The US Department of Justice (DOJ) is currently investigating whether financial professionals at Credit Suisse and UBS assisted Russian oligarchs in evading sanctions imposed by the US. The two Swiss banks are reported to have been included in a recent round of US government subpoenas. The investigations are aimed at determining which bank personnel interacted with “sanctioned clients” and how these clients were screened over the past few years. If violations are found, the banks could be subject to significant fines.
Credit Suisse and UBS Face DOJ Scrutiny
According to a report by Bloomberg, the US DOJ has sent subpoenas to Credit Suisse and UBS as part of an ongoing investigation into whether financial professionals at these banks helped Russian oligarchs evade US sanctions. In addition, the DOJ has also reportedly sent subpoenas to the staff at several large US institutions. The DOJ is investigating whether banks violated
sanctions by doing business with clients who were already sanctioned by the US.
The investigation serves as a reminder of the potential consequences of violating sanctions laws. In addition to facing substantial fines, banks can also face reputational damage and loss of business. The subpoenas sent to US institutions suggest that the DOJ is conducting a broad investigation into potential sanctions violations across the financial industry. It remains to be seen whether the investigation will result in any charges against Credit Suisse, UBS, or other financial institutions.
Credit Suisse’s Russian Affluent Clients
Credit Suisse had a well-established reputation for serving affluent Russians before the Russian invasion of Ukraine led to further sanctions. At the height of its success, the Swiss bank earned between $500 million and $600 million in annual revenue from its Russian customers, managing close to $60 billion in assets for Russian clients. However, the bank opted to cease doing business with Russian clients in May 2022, when it held over $33 billion for individual Russian clients. This was approximately 50% more than UBS, despite the latter having a larger wealth management division.
Credit Suisse’s decision to stop doing business with Russian clients likely stemmed from the increased regulatory scrutiny on banks and their dealings with sanctioned clients. The bank’s substantial exposure to Russian clients and assets underscores the potential risks that financial institutions face when conducting business with clients from countries that are subject to sanctions. It remains to be seen how the DOJ’s investigation into Credit Suisse and UBS will impact the banks’ relationships with their remaining clients, including those in Russia.
Severe Fines for Sanctions Violations
If the DOJ finds evidence that Credit Suisse and UBS violated sanctions, both banks could face significant fines. In 2014, the Paris-headquartered BNP Paribas entered a guilty plea to US charges for conducting transactions with sanctioned Sudanese, Iranian, and Cuban companies. As part of the settlement, BNP Paribas agreed to pay roughly $9 billion, demonstrating the severe penalties that can be imposed for sanctions violations.
The size of the fine levied against BNP Paribas illustrates the potential financial impact of sanctions violations on banks. While Credit Suisse and UBS have not yet been charged with any wrongdoing, the DOJ’s investigation serves as a reminder of the importance of compliance with sanctions laws and the potential consequences for banks that fail to comply. The outcome of the investigation will be closely watched by industry experts and investors alike.
Conclusion
The ongoing investigation by the US DOJ into Credit Suisse and UBS highlights the importance of adhering to international sanctions laws. Financial institutions that do business with sanctioned clients face significant risks, including large fines, reputational damage, and loss of business. Banks must ensure that they have proper screening procedures in place to identify and avoid doing business with sanctioned clients.
