Federal Reserve Fines UBS
By Marcy Gordon
The Associated Press
WASHINGTON - The Federal Reserve on Monday fined Switzerland's largest
bank, UBS AG, $100 million for allegedly sending dollars to Cuba, Libya,
Iran and Yugoslavia in violation of U.S. sanctions against those
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 that are under U.S.
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 to the
U.S. central bank. 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 have been dismissed and
disciplinary measures were 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 will
inspect its operations to ensure that corrective actions are effective.
Unlike the Fed, the Swiss agency does not have the power to impose fines
in such cases.
"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, or OFAC,
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.
Roughly two-thirds of the $669 billion in U.S. currency circulates
overseas. Five other financial institutions - American Express, Bank of
America, 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.
In previous cases involving foreign banks that were accused of deceiving
the Fed, the central bank fined collapsed Bank of Credit and Commerce
International $200 million in 1992 for allegedly concealing its
ownership of First American Bank in the United States, and fined
France's Credit Lyonnais $100 million last December in connection with
its illegal acquisition of California insurance company Executive Life.
UBS recently reported that its first-quarter profit doubled from a year
earlier, to 2.42 billion Swiss francs ($1.89 billion). It owns UBS
Financial Services, a major Wall Street investment firm.
UBS' U.S.-traded shares fell $2.17, or about 3 percent, to close at
$68.89 Monday on the New York Stock Exchange.