finance

A record fine on the Swiss bank highlights U.S. regulators shifting focus to fill anti-money laundering gaps.

This article appears in the October issue of Global Finance Magazine.

A record $125 million fine handed out to UBS by U.S. regulators in August could herald increased scrutiny of banks.

How banks react to stricter compliance with anti-money laundering laws will be key as U.S. foreign policy and enforcement go together.

“As sanctions and tariffs continue to define U.S. foreign policy, this trend will likely continue. The U.S. and European banks are intertwined the most with the global economy, so the probability of them being under increased scrutiny is likely,” said Salar Ghahramani, associate professor of business law and international law & policy at Penn State Abington.

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) settlement resolves allegations made by the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Financial Industry Regulatory Authority.

Johann Scholtz, senior equity analyst for Morningstar, suggests that the fine is a result of the market that the Swiss bank targets. 

“These banks are particularly exposed to the risk of fines and regulatory intervention just by virtue of their business model. Banking, politically connected individuals, banking high-net-worth people, I think it exposes them to particular risk from an anti-money laundering perspective,” Scholtz said.

The fines were for not sufficiently monitoring 61,500 foreign exchange transactions and not flagging suspicious activity. The record amount is partly because UBS Group AG was fined $14.5 million in 2018 for similar activities with regulators discovering that remedial action had not been taken. 

“The 2018 fine may have convinced the UBS board that they were standing on very shaky PR and legal grounds due to the previous track record, likely propelling them to agree to the terms of the fine,” added Ghahramani.

Outcome-Focused Compliance

Although there is no current political push to modify AML laws, the UBS judgement may constitute shifting priorities by U.S. regulators.

 “The direction of AML regulations in the U.S. seems that it’s becoming more outcome-focused and less of a tick-box exercise. They really want banks to prove that they have a robust system in place rather than just ticking boxes,” Scholtz said.

How can banks protect themselves? By updating their risk management systems to ensure compliance through internal audits. The technical description of UBS’ settlement was unduly specific. Blaming an error in AML surveillance data feeds, a lack of verification of account holder addresses, no reliable unique identifier to match transactions, an absence of any exception queue and errors in the Excel spreadsheet used for foreign exchange transfers

“The 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,” A UBS spokesperson said. 

Nic Wirtz is a contributing writer based in Guatemala.

Lighter regulation and excess capital are setting up the biggest U.S. banking wave since the 2008 crisis.

The U.S. banking industry is bracing for its most significant wave of consolidation since the 2008 financial crisis, according to a new Bain & Co. analysis.

The firm expects the number of trillion-dollar U.S. banks to grow from the “Big Four” — JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., and Wells Fargo & Co. — to as many as seven by 2030. Key drivers include lighter regulation, burgeoning tech and 17 global banks holding over $10 billion each in excess capital. That capital cushion, Bain argues, will lead to a spike in M&A activity.

Banco Santander SA’s August acquisition of Webster Financial Corp. serves as an early example of what could be in store for U.S. banking giants. For Joe Lischwe, a partner in Bain’s financial services and customer strategy practice, the deal illustrates how capital-rich banks are leveraging eased regulatory conditions to combine geographic scale with targeted scope. In this scenario, Santander gets Webster’s health savings account franchise.

“We think there’s a window within this current [Trump] administration over the next two to three years where this will continue to be accelerating,” Lischwe told Global Finance on a call. “You will see more consolidation over the next few years.”

A Capital-Rich Setup

Seventeen U.S. banks currently hold more than $10 billion in excess capital — a figure Lischwe said Bain compiled from a mix of public quarterly filings and third-party data sources, including Refinitiv.

Bain also found that total bank M&A deal value rose 19% in 2025 and is up another 7% so far this year.

“There’s been an uptick in the actual deal value that has been occurring,” Lischwe added. “But I think, probably, the biggest tailwind is from a regulatory perspective.”

The Trump administration continues to move on multiple fronts that matter most to M&A-hungry banks, the latest being on Sept. 17 when the Federal Deposit Insurance Corporation’s (FDIC) proposed new guidelines to make bank mergers easier and faster to approve.

Scale vs. Scope

Not all acquisitions are created equal, according to Bain’s framework, which sorts bank deals into two categories. “Scale” deals expand a bank’s existing footprint — deposits, branches and geographic reach — and generate value primarily through cost synergies.

“Scope” deals, meanwhile, bring in capabilities the acquirer doesn’t already have. Bain predicts that these blended scale-and-scope deals will emerge as the standouts. Capital One Financial Corp.’s acquisition of Discover, which gave Capital One a payments network it previously lacked, produced outsized total shareholder returns on a two-year basis, Lischwe said.

Fifth Third Bancorp’s purchase of Comerica, by contrast, was a more traditional scale play — consolidating similar deposit and branch businesses — without adding new capabilities.

“In general, we were seeing that blended deals, on average, performed better,” Lischwe said. “That’s not to say that scale deals don’t do well.”

The Fintech Integration Trap

Bain’s advice to bank executives is to first conduct a rigorous self-assessment across six dimensions — financial scale, geographic density, business mix, product capability, technology and liquidity — before approaching an acquisition target.

“The answer is not to buy more fintechs,” Lischwe said. “The answer is to know your gaps, diligence those gaps, and then consider every asset that helps you close those gaps.”

Nowadays, fintechs tend to outpace incumbent banks in artificial intelligence, data, payments, blockchain and digital assets — areas that could tempt banks to leapfrog years of in-house development. But evaluating those targets is harder than buying a similar-sized bank, Lischwe said. A fintech operating in an unfamiliar capability area is more difficult to underwrite than a competitor running the same core business.

That complexity introduces significant execution risk for buyers looking to acquire growth quickly.

Winners, Losers, and the Case for Consumers

Jeff Barrington, Managing Director at tech and payments sell-side advisory firm Windsor Drake, cautions that banks frequently misjudge these acquisitions on several fronts.

“Banks buying fintechs tend to get tripped up in four ways: they pay a growth multiple for revenue that was acquisition cost-fuelled and doesn’t survive inside the bank, they underestimate the cost of bolting a modern stack onto a legacy core, they lose the founders and engineers once the earnout vests, and they misprice the regulatory and partner bank risk that comes attached,” Barrington said. “The recurring error is buying what looks like a growth company and ending up with a bank-owned product that stops growing.”

There’s also the risk of a more concentrated banking landscape: fewer banks means higher fees and diminished access to the kind of relationship-based banking that small towns and entrepreneurs rely on.

Barrington added that while scale can fund improved pricing and technology for users, “consolidation consistently narrows choice, closes branches and thins out relationship lending.

Yes, but …

Banks that fail to acquire or build the AI, data and digital capabilities that are currently reshaping the industry risk falling behind competitively.

“Those [banks] that will be successful are those that will be really ruthless about what are our capability gaps, what can we close inorganically, doing the proper diligence and then properly integrating it,” Lischwe added.

Capital One-Discover, Fifth Third-Comerica and Santander-Webster are recent deals that, so far, have held up. Whether pricier, more speculative targets — he cited digital banking upstart Revolut as an example of an asset banks are watching, despite its rich valuation — get bought will depend on whether acquirers can underwrite a clear strategic fit and value-creation case.

As for whether a change in political control in Washington could derail the trend, Lischwe remains skeptical.

“The regulatory tailwind is going to last,” he said, “through this administration and even into the next one.”

Anthony Noto covers corporate finance and private credit. Contact him at anoto@gfmag.com