Congress continues to scrutinize UBS
By Julie Fishman-Lapin
April 1, 2006
Two years after paying a $100 million fine for sending American money to
Cuba, Libya, Yugoslavia and Iran in violation of U.S. sanctions against
those countries, UBS AG continues to face congressional scrutiny about
its offshore banking practices.
The Swiss financial institution, with its investment bank headquartered
in Stamford, answered this week to Capitol Hill lawmakers seeking more
information about UBS’ transfer of American currency — particularly to
Iran during the 1990s — through the Extended Custodial Inventory program.
ECI lets bank clients exchange old American banknotes for new bills. The
program prohibits international banks from accepting cash from nations
that the United States has sanctions against. Banks also are not allowed
to transfer cash to those countries.
“What concerns us is the motivation for supplying this money against the
directions of the ECI program,” said U.S. Rep. Dana Rohrabacher,
R-Calif., who chairs the House International Relations Committee’s
Subcommittee on Oversight and Investigation, which conducted Wednesday’s
“Was UBS worrying about other business that it had with Iran, and did
those in the bank think that supplying these banknotes would help that
business?” Rohrabacher asked during hearing testimony.
The United States was trying to prevent international investment in
Iran’s energy sector, Rohrabacher said, but UBS then transferred $440
million in U.S. banknotes to Iran in violation of the ECI program.
“If the U.S. was trying to restrict Iran’s flow of income, but UBS was
working to supplement it through loans and credit, then it seems to me
that the bank, which has a substantial presence here in the U.S., was
working directly against the interests of the country that acted as one
of its most important sources of business,” he said.
A 2004 investigation into UBS by the Federal Reserve Bank of New York
and the Department of Treasury led to a $100 million fine. And according
to the bank, employees involved in the banknote transfers were fired or
Rohrabacher said he and the other subcommittee members wanted to gain a
better understanding of the bank’s motivation and role in opposing U.S.
efforts to restrict Iran’s cash flow. The committee also had a host of
other concerns, such as allegations that UBS once held an account for
Osama bin Laden.
Michael Herde, a UBS managing director and head of compliance for the
Americas, who testified at the hearing, said the bank “has learned a
great deal” from the ECI incident and has committed to improve its
“I want to make clear that when we suspect money laundering activity, we
take action,” Herde said. “We investigate potential suspicious activity,
file suspicious activity reports, and we support law enforcement
authorities all over the world in providing requested banking information.”
An internal investigation found no evidence that any of the banknote
exchanges in question involved money laundering or terrorist financing,
he said at the hearing.
“UBS acted unacceptably in operating its ECI facility . . . UBS deeply
regrets these failures,” said Herde, adding that the bank has made the
decision to stop doing business in Iran, Cuba, Syria, Sudan, North Korea
Yesterday, UBS spokeswoman Christine Walton said the bank anticipates
that by the end of this month about 80 percent of its business with
those countries will be closed.
Walton also said UBS never held an Osama bin Laden bank account.
Bin Laden never deposited or withdrew money from the bank, she said.
However, one of bin Laden’s siblings had an account with the bank in
which bin Laden was a beneficiary.
“It was an extremely nominal figure,” Walton said of the money in the
Walton also said she wanted to clarify reports about the $762 million in
American currency stashed in hideouts in Iraq that was found by American
soldiers during the war. Serial numbers on the banknotes were traced to
UBS. But Walton said the money also was traced to five other banks,
including the Royal Bank of Scotland, HSBC and Bank of America.