Fed fines Swiss bank $100 million for sending U.S. money to prohibited countries

WASHINGTON (AP) _ 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

Monday, May 10th 2004, 12:18 pm

By: News On 6

WASHINGTON (AP) _ 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 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. A condition for the Swiss bank was not to deliver or accept dollar notes through the depot to or from banks in countries that are 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, intentionally concealed the transactions by falsifying UBS' monthly reports to the U.S. central bank. The individuals were not part of the order issued Monday by the Fed, 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.

Bank officers and employees ``have repeatedly acted in breach of UBS's contractual obligations by failing to comply with U.S. embargo provisions ... and by providing incorrect information to the Federal Reserve Bank of New York,'' the Swiss commission said in a statement. ``The Swiss Federal Banking Commission has reprimanded UBS and decided to impose corrective measures.''

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.''

Roughly two-thirds of the $669 billion in U.S. currency circulates overseas. Five other financial institutions _ American Express, Bank of America, HSBC, Royal Bank of Scotland and United Overseas Bank _ 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.