Logo of Swiss banks UBS and Credit Suisse on an office building in Zurich, Switzerland, March 19, 2023.Reuters/Dennis Baribous Obtaining license rights
ZURICH, Sept 27 (Reuters) – UBS shares fell on Wednesday after reports the U.S. Department of Justice has stepped up scrutiny over alleged compliance violations that helped a Russian client evade sanctions.
UBS declined to comment when asked by Reuters to respond to the Bloomberg News report. The report cited allegations of compliance violations related to UBS and Credit Suisse, which was acquired by larger rival UBS (UBSG.S) earlier this year.
The Bloomberg report, citing people familiar with the matter, added that a full-scale investigation by the Justice Department is currently underway, primarily focused on Credit Suisse and possible sanctions violations.
The Justice Department declined to comment.
In its latest financial report at the end of August, UBS said its sanctions program is designed to comply with sanctions across multiple jurisdictions “including sanctions imposed by the United Nations, Switzerland, the European Union, the United Kingdom and the United States.” He said that it has been done.
Switzerland’s largest bank said in a report that Credit Suisse branches in the UK, Netherlands, France and Belgium had been contacted by law enforcement authorities as part of an investigation into cross-border banking transactions for wealthy customers. He said there was, but did not provide details.
UBS added: “Credit Suisse has conducted an investigation into these matters, but the UK and French aspects are closed and we continue to work with authorities.”
Following the news, UBS shares fell nearly 8% and trading was suspended. Swiss bank shares have since recovered and were trading 3.3% lower as of 3pm Japan time.
Bloomberg reports, citing people familiar with the matter, that the Justice Department is investigating Credit Suisse for sanctions violations since UBS acquired a smaller rival in June. It reported that it had spoken with a US-based lawyer.
The Justice Department is also investigating possible compliance violations at UBS, one of the people cited by Bloomberg said. Officials also said the investigation is still in its early stages and may not lead to charges or settlements.
The Justice Department investigation also targets restrictions imposed after Russia’s 2022 invasion of Ukraine and earlier measures put in place after Crimea was annexed in 2014, Bloomberg reported.
JPMorgan said in a note that while the Justice Department investigation was a headwind for UBS, the bank had built adequate reserves to deal with any costs arising from the incident.
UBS had $4.7 billion in litigation reserves at the end of June, and the bank could set aside an additional $2.2 billion in reserves related to potential future litigation.
The Swiss bank also adjusted Credit Suisse’s valuation by $3 billion to cover outflows related to litigation and other contingent liabilities.
“Overall, we have $6.8 billion in reserves and $3 billion in contingent liabilities, which translates to our estimate of nearly $10 billion in litigation-related buffers,” JPMorgan said.
Reporting by Shivani Tanna in Bengaluru and John Revill in Zurich.Edited by: Krishna Chandra Elli, Emelia Sithole-Matarise, Jane Merriman, Alexander Smith
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