CASE STUDY
February 2026
Executive Summary
The international banking system is undergoing a period of intensifying politicisation driven by three converging forces: the aggressive extraterritorial use of U.S. sanctions enforcement, the re-emergence of ideologically-motivated debanking as a contested legal and political doctrine, and the fragmentation of post-2008 regulatory consensus among major economies. This case study examines four concurrent developments — the proposed severing of Swiss bank MBaer from the U.S. financial system, the Trump administration’s lawsuit against JPMorgan Chase, the Deutsche Bank raid over Abramovich-linked transactions, and the UBS capital reform dispute — as diagnostic indicators of structural stress in the architecture of global finance.
For Singapore, a jurisdiction deeply embedded in international capital flows and reliant on the credibility of its own regulatory framework, these developments carry material implications for correspondent banking relationships, wealth management positioning, and the MAS’s ongoing supervisory posture.
- Case Studies in Banking Politicisation
1.1 MBaer Merchant Bank — U.S. Sanctions as Dollar Hegemony
On 26 February 2026, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) published a notice of proposed rulemaking to prohibit covered U.S. financial institutions from maintaining correspondent accounts with MBaer Merchant Bank AG, a small Swiss private bank. The action invokes Section 311 of the USA PATRIOT Act and alleges that MBaer facilitated over USD 100 million in illicit transactions on behalf of actors linked to Iran’s Islamic Revolutionary Guard Corps (IRGC), Venezuelan corruption networks, and Russian money laundering operations.
Key Finding
This represents the first invocation of Section 311 against a European bank since Latvia’s ABLV was shut down in 2018. The mechanism is uniquely powerful: it does not require a criminal conviction but rather administrative action, effectively severing the target from the dollar-denominated financial system — the backbone of global trade settlement.
The jurisdictional layering in this case is analytically significant. Switzerland’s FINMA had already concluded its own enforcement proceedings against MBaer three weeks prior, but those measures remain suspended pending an appeal before the Swiss Federal Administrative Court. The U.S. action therefore proceeds in parallel with — and effectively supersedes — the domestic Swiss regulatory outcome, illustrating how dollar-clearing access enables Washington to exercise de facto supervisory authority over foreign institutions.
1.2 Deutsche Bank — Legacy Exposure and Ongoing AML Risk
On 28 January 2026, Frankfurt prosecutors raided Deutsche Bank offices in Frankfurt and Berlin as part of a money laundering investigation related to past transactions with companies allegedly connected to sanctioned oligarch Roman Abramovich. The transactions in question span 2013 to 2018 — a period predating Abramovich’s March 2022 EU designation — but the investigation signals that regulators and prosecutors are applying retroactive scrutiny to relationships formed under pre-sanctions conditions.
The case is a setback for CEO Christian Sewing’s restructuring narrative, which centred on drawing a definitive line under the bank’s prolonged compliance failures. Deutsche Bank’s shares fell 3.9% intraday on the news. The episode reinforces a pattern: even where banks have invested substantially in remediation, legacy correspondent and private banking relationships with politically-exposed persons (PEPs) remain a durable source of legal and reputational risk.
1.3 Trump v. JPMorgan — Debanking as Political Doctrine
President Trump filed suit against JPMorgan Chase and CEO Jamie Dimon in Miami-Dade County on 22 January 2026, seeking USD 5 billion in damages and alleging that the bank’s closure of Trump-affiliated accounts in February 2021 — seven weeks after the January 6 Capitol assault — constituted politically-motivated discrimination. The complaint alleges trade libel, breach of implied covenant of good faith, and violation of Florida’s deceptive trade practices law.
JPMorgan’s Position
“We do not close accounts for political or religious reasons. We do close accounts because they create legal or regulatory risk for the company. We regret having to do so but often rules and regulatory expectations lead us to do so.” — JPMorgan Spokesperson
The lawsuit crystallises a fundamental tension in the debanking debate. Banks operate under a regulatory framework — encompassing BSA/AML obligations, reputational risk policies, and supervisory expectations — that requires them to de-risk certain relationships. The Trump administration is simultaneously the sovereign empowered to reshape those regulatory expectations and the plaintiff alleging harm from their application. This dual posture creates legal incoherence but political utility: the lawsuit functions as a mechanism to pressure financial institutions regardless of its juridical merit.
The debanking issue has broader implications beyond Trump personally. The administration’s framing — that banks deploy compliance infrastructure as a tool of ideological gatekeeping — has attracted support from cryptocurrency firms, conservative media entities, and firearms dealers who have faced account closures in recent years.
1.4 UBS and Swiss Capital Reform — Post-Credit Suisse Regulatory Reckoning
The Swiss government’s proposed post-Credit Suisse capital reforms, unveiled in June 2025, would require UBS to hold full equity backing for the foreign subsidiaries of its global operations — an estimated additional USD 23–26 billion in capital requirements. UBS has mounted a sustained campaign against the proposals, arguing they would jeopardise its business model and impose costs on the broader Swiss economy.
The reform trajectory appears increasingly uncertain. Switzerland’s largest parliamentary party, the SVP, backed an alternative proposal in January 2026 that would allow AT1 bonds to satisfy up to half of the new foreign subsidiary requirement. This political development pushed UBS shares to a 17-year high on investor expectations of a softened regulatory outcome. Simultaneously, Julius Baer — still managing the fallout from its CHF 700 million Signa write-off — booked an additional CHF 150 million loan-loss provision in November 2025, underscoring that Swiss private banking remains in a period of balance sheet normalisation.
The Swiss experience illustrates a dilemma common to major financial centres: how to implement credible post-crisis reforms without triggering competitive disadvantage or capital flight from their primary internationally active institutions.
- Structural Outlook
2.1 Escalating Extraterritoriality of U.S. Financial Regulation
The MBaer action is unlikely to be isolated. FinCEN and OFAC have signalled an aggressive posture under the current Treasury leadership, with Secretary Bessent explicitly warning that “banks should be on notice” regarding illicit finance enforcement. The combination of heightened geopolitical tension with Iran, Russia, and Venezuela — all major sanctions targets — with an administration willing to deploy Section 311 against European institutions creates a structural environment of heightened correspondent banking risk for any institution with even indirect exposure to these jurisdictions.
The dollar’s role as the dominant reserve and settlement currency means this extraterritorial reach is not merely a policy preference but a structural feature of the international monetary system. Short of a material erosion of dollar dominance — which remains a multi-decade prospect at best — foreign banks will continue to face asymmetric regulatory exposure to U.S. enforcement actions.
2.2 Fragmentation of the Regulatory Consensus
The post-2008 regulatory architecture — centred on Basel III capital standards, FATF-aligned AML frameworks, and G20 coordination — is showing signs of fragmentation. The UBS capital dispute reflects a broader divergence between jurisdictions seeking to tighten systemic risk buffers and globally active banks seeking regulatory equivalence. Meanwhile, the Trump administration’s rollback of certain domestic ESG and compliance expectations may widen the gap between U.S. and European regulatory cultures, complicating the operation of globally integrated banks.
The Bank of England’s warning regarding Fed independence spillovers adds a further dimension. Governor Bailey’s characterisation of central bank solidarity as “pretty unprecedented” reflects genuine institutional anxiety: if the normative commitment to monetary policy independence is eroded in the world’s largest economy, the spillover effects on yield curves, capital flows, and currency stability are difficult to bound.
2.3 Politicisation of AML and Compliance Infrastructure
Perhaps most structurally significant is the normalisation of compliance frameworks as instruments of political contest. The Trump debanking litigation, regardless of its legal outcome, establishes a precedent that risk-based account closure decisions are justiciable political acts rather than regulatory necessities. If courts accept even a portion of the administration’s framing, banks will face sharply increased litigation risk for de-risking decisions — potentially undermining the effectiveness of AML enforcement globally.
Systemic Risk
There is a paradox at the heart of the debanking debate: the same political actors alleging discriminatory de-risking also benefit from a robust AML framework that prevents illicit finance from corrupting legitimate markets. Weakening the legal insulation of compliance decisions creates adverse incentives across the financial system.
- Policy and Institutional Responses
3.1 For Regulators and Supervisory Bodies
Develop multilateral Section 311 equivalents: The EU and other major financial centres should advance reciprocal mechanisms that can impose correspondent banking restrictions on institutions facilitating sanctions evasion. Reliance on U.S. unilateral action creates asymmetric enforcement landscapes.
Clarify de-risking legal protections: Regulatory guidance should provide explicit safe harbour provisions for institutions that close accounts on documented, risk-based grounds — insulating compliance teams from politically-motivated litigation.
Strengthen cross-border supervisory coordination: The MBaer case — where FINMA proceedings and U.S. action proceeded in parallel — illustrates the need for formal channels of regulatory pre-notification and coordination between FATF member jurisdictions.
Calibrate capital reform to competitive dynamics: The Swiss experience suggests that unilateral imposition of capital requirements significantly above Basel minima risks competitive disadvantage without necessarily improving systemic stability. International coordination through the FSB should precede major domestic departures from agreed standards.
3.2 For Internationally Active Banks
Intensify retroactive PEP exposure reviews: The Deutsche Bank case confirms that relationships formed under pre-sanctions conditions may become liabilities upon later designation. Banks should conduct rolling reviews of historical PEP relationships against current sanctions lists.
Invest in transaction monitoring for sanctions-evasion typologies: The MBaer allegations — involving intermediary structures used to move funds for IRGC and Venezuelan actors — are consistent with known typologies. Correspondent banks must invest in detecting layered beneficial ownership structures.
Document de-risking decisions forensically: Given the litigation environment, banks should ensure that account closure decisions are comprehensively documented against objective regulatory criteria, creating an evidentiary record that withstands judicial scrutiny.
Diversify clearing infrastructure where possible: Institutions with significant non-U.S. business should evaluate whether euro-denominated clearing relationships, including through SEPA and TARGET2, can provide partial resilience against Section 311-type actions.
- Implications for Singapore
4.1 Correspondent Banking and Regional Exposure
Singapore functions as the primary hub for regional correspondent banking relationships across Southeast Asia. As of 2025, Singapore-incorporated banks collectively maintain correspondent relationships with over 500 foreign financial institutions. The MBaer precedent raises the risk of secondary exposure: any Singapore bank maintaining a correspondent relationship with a European institution that is itself under U.S. sanctions scrutiny faces potential de-listing pressure or enhanced due diligence requirements from U.S. counterparties.
MAS Notice 626 and MAS Notice 1014 already impose robust AML/CFT requirements, including enhanced due diligence for high-risk jurisdictions and politically-exposed persons. However, the current enforcement climate suggests these obligations should be viewed as a floor rather than a ceiling. Singapore institutions should assume that U.S. counterparties — and by extension U.S. regulators — are scrutinising their correspondent networks with increased granularity.
4.2 Wealth Management and Private Banking
Singapore has emerged as a primary beneficiary of the post-2022 redistribution of private wealth away from Switzerland, driven partly by the Credit Suisse collapse and partly by heightened scrutiny of Swiss banking secrecy. The MBaer case — involving alleged facilitation of Russian, Venezuelan, and Iranian illicit funds through a Swiss private bank — will intensify due diligence requirements imposed by international clients and their advisors when onboarding through Singapore-based private banks.
Singapore Context
Singapore seized millions in Credit Suisse and Julius Baer accounts as part of the 2023 S$3 billion money laundering case — the largest in Singapore’s history. This domestic enforcement action, combined with the current international environment, places MAS in a position of heightened vigilance regarding high-net-worth onboarding from sanctioned-jurisdiction networks.
At the same time, Singapore’s continued attractiveness as a wealth management centre depends in part on its ability to receive legitimate capital displaced from more scrutinised jurisdictions. The policy challenge for MAS is to maintain a risk-based framework that distinguishes credibly between licit wealth seeking a stable, rule-of-law jurisdiction and illicit wealth seeking a permissive one.
4.3 MAS Regulatory Posture
MAS has demonstrated a willingness to take assertive enforcement action, as evidenced by the 2023 money laundering prosecutions and its ongoing engagement in FATF mutual evaluation cycles. In the current environment, proactive regulatory posture serves Singapore’s interests in several respects. First, it insulates Singaporean institutions from the reputational contamination associated with being perceived as a permissive jurisdiction in the wake of Swiss banking scandals. Second, robust enforcement credibility is a prerequisite for maintaining the correspondent banking access on which Singapore’s trade finance infrastructure depends.
The Bank of England’s articulation of Fed independence spillover risks has a direct analogue in Singapore’s context. MAS’s credibility as an independent, apolitical regulator is itself a competitive asset. In an environment where central bank independence is being contested in the world’s largest economy, Singapore’s institutional commitment to monetary and supervisory independence represents a differentiating feature rather than simply a normative obligation.
4.4 Summary Risk Matrix for Singapore
Risk Domain Mechanism Severity MAS Response Priority
Correspondent banking de-risking U.S. counterparties tighten due diligence on SG banks’ foreign correspondents High Proactive outreach to U.S. regulatory counterparts
Wealth management onboarding Displaced capital from Swiss banking scrutiny; heightened PEP risk Medium-High Enhanced beneficial ownership verification
Trade finance disruption Section 311 actions against regional correspondent banks Medium Diversification of clearing channels
Regulatory contagion Erosion of de-risking legal protections via debanking litigation Medium Legislative clarity on compliance safe harbours
Monetary spillovers Fed independence erosion affecting global yield curves Low-Medium MAS independence signalling; FX reserve management
- Conclusion
The cases examined in this study collectively indicate that global banking infrastructure is entering a more contested, fragmented, and politically volatile phase. The extraterritorial reach of U.S. sanctions enforcement, the juridification of de-risking decisions, and the post-Credit Suisse capital reform debates each represent distinct vectors of institutional stress — but they converge on a common theme: the boundaries between prudential regulation, foreign policy, and domestic politics are eroding.
For Singapore, this environment presents both risk and opportunity. The risk lies in the exposure of Singapore-based institutions to second-order effects of sanctions actions, correspondent banking de-risking, and reputational contagion from offshore wealth management controversies. The opportunity lies in Singapore’s capacity — by virtue of its institutional credibility, rule-of-law reputation, and MAS’s track record of effective enforcement — to position itself as a reliable node in a global financial system under stress.
The paramount policy imperative is to ensure that Singapore’s regulatory framework remains calibrated to the current threat environment: sufficiently robust to satisfy U.S. and FATF scrutiny, sufficiently clear to protect compliant institutions from politically-motivated litigation, and sufficiently adaptive to capture the legitimate capital flows that a turbulent international environment is displacing toward stable jurisdictions.
Sources
Reuters (Feb 26, 2026); Bloomberg — Deutsche Bank, Julius Baer, UBS, JPMorgan reporting (Jan–Feb 2026); Euronews (Jan 23, 2026); U.S. Treasury FinCEN Notice of Proposed Rulemaking (Feb 2026); MAS Notices 626 & 1014.