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US authorities expand investigation into UBS and Credit Suisse’s Russia sanctions violation -Bloomberg

UBS shares experienced a decline after news broke that the US Department of Justice (DOJ) has intensified its investigation into alleged compliance failures that enabled Russian clients to evade sanctions. The Bloomberg report states that both UBS and Credit Suisse are facing scrutiny, with the DOJ launching a full-scale investigation into Credit Suisse’s potential violations of sanctions. UBS, which acquired Credit Suisse earlier this year, declined to comment on the matter. The DOJ probe reportedly encompasses sanctions related to Russia’s 2022 invasion of Ukraine and its 2014 annexation of Crimea. Whilst UBS shares temporarily halted trading and fell nearly 8% after the news, they later recovered to trade 3.3% lower.

In its latest financial report, UBS stated that it has designed its sanctions programs to comply with multiple jurisdictions, including those imposed by the United Nations, Switzerland, the European Union, the UK, and the United States. The bank also revealed that Credit Suisse offices have been contacted by law enforcement officials from the UK, Netherlands, France, and Belgium, as part of an investigation into cross-border banking for wealthy clients. UBS confirmed that Credit Suisse has conducted a review of the issues and is cooperating with authorities. The DOJ has spoken to US-based lawyers for UBS regarding Credit Suisse’s alleged exposure to sanctions violations since UBS’s acquisition of the company in June. The investigation is still in its early stages and may not necessarily lead to charges or a settlement.

JP Morgan has noted that the DOJ investigation presents a challenge for UBS. However, the bank has made adequate provisions to handle any costs arising from the case, with litigation provisions of $4.7 billion at the end of June. UBS has also adjusted the valuation of Credit Suisse by $3 billion to account for contingent liabilities such as lawsuits. Overall, JP Morgan estimates that UBS has around $10 billion in litigation-related buffers in its forecasts.

In summary, UBS has seen its shares fall as it faces increased scrutiny from the DOJ over alleged compliance failures that enabled Russian clients to evade sanctions. The investigation reportedly covers both UBS and Credit Suisse, with the DOJ focusing on potential sanctions violations by Credit Suisse. UBS has stated that its sanctions programs are designed to comply with regulations from various jurisdictions. The investigation is still in its early stages and may not necessarily lead to charges or a settlement. Despite the challenges posed by the investigation, UBS has made provisions to handle any potential costs arising from the case.

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