The United States has launched an investigation into Russian clients that UBS inherited from its recent acquisition of Credit Suisse, according to sources familiar with the matter. This investigation heightens scrutiny on UBS, one of the world’s largest wealth managers, as it seeks to navigate the complex landscape of sanctions related to Russian assets.
The U.S. Treasury’s Office of Foreign Assets Control (OFAC), known as one of the most powerful sanctions enforcement bodies globally, has reached out to UBS as part of the inquiry. Two individuals familiar with the case confirmed that OFAC contacted UBS in recent weeks, and discussions between the Swiss bank and the agency have taken place. Both UBS and OFAC declined to comment on the ongoing investigation.
The investigation reportedly focuses on Russian clients who held accounts at Credit Suisse before UBS took over the troubled bank in March 2023. Credit Suisse collapsed amid a string of financial and reputational scandals, including allegations of drug money laundering and corporate espionage. UBS acquired its smaller Swiss rival in a high-profile rescue deal, and it now faces the task of managing Credit Suisse’s remaining client base while addressing potential regulatory issues.
To mitigate potential consequences from the U.S. inquiry, UBS has reportedly taken proactive steps to “cordon off” suspicious accounts, isolating questionable funds and deactivating certain accounts. This effort aims to prevent the risk of financial penalties, which could be levied if UBS is found in breach of sanctions. OFAC has the authority to impose significant fines for violations of U.S. sanctions and, in some cases, can even restrict a bank’s access to the U.S. dollar—a crucial currency for international finance.
Following Russia’s invasion of Ukraine, the United States and its allies implemented an unprecedented series of sanctions targeting Russian individuals, companies, and financial interests. These sanctions restrict the flow of Russian funds, making it increasingly risky for banks worldwide to handle Russian-linked assets. According to one U.S. official, UBS has shown cooperation in the inquiry, yet OFAC made it clear that failure to address any problematic accounts could result in punitive measures.
Regulatory bodies in Switzerland are also monitoring UBS’s management of former Credit Suisse clients, particularly regarding the bank’s anti-money laundering protocols. Swiss regulators are concerned that UBS may inherit high-risk clients who could pose significant reputational and regulatory risks to the bank.
Under the leadership of CEO Sergio Ermotti, UBS has been reviewing Credit Suisse’s books, reportedly removing unwanted clients and selling off assets, including those linked to Russian interests. However, it remains unclear just how much Russian-originated money currently resides within UBS’s portfolio. In 2022, Credit Suisse’s then-CEO disclosed that about 4% of the bank’s assets, valued at approximately $35 billion, were managed for Russian clients.
The investigation by U.S. authorities has highlighted long-standing disagreements between the U.S. and Switzerland over the identification and management of Russian assets. One major issue is Switzerland’s lack of legislation requiring asset owners to declare their identities publicly. Without this transparency, it becomes challenging to determine if an asset’s owner is subject to sanctions. A U.S. official familiar with the inquiry expressed frustration over Switzerland’s regulatory gaps, fearing they could enable not only Russian but also Iranian funds to move undetected through the country.
The official also indicated that the main area of concern was smaller Swiss private banks, which may potentially shield the identities of sanctioned individuals through complex legal structures. However, UBS, being Switzerland’s largest bank and highly regulated, is not thought to be a primary offender in this respect.
In response to international pressure, the Swiss government has recently proposed legislative reforms. These reforms, which are scheduled for parliamentary debate, include establishing a register of “beneficial ownership” to improve transparency around the true ownership of companies and properties. The Swiss government has also suggested binding lawyers to stricter anti-money laundering standards, which would prevent attorneys from disguising client identities to circumvent sanctions.
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The upcoming U.S. administration could also influence the course of Russian sanctions and Swiss financial regulations. Although the election of Donald Trump as U.S. president might signal a shift in U.S. foreign policy, it is still unclear how his administration might approach sanctions on Russia or whether it will pressure Switzerland for further reforms.
In its latest quarterly report, UBS acknowledged the challenges posed by “continuously evolving sanctions” related to the Russia-Ukraine conflict, noting that they require ongoing adjustments to its global compliance programs. UBS stated that it remains committed to enhancing its anti-money laundering (AML), know-your-client (KYC), and sanctions compliance strategies to meet international standards.
As UBS works to align with U.S. and Swiss regulatory expectations, the bank’s handling of Credit Suisse’s Russian accounts could set a precedent for how other international banks navigate the increasingly complex sanctions landscape surrounding Russian assets.
