UBS shares experienced a decline in value after it was reported that the U.S. Department of Justice (DOJ) is intensifying its investigation into alleged compliance failures that allowed Russian clients to evade sanctions. The investigation is said to be focused primarily on Credit Suisse, which was acquired by UBS earlier this year. UBS, in its financial report, stated that its sanctions programs are designed to comply with regulations imposed by various jurisdictions, including the United States. The DOJ declined to comment on the matter. UBS shares fell almost 8% after the news broke and trading was temporarily halted.

Sources familiar with the matter have revealed that the DOJ has been in contact with U.S.-based lawyers for UBS to discuss Credit Suisse’s alleged exposure to sanctions violations since UBS acquired the smaller bank. The investigation is said to be in its early stages and may not result in charges or a settlement. The probe covers the restrictions imposed after Russia’s invasion of Ukraine in 2022 and the annexation of Crimea in 2014. JP Morgan noted that while the investigation poses a challenge to UBS, the bank has already made provisions to address any costs that may arise from the case. UBS had litigation provisions of $4.7 billion at the end of June.

In response to the news, UBS shares initially fell by almost 8% before recovering slightly to trade 3.3% lower. The investigation by the DOJ is expected to focus on the compliance failures within Credit Suisse and potential sanctions violations. UBS has stated that it is committed to cooperation with the authorities, and its financial report already accounted for potential litigation costs. While the investigation is still in its early stages, UBS has made provisions and adjustments to its valuation of Credit Suisse to ensure it is prepared for any contingent liabilities.

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