Credit Suisse Group AG and UBS Group AG are among banks under scrutiny in a Department of Justice probe into whether financial professionals helped Russian oligarchs evade sanctions, according to people familiar with the matter.
The Swiss banks were included in a recent wave of subpoenas sent out by the U.S. government, the people said. The information requests were sent before the crisis that engulfed Credit Suisse and resulted in UBS’ proposed takeover of its rival.
Subpoenas also went to employees of some major U.S. banks, two people with knowledge of the inquiries, said.
The Justice Department inquiries are focused on identifying which bank employees dealt with sanctioned clients and how those clients were vetted over the past several years, according to one of the people. Those bankers and advisers may then be subject to further investigation to determine if they broke any laws.
Credit Suisse and UBS both declined to comment. UBS fell as much as 7.2% and was 5.5% lower as of 10:14 a.m. in Zurich on Friday.
Before the Russian invasion of Ukraine resulted in expanded sanctions, Credit Suisse was well-known for catering to wealthy Russians. At its peak, the bank managed more than $60 billion for Russian clients, who generated between $500 million and $600 million a year in revenue.
At the time it discontinued its business with individual Russian clients last May, Credit Suisse held about $33 billion for them, 50% more than UBS, despite the latter’s larger wealth management business.
The probe by U.S. regulators may prompt UBS to further scrutinize the client list of Credit Suisse after the emergency takeover. Credit Suisse has seen a number of relationships blow up in recent years, from Bill Hwang at Archegos Capital Management to Lex Greensill at his eponymous finance company and Luckin Coffee founder Lu Zhengyao.
The Justice Department last year launched its KleptoCapture task force to enforce sanctions on wealthy Russians who are political allies of President Vladimir Putin. The U.S. government has since seized a number of yachts, private planes and luxury properties.
Last month, the U.S. moved to seize homes in New York, Florida and the Hamptons owned by sanctioned oligarch Viktor Vekselberg.
A number of individuals have also been charged with helping oligarchs hide assets — British businessman Graham Bonham-Carter was arrested in October on charges that he illegally transferred $1 million to maintain US properties for sanctioned billionaire Oleg Deripaska. A former senior Federal Bureau of Investigation agent was also charged with helping Deripaska violate sanctions in January.
Banks can face serious penalties for violating U.S. sanctions. BNP Paribas in 2014 agreed to pay nearly $9 billion after pleading guilty to U.S. charges for processing transactions for sanctioned Sudanese, Iranian and Cuban entities. In 2019, Standard Chartered Bank agreed to pay more than $1 billion to settle a Justice Department probe, in which a former bank employee pleaded guilty to conspiring to violate US sanctions on Iran.
As the Credit Suisse rescue plan emerged over the weekend, UBS expressed general concern about taking on its rival’s potential legal liabilities. While the Swiss government has said it will guarantee up to $9.8 billion) inlosses UBS might incur from the deal, it indicated that funding is earmarked for the wind down of “difficult-to-assess” assets.
U.S. Deputy Attorney General Lisa Monaco in early March said the Justice Department was responding to the “uncertain geopolitical environment” by beefing up its national security division, which enforces sanctions violations.
“Corporate crime and national security are overlapping to a degree never seen before, and the department is retooling to meet that challenge,” Monaco said.
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