PARIS--A French court found Swiss bank UBS AG guilty of illegally soliciting clients and laundering the proceeds of tax evasion, ordering it to pay 4.5 billion euros ($5.1 billion) in penalties.
Shares in the Swiss bank fell as much as 3.2 percent after the ruling on Wednesday. UBS, which has denied any wrongdoing, said it would launch an appeal.
"The court can only conclude that (UBS) consistently put its own financial interests over the sovereign rights of the French state," the court's president Christine Mee said in her ruling.
"Hence, the crimes are exceptionally serious," she added.
The case shows how French courts are taking a hard line on financial misconduct in general, and tax fraud in particular. The trial will be scrutinised by European bankers who have come under pressure from regulators to tighten compliance with money laundering rules since the financial crisis.
"This is a clear signal to all financial intermediaries: you will be punished severely if you don't behave," said banking law professor Thierry Bonneau from Paris Pantheon Assas Univesity. "They will have to be excessively prudent on all these questions of tax fraud."
The penalties, which exceed the bank's net profit last year, included a 3.7 billion euro fine and additional damages of 800 million euros to the French state. UBS last month reported a 2018 net profit of $4.9 billion.
"This decision is incomprehensible, we will appeal," UBS general counsel Markus Diethelm told reporters outside the courtroom. "We have seen no facts and no evidence."
An appeal could see the case drag on for years and the bank will not have to pay anything until all appeals are heard. The combined penalties are a record for France and more than double the $2.46 billion the bank has set aside to cover potential losses from litigation and regulatory requirements.
The bank may have to increase its provisions in the coming weeks, Citi said in a note to investors and its plan to buy back as much as $1 billion worth of shares this year is at risk, it added.
The French trial follows a similar case in the United States, where UBS accepted a $780 million settlement in 2009, and in Germany, where it agreed to a 300 million euro fine in 2014. The penalty is high by European standards, although in the United States judges have levied higher fines including the $8.9 billion a U.S. court in 2015 ordered BNP Paribas to pay for violating U.S. economic sanctions against Sudan, Cuba and Iran.
