By Oliver Hirt, John O’Donnell, Stefania Spezzati and Dave Graham
ZURICH/FRANKFURT/LONDON (Reuters) – The United States is stepping up an investigation into Russian clients that UBS did when it bought Credit Suisse, three people familiar with the matter said, increasing scrutiny of one of the world’s biggest wealth managers.
The US sanctions enforcement agency, OFAC, has written to the bank as part of this investigation, two people familiar with the matter told Reuters. The US official, who asked not to be named, said the Swiss bank and enforcers had held discussions.
OFAC, or the Office of Foreign Assets Control, the world’s most powerful sanctions agency, wrote to UBS in recent weeks, one of the people said.
Spokesmen for UBS and OFAC declined to comment.
The review concerns Russian customers at Credit Suisse that UBS is now responsible for after bailing out the lender, the two people said. Credit Suisse, UBS’s smaller Swiss counterpart, imploded in March 2023 after years of scandals ranging from spying to drug money laundering.
UBS is seeking to contain the potential fallout from OFAC’s inquiry by freezing suspect funds and decommissioning the accounts to avoid the threat of penalties, one of the people said.
The US uses sanctions as a foreign policy tool, imposing sanctions to limit the activities of countries such as Russia and Iran.
Handling Russian money has become increasingly risky, after the US and its Western allies launched unprecedented web sanctions in response to Moscow’s invasion of Ukraine.
While US officials praised UBS for being cooperative, another source said it was clear that failure to address the issue could be punishable. Regulators in Switzerland have been looking into how UBS handled Credit Suisse clients and the bank’s anti-money laundering. policy of laundering because they worry that Swiss banks can end up with risky clients, Reuters has reported.
Money is a PROBLEM
The bank led by CEO Sergio Ermotti will go through Credit Suisse’s books, shedding unwanted clients and assets, including those linked to Russia, one of the people said.
For those who violate US sanctions, such as banks that handle payments to approved individuals, they may be subject to fines. In an extraordinary case, the US has cut off access to the dollar, an international financial resource.
It is not clear how much Russian-origin problem money is currently at UBS. In 2022, the then CEO of Credit Suisse announced that 4% of the money managed by the bank was for Russian clients – equivalent to about $35 billion.
The US and Switzerland have clashed over efforts to identify and filter Russian money.
One of the main complaints in Washington is that Switzerland does not have a law requiring that the actual ownership of assets, such as apartments or companies, be declared. This will be clear, for example, when the owner is subject to sanctions, US officials said.
The person said that OFAC is frustrated by Switzerland’s failure to act and there are fears that the country could be used to channel illegal finance not only to Russia but also to countries like Iran.
The person said the concern is particularly focused on smaller private Swiss banks, where there is suspicion that lawyers cover up the true identity of owners to move money. UBS, the source said, does not appear to be the culprit here.
A spokesman for the finance ministry pointed out how parliament will discuss the government’s proposal to create a register for the ownership of companies and foundations and bind lawyers to stricter anti-money laundering rules.
The election of Donald Trump as US president could signal a change in Russia or Switzerland sanctions, although it is not clear what policy he will follow.
In its third-quarter earnings report, UBS said the growing sanctions stemming from the Russia-Ukraine war require continued attention. The bank is focusing “on strategic enhancements to its anti-money-laundering (AML), know-your-client (KYC) and sanctions programs,” he added.
