Switzerland Finds Serious Risk & Money-Laundering Failures at Julius Bär

Key Takeaways

• FINMA Finds Serious Breaches: FINMA concluded that Julius Bär committed serious supervisory violations involving private debt lending and client relationships linked to two Russian politically exposed persons.
• Private Debt Exposure Surpassed $1.26 Billion: Eight loans to a European group and its founder exceeded approximately $1.26 billion (CHF 1 billion) in 2022 and 2023, while approximately $738 million (CHF 586 million) outstanding at the end of 2023 was ultimately written down in full.
• AML Controls Fell Short: FINMA found that Julius Bär failed over several years to adequately scrutinize the origin of assets belonging to high-risk clients linked to two Russian PEPs and breached reporting obligations under Switzerland’s Anti-Money Laundering Act.
• Fifth Enforcement Proceeding in Less Than 10 Years: FINMA said previous interventions had failed to produce the necessary change in Julius Bär’s risk and compliance culture.
• Oversight Will Continue Through 2032: Julius Bär must report on its risk, error and compliance culture through 2032 and temporarily hold approximately $315 million (CHF 250 million) in additional capital, while FINMA is confiscating approximately $12.6 million (CHF 10 million) in profits connected to the two Russian PEP client groups.

Deep Dive

Swiss financial regulator FINMA has found serious risk management and anti-money laundering failures at Julius Bär, concluding an enforcement proceeding that exposed weaknesses in more than $1.26 billion (CHF 1 billion) of private debt lending and in the bank’s handling of clients linked to two Russian politically exposed persons.

The findings mark the fifth enforcement proceeding FINMA has concluded against Julius Bär in less than 10 years. That history sits at the center of the regulator’s judgment. Similar shortcomings had surfaced before, measures had been imposed before, and yet FINMA found that the bank had failed to produce the necessary change in its risk and compliance culture.

The latest case brings together two investigations that began separately. One concerned loans Julius Bär granted to a European group and its founder. The other examined possible anti-money laundering breaches involving clients linked to two Russian PEPs. FINMA combined them because, beneath the different transactions and client relationships, it found the same weakness: serious shortcomings in how the bank understood, controlled and responded to risk.

Some of the consequences will extend well beyond the proceeding itself. Julius Bär must report to FINMA through 2032 on its risk, error and compliance culture. It must temporarily hold approximately $315 million (CHF 250 million) in additional capital, while shareholder payments, including dividends, require FINMA’s prior approval. The regulator is also confiscating approximately $12.6 million (CHF 10 million) in profits generated in violation of supervisory provisions in connection with the two Russian PEP client groups.

The private debt investigation reaches back to a business Julius Bär began developing in 2018. The loans were generally secured not by traditional collateral, but by borrowers’ unlisted shares. Beginning in September 2019, the bank granted eight loans to the European group and its founder. Their total value rose quickly, passing approximately $1.26 billion (CHF 1 billion) in 2022 and 2023.

The business grew beyond the bank’s ability to control it properly, according to FINMA. Julius Bär lacked adequate internal regulations, effective control mechanisms and enough trained staff for a prolonged period. The private debt business was also outside the strategy of a bank specializing solely in private banking. As the exposure grew, FINMA found, so did the warning signs.

The bank repeatedly disregarded limits it had imposed on individual debtors and breached regulatory requirements for reporting concentration risks. FINMA also found conflicts of interest and incentives within the relationship that it considered misguided.

There was considerable money attached to that relationship. Julius Bär employees and external intermediaries earned salaries and commissions running into the millions as a result of the business with the client group. The bank also facilitated opaque equity transactions involving securities in the group’s entities and, in return, persuaded the client group to carry out a pass-through transaction worth approximately $70.5 million (€60 million).

The transaction mattered for more than its size. FINMA found that, as a result, the total loan portfolio Julius Bär reported at the end of 2022 did not reflect the economic reality of its exposure.

By the end of 2023, approximately $738 million (CHF 586 million) remained outstanding. Julius Bär ultimately had to write down the entire amount. FINMA had already begun intervening. It imposed extensive immediate measures in June and December 2023 and again in May 2024 after identifying weaknesses in lending practices, anti-money laundering procedures and risk management, as well as what it described as the bank’s very high appetite for reputational, money-laundering and credit risks. In December 2024, the regulator opened its enforcement proceeding over the loans.

The lending case was not the only one taking shape.

The PEP Relationships

In August 2025, FINMA opened another enforcement proceeding, this time examining possible breaches of anti-money laundering rules involving clients linked to two Russian PEPs. Immediate measures followed in September. The clients posed a high risk, and FINMA nevertheless found that Julius Bär had failed over several years to adequately verify and scrutinize the origin of their assets. The bank also failed to critically examine negative media reports and suspicious client behavior with sufficient rigor and breached its reporting obligations under Switzerland’s Anti-Money Laundering Act.

One decision from 2019 showed how far those failures could reach into the bank’s judgment.

Rather than comply with its due diligence and reporting obligations, Julius Bär made an exception to its rules, known as a “Know Your Client Exception to Policy,” or KYC-EtP. The bank considered the exception justified because one of its employees had endorsed the PEP client.

There was a problem with that assurance. The employee had close personal ties to the PEP client’s family.

FINMA found that Julius Bär did not question the approach even during later reviews.

The regulator eventually combined the PEP investigation with the private debt case because both led it to the same place. These were not merely technical failures confined to separate corners of the bank. FINMA found serious shortcomings in risk management and culture, repeating problems that earlier enforcement proceedings had already sought to correct.

Since 2017, FINMA has identified serious breaches of supervisory law in five enforcement proceedings against Julius Bär. It had ordered measures to restore compliance after previous cases, some involving similar shortcomings. Yet the regulator concluded that those interventions had not brought about the necessary change in the bank’s risk and compliance culture.

Repetition changes the meaning of a failure. A weakness identified once can be repaired. When related weaknesses return after enforcement and remediation, the question moves beyond whether a control existed and toward whether the institution had learned to respect it.

FINMA’s latest measures are built around that problem.

The Long Repair

Julius Bär has already changed considerably since the events covered by the proceeding, something FINMA expressly acknowledged. At the regulator’s request, the bank redefined its risk appetite in 2025 and decided to gradually divest itself of clients and assets that no longer fit within it. Julius Bär has discontinued its private debt business, reduced lending, strengthened control functions, overhauled its remuneration system and begun what FINMA described as a cultural transformation.

There has also been change at the top. FINMA said Julius Bär has made the necessary consistent personnel changes at Board of Directors and Executive Board level over the past two years and fundamentally overhauled its corporate governance framework.

The timing is important. The current management team was appointed after the events that produced the breaches identified by FINMA. It now carries responsibility for implementing the measures imposed in response to them.

Those changes have already altered the regulator’s approach. FINMA has lifted, either partly or entirely, immediate measures previously imposed in the areas of capital and liquidity. Measures restricting lending activities and the establishment of new business relationships with PEPs from high-risk countries have also been lifted or relaxed.

But FINMA is not treating the work as finished. Julius Bär must submit reports through 2032 explaining its risk, error and compliance culture and the measures taken to improve it. A temporary ban on establishing new business relationships with PEP clients from high-risk countries, imposed in September 2025, will be phased out gradually until the bank completes the divestment of client assets that no longer conform to its revised risk appetite.

Until then, the bank must hold approximately $315 million (CHF 250 million) in additional capital. FINMA said that requirement was higher at times during the proceedings. Payments to shareholders, including dividends, must receive the regulator’s approval in advance.

FINMA is also confiscating approximately $12.6 million (CHF 10 million) in profits Julius Bär generated in violation of supervisory provisions in connection with the two Russian PEP client groups.

The measures leave the bank in an unusual position: FINMA has recognized substantial changes already made under new leadership while imposing years of oversight intended to determine whether those changes endure. The question is no longer simply whether Julius Bär can rewrite policies, change executives or close a business line. FINMA’s findings show why the regulator wants evidence that different decisions will be made when commercial interests and controls collide again.

And not every part of the case has been closed. FINMA has launched proceedings against three former Julius Bär employees who may be responsible for violations of supervisory provisions or internal guidelines. The bank’s combined enforcement proceeding has reached its conclusion. The regulator’s examination of individual responsibility has not.

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