UBS Said to Plan Closing Moscow Representative Office

(Corrects to show the bank plans to close a representative office in Russia.)

(Bloomberg) — UBS Group AG plans to scale back its wealth-management activities in Moscow that serve clients who deposit their funds offshore as Switzerland’s largest bank streamlines operations in some emerging markets, according to two people with knowledge of the decision.

By closing the wealth-management representative office, UBS will stop marketing its money-management services, said one of the people, who asked not to be identified because the information hasn’t been made public. Clients typically book funds outside the country, said the person.

“Russia is one of our key markets in global emerging markets” and the bank’s advisory unit, OOO UBS Bank, continues to serve customers in Moscow, UBS said in an e-mailed statement. A spokesman in Zurich declined to comment on the closure.

The overhaul follows a new law implemented in Russia this year that aims to boost transparency on assets abroad and allows the taxation of profits on funds held outside the country. At the same time, risks to economic growth in the country remain as Europe and the U.S. threaten new sanctions a year after President Vladimir Putin orchestrated the annexation of Crimea from Ukraine.

UBS has been streamlining services for ultra-rich clients in some emerging markets to cut overlap with other divisions within the bank. The Swiss lender in September said it was closing its representative office in Dubai and moving the operations to Abu Dhabi as part of the bank’s plan to “optimize its local operations” in the United Arab Emirates, according to a statement at the time.

Russia Buildup

UBS first opened a representative office in Moscow in 1996, and formed a joint venture with local brokerage Brunswick in 1997. In 2004, UBS purchased the remaining stake in the joint venture, and re-branded the business as UBS a year later. In 2006, UBS received a banking license from the Russian central bank, allowing it to offer wealth management, asset management, ruble fixed-income and foreign-exchange services onshore.

The bank remains to committed to its domestic onshore wealth business, one of the people said.

International banks with Russian clients need to review the structures used by their clients for personal and corporate use, law firm Withers LLP said in a note published on their website. Russian tax residents must comply, the firm said, lest they incur Russian tax or criminal liability.