion at stake 
 
According to documents that German authorities handed over to French investigators, deposits from some 38,000 French clients with UBS amounted to a total of around 13 billion Swiss francs (12 billion euros, $13 billion), a source close to the case told AFP. Not all these clients are suspected of tax fraud, the source said.
   
The total fine slapped on UBS could amount to up to half the sums laundered, according to French law. If investigators are right in their estimates, that would mean a fine of up to nearly five billion euros.
   
French judges already slapped a 1.1 billion euro bond on UBS in 2014, a measure the bank failed to overturn before the European Court of Human rights in January of this year.
   
The court, which normally hears complaints from individuals, ruled that the bond was “an interim measure which did not prejudge the outcome of the proceedings”.
   
On the Zurich stock exchange on Monday, UBS shares closed 0.9 percent lower at 15.89 francs, having bounced off the day's low of 15.77.
   
Headquartered in Zurich, UBS provides financial advice and banking solutions to wealthy, institutional and corporate clients worldwide, as well as private clients in Switzerland.
   
It calls itself “the world's largest and fastest-growing wealth manager”.

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Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site comparis.ch 

Holders of other, temporary or conditional permits are not accepted.

READ MORE: ‘A feeling of belonging’: What it’s like to become Swiss

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.

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