UBS Shares Fall as Swiss Prosecutors File 'Tuna Bonds' Charges
Bank vows to 'vigorously defend' itself against money laundering charges inherited from Credit Suisse in long-running Mozambique scandal.
Shares of UBS Group AG fell in Tuesday trading after Swiss federal prosecutors filed charges against the banking giant and its recently acquired subsidiary, Credit Suisse, for alleged failures to prevent money laundering in the long-running ‘Tuna Bonds’ scandal.
The Office of the Attorney-General of Switzerland announced the indictment, which centers on organizational deficiencies that allegedly allowed for illicit transactions connected to a multi-billion-dollar loan scheme in Mozambique. The move revives a damaging legacy issue for UBS, highlighting the persistent legal and reputational risks embedded within its landmark takeover of its former rival.
UBS shares (NYSE: UBS) dropped as much as 1.5% in morning trading, reflecting investor concern over the new legal battle. The bank immediately pushed back against the charges. "We firmly reject the Office of the Attorney General's conclusions and will vigorously defend our position," the bank said in a statement.
The charges represent the latest chapter in the notorious 'Tuna Bonds' affair, a complex scandal dating back nearly a decade. Between 2013 and 2014, Credit Suisse and Russian bank VTB arranged approximately $2 billion in loans for Mozambican state-owned companies, ostensibly to fund a tuna fishing fleet and maritime security projects.
However, investigations by global authorities later revealed that hundreds of millions of dollars were diverted through kickbacks to corrupt Mozambican officials and Credit Suisse bankers. The loans, backed by undisclosed state guarantees, plunged Mozambique into a severe economic crisis when they came to light in 2016, leading to a debt default.
The indictment from Swiss prosecutors alleges that Credit Suisse did not have the necessary organizational measures in place to prevent the laundering of these illicit funds. While the actions occurred long before UBS's 2023 acquisition, the charges have been filed against the new combined entity, placing the legal burden squarely on UBS's shoulders.
This development underscores the complex and costly integration process UBS is navigating. The government-brokered acquisition of Credit Suisse was intended to prevent a wider financial crisis, but it also meant absorbing a portfolio of deep-seated legal problems.
Credit Suisse had already faced significant penalties for its role in the affair. In 2021, it agreed to pay nearly $475 million in fines to U.S. and British authorities, with its European subsidiary pleading guilty to wire fraud conspiracy. Just last year, UBS had sought to draw a line under the issue by reaching a settlement with the Mozambique government, resolving outstanding claims related to the transactions.
For UBS CEO Sergio Ermotti, the new charges present a fresh challenge in his efforts to clean up the inherited mess and restore investor confidence. The bank has been working diligently to resolve outstanding litigation and wind down risky assets from Credit Suisse's books. This indictment from its home-country regulator serves as a stark reminder of the long tail of risk associated with the acquisition.
While the financial impact of a potential fine from Swiss authorities remains uncertain, the reputational cost is more immediate. The case brings unwelcome attention back to a scandal synonymous with lax controls and corporate malfeasance at Credit Suisse, complicating UBS's efforts to present a new, unified, and more robustly managed institution to the global market.