FIDE's eccentric Russian millionaire president Kirsan Ilyumzhinov was placed on a United States sanctions list in November 2015 for allegedly brokering oil purchases by Syrian President Bashar al-Assad's regime from IS.
According to a letter posted on FIDE's website by its treasurer, Adrian Siegel, UBS initially allowed the organisation to maintain its accounts because Ilyumzhinov had given assurances that he would soon be removed from the sanctions list.
"Now however, after more than two years of Kirsan Ilyumzhinov's presence on the sanctions list of the US Department of the Treasury, the Swiss bank UBS has announced that they will immediately close our accounts," the letter said.
Siegel confirmed the document's authenticity in an email to AFP.
"Kirsan Ilyumzhinov's problems severely damage FIDE's business activities and we have to look for a new bank connection," the letter added, describing the situation as a "serious problem".
Siegel's letter noted that Ilyumzhinov had been removed from FIDE's "legal, financial and business operations" since December of 2015.
But this does did not appear to have satisfied the concerns of UBS.
Ilyumzhinov, a businessman and former leader of Russia's Buddhist Kalmykia region, is no stranger to controversy and is perhaps best known for claiming to have encountered aliens.
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