Photo © Fabrice Coffrini, AFP
According to Reuters, citing the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the U.S. division of UBS Financial Services has admitted to willfully violating legal requirements. The regulator found that the division failed to establish and maintain an effective anti-money laundering system, did not ensure proper monitoring of customer transactions, and did not file mandatory reports on suspicious activity.
Repeated violations led to harsher penalties
Bank Secrecy Act requires financial institutions to identify suspicious transactions, screen high-risk customers, and promptly notify authorities of potential cases of money laundering and the financing of illegal activities.
According to FinCEN, the violations continued from January 2019 through June 2023—even after UBS was fined $14.5 million in 2018 for similar violations. It was precisely the recurring nature of the violations that became one of the key factors in determining the amount of the new penalties.
At the same time, the bank settled claims brought by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Industry Regulatory Authority (FINRA), which had also been investigating the violations.
Regulators pointed to clients in the high-risk category
The regulators stated that UBS failed to conduct adequate due diligence on high-risk clients, including those associated with Russia and Latin American countries. The investigation materials mention a Russian businessman whom FinCEN describes as close to Russian President Vladimir Putin. Despite numerous reports about the origins of his wealth and potential money laundering risks, the bank continued to service his accounts.
In addition, FinCEN identified inadequate controls over more than 60,000 international money transfers totaling over $10 billion, which, according to the regulator, significantly increased the risk of the financial system being used for illegal transactions.
As part of the settlement agreement, UBS Financial Services is required to engage an independent consultant to conduct a comprehensive review of its anti-money laundering program and remedy the identified violations. Particular attention will be paid to risks associated with cross-border crime, drug trafficking, and transactions involving Iran, Russia, and Venezuela.
UBS stated that the bank cooperated with U.S. regulators throughout the investigation and has already invested significant resources in modernizing its financial monitoring system in accordance with industry best practices.
“Today’s actions should send a clear message: financial institutions that engage in such violations will face serious consequences,” said FinCEN Director Andrea Gatzki.
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