UBS fined $125 million by US regulators for money laundering violations, total penalties reach $145 million

UBS Financial Services, the US broker-dealer and wealth management subsidiary of UBS Group AG, has been fined $125 million by the US Treasury's Financial Crimes Enforcement Network for willful violations of the Bank Secrecy Act, the primary US anti-money laundering statute. The penalty, announced on Monday, is the largest civil fine ever imposed on a broker-dealer for BSA violations. The Securities and Exchange Commission separately imposed a $20 million fine, and additional penalties from the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority bring the total cost to $145 million (about €125 million or CHF 117 million).

Repeat offender

FinCEN labelled UBS a recidivist. In December 2018, the bank paid a $14.5 million fine and entered into a consent agreement after regulators found it had failed to adequately monitor foreign currency wires. UBS promised to quickly remediate its anti-money laundering program, but the underlying deficiencies persisted. The bank did not inform FinCEN of the ongoing problems; the agency uncovered them only after a subsequent investigation triggered by a regulatory audit.

Monitoring failures

The case centres on foreign currency transactions. Between January 2019 and June 2023, UBS used an obsolete automated monitoring system that left approximately 52,000 wires worth $7.6 billion without proper oversight. A new system introduced in 2021 resolved only part of the issue: data errors caused another 8,000 transactions, valued at $2.7 billion, to be monitored inadequately. In some instances, the bank filed suspicious activity reports years after the transactions occurred. FinCEN also found that UBS relied on a monitoring setup that included an Excel spreadsheet, where errors led to hundreds of missed alerts. The regulator noted that UBS's growth strategy targeted wealthy clients, including ultra-high-net-worth individuals from jurisdictions with elevated illicit finance risks, which heightened the need for robust controls.

High-risk clients

UBS also failed to conduct adequate customer due diligence, particularly for clients with ties to Russia and Latin America. FinCEN cited a retired US client with Russian connections who was classified as low risk despite publicly available information showing he had done consulting work for a sanctioned oligarch. UBS processed multiple large transfers for this client before eventually filing a suspicious activity report and ending the relationship. The bank also permitted tens of millions of dollars in transactions, including third-party transfers that appeared to breach its own controls, for a Russian billionaire described as one of the world's wealthiest individuals. The regulator said UBSFS did not properly assess or mitigate money laundering risks associated with the source of wealth of these clients, ignoring red flags pointing to alleged corruption, fraud, and money laundering.

Regulatory message and UBS response

FinCEN director Andrea Gacki said the penalty should serve as a warning.

Today's historic action against UBSFS should send a clear message that recidivist financial institutions will face severe repercussions.

As part of the consent order, UBS admitted to willfully violating the Bank Secrecy Act, including failing to implement an effective AML program and omitting suspicious activity reports. The bank must also hire an independent third party to conduct a retrospective review of its compliance.

UBS characterized the matter as a legacy issue.

Today's announcement brings closure to this legacy matter. UBS has cooperated fully with its regulators and has made significant investments to remediate and strengthen its AML program in line with leading industry practices.