UBS Group AG ( UBS Quick Quote UBS - Free Report) has filed an appeal with the French Supreme Court regarding the decision of the Court of Appeal. Last week, the court had ordered the Swiss bank to pay a fine of €3.75 million for unlawful solicitation and laundering of tax-fraud proceeds of wealthy clients. The penalty was reduced from the 2019 fine of €3.7 billion. Moreover, the court had instructed the confiscation of €1 billion. Civil damages worth €800 million slapped on the Swiss firm to be paid to the French state were intact from the 2019 ruling.
The notice of appeal was filed within the statutory five-day notice period to uphold UBS Group’s rights. This capacitates UBS Group to comprehensively gauge the Court of Appeal’s ruling and figure out the next steps in the best interest of its stakeholders.
Around €450 million was already set aside by the UBS Group as provisions for legal fines. It also had to post a €1.1-billion bond.
Lawyers for the UBS Group had contended in the appeals trial that investigators had not discovered lucid evidence of any systematic attempt by the UBS Group’s sales consultants to solicit French customers at client events, such as cocktail parties and hunts. The bank had also argued that the original fine was disproportionate.
UBS Group was under investigation by the French authorities on potential charges of illegally soliciting clients in France to open Swiss accounts for stashing undisclosed wealth between 2004 and 2012. Later, the enquiry included money-laundering charges against the bank. In 2019, following a seven-year probe into such allegations and abandoned settlement negotiations, the bank was liable to counter allegations of those illegal activities.
The money laundering charge underpins a potential for reputational damage to UBS Group, which is one of the world’s biggest wealth managers. UBS Group operates in a business and regulatory environment that is complex, uncertain and subject to change. Also, UBS Group is subject to numerous regulations by the U.S. and non-U.S. regulators that add complexity to the ongoing global compliance operations.
We believe that the prevalent investigations on several banks will be a step forward in reducing the huge losses incurred due to offshore tax evasions. Regulatory authorities are investigating scandals and are determined to make a landmark judgment to terminate such shrewd practices in the future, bring justice to the sufferers and punish the wrongdoers.
The ongoing probes will undoubtedly dent UBS Group’s reputation in the global arena. Nevertheless, resolution of such issues will likely restore investors’ confidence in the stock.
Shares of UBS Group have gained 10.5% on the NYSE in the past three months against a 1.6% decline recorded by the
industry. Image Source: Zacks Investment Research
Currently, UBS Group carries a Zacks Rank #2 (Buy). You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Several finance companies continue to encounter legal hassles and are charged with huge sums of money for business malpractices. Some of those are
Franklin Resources, Inc. ( BEN Quick Quote BEN - Free Report) , Washington Federal ( WAFD Quick Quote WAFD - Free Report) and Charles Schwab ( SCHW Quick Quote SCHW - Free Report) .
Last month, a lawsuit was filed against Franklin Resources by a group of investors claiming that BEN sabotaged a startup named Onsa to get its technology and hence, an entry into the flourishing fintech market. Bloomberg reported this news.
Washington Federal agreed to pay a civil money penalty of $2.5 million to the Office of the Comptroller of the Currency in relation to its February 2018 Consent Order for Anti-Money Laundering and Bank Secrecy Act (“AML/BSA”) deficiencies.
In April 2017, Washington Federal entered into an agreement to acquire Anchor Bancorp in an all-stock transaction. That year, in September, the companies amended the merger’s termination date from Dec 31, 2017, to Jun 30, 2018, because of identifying some faults regarding procedures, systems and processes of Washington Federal’s BSA program. However, the deal was terminated on Jul 17, 2018.
SCHW was slapped with a class-action lawsuit over violations of its fiduciary duty by placing its interest before the protection of its clients through the bank’s robo-adviser Schwab Intelligent Portfolios’ cash sweep program.
The case, filed in the U.S. District Court in Northern California, also accused Charles Schwab of breach of contract and the infringement of state laws.