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Fed Fines UBS Over Handling of Dollars

The bank, accused of sending U.S. currency to nations under sanction, will pay $100 million.

May 11, 2004|From Associated Press

The Federal Reserve on Monday fined Switzerland's largest bank, UBS, $100 million for allegedly sending dollars to Cuba, Libya, Iran and Yugoslavia in violation of U.S. sanctions against those countries.

UBS operated a trading center for dollars in its Zurich headquarters under contract with the Federal Reserve of New York, to help the circulation of new U.S. notes and the retirement of old ones. One condition was that the Swiss bank not deliver or accept dollar notes through the depot to or from banks in countries under U.S. trade sanctions.

In an announcement, the Fed said that UBS had violated the agreement and that some former bank officers and employees, whom it did not name, concealed the transactions by falsifying UBS' monthly reports. The individuals were not part of the order issued Monday, in which UBS agreed to pay a $100-million civil fine without admitting to the allegations.

The bank said Monday that some employees had been dismissed and disciplinary measures had been taken against others.

The violations allegedly occurred throughout the duration of UBS' contract with the New York Fed, from 1996 through October 2003, when the Fed terminated it.

The Swiss Federal Banking Commission reprimanded UBS and said it would inspect its operations to ensure that corrective actions were effective.

"UBS recognizes that very serious mistakes were made, accepts the sanctions and expresses its regret," the bank said. "It has already instituted corrective and disciplinary measures and has decided to exit the international banknote trading business."

The Treasury Department's Office of Foreign Assets Control, which enforces U.S. trade embargoes, is investigating the UBS case to determine whether action needs to be taken against any Americans who might have been involved.

About two-thirds of the $669 billion in U.S. currency circulates overseas. Five other financial institutions -- American Express Co., Bank of America Corp., London-based HSBC, Royal Bank of Scotland and United Overseas Bank of Singapore -- operate a total of eight such trading centers, known as extended custodial inventory facilities, in Europe and Asia under contract with the Fed.

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