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Shares of UBS Group AG came under pressure on Wednesday after a report that the U.S. Justice Department suspects Credit Suisse helped Russian clients evade sanctions and may be looking at compliance failures at its new parent company.
Citing sources, Bloomberg News said subpoenas at one point sent to multiple banks were now focused on the Swiss bank, Credit Suisse which was taken over by UBS earlier this year. Those sources said the Justice Department was in the early stages of its investigation and that the outcome may be neither charges or a settlement, but that UBS
UBS,
UBSG,
lawyers in the U.S. had been briefed on Credit Suisse’s potential exposure to violations.
UBS purchased Credit Suisse earlier this year for more than $3 billion with the government’s backing. The combined Swiss bank reported a blowout net profit of $28.88 billion in the second quarter, from $2.11 billion in the previous quarter, mostly due to negative goodwill from the Credit Suisse purchase.
The sources said the Justice Department wanted to use that historic merger to advance its probe into Credit Suisse, and had been growing impatient after getting no answers from either Swiss bank over how accounts of sanctioned clients such as Russia were handled. The probe covers sanctions linked to the 2022 Russia invasion of Ukraine and from 2014 when Russia annexed Crimea.
A lingering headache for UBS, Credit Suisse is also the subject of other probes by the U.S. department which is still trying to determine whether the bank helped U.S. clients hide their assets, years after it paid a settlement of $2.6 billion on tax evasion.
U.S. officials have viewed Switzerland as a country that isn’t aggressive enough when it comes to sanctions or money laundering enforcement. In the wake of Russia’s invasion of Ukraine in February 2022, an extensive list of western companies have left Russia, including BP
BP,
and McDonald’s
MCD,
though some have found it costlier and trickier to exit as the war has dragged on. Some have stayed and others have reneged on initial promises to leave.
From the archives: Companies that exited Russia after its invasion of Ukraine are being rewarded with outsize stock-market returns, Yale study finds — and those that stayed are not
As for what kind of fine UBS could face, BNP Paribas was fined a hefty $8.9 billion for Illegally processing financial transactions for countries under U.S. sanctions in 2014. UBS has a market cap of nearly $80 billion, but lost about $2.8 billion of that via share losses on Wednesday.
UBS shares slid 3.3% on Wednesday, having gained 29% year to date.
A UBS spokesman declined to comment when contacted by MarketWatch, which also reached out to the Justice Department.
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