US Fed fines Swiss bank $100m

UBS has now quit banknote trading outside Switzerland

Switzerland's largest bank, UBS, has been fined $100m by the United States Federal Reserve for violating US trade sanctions.

UBS admitted "very serious mistakes" had been made and said it would now quit the banknote trading business outside Switzerland.

The Fed had accused the bank of supplying US dollars to countries such as Cuba, Libya, Iran and Yugoslavia.

But in making the payout, UBS did not admit any guilt to the allegations.

The Fed said the transactions had been carried out by UBS's Extended Custodial Inventory (ECI) facility in Zurich.

The ECI was operated through a contract with the Federal Reserve Bank of New York which allowed UBS to maintain a depot for US dollar notes in Zurich.

False reports

Such depots are established with private sector banks in order to ease the introduction and circulation of new banknotes while retiring old ones.

As part of the agreement, UBS had agreed not to deliver, accept or deposit US banknotes into or out of the depot to or from countries which face US trade restrictions.

But following an internal investigation after queries from the New York Fed, UBS found dollars had been traded with Yugoslavia, Iran, Libya and Cuba.

It also discovered that former employees had submitted false reports, covering up the transactions in question.

The Swiss bank said: "UBS has decided to end its banknotes trading business with counterparties in countries outside Switzerland.

"UBS will in future limit its banknotes business to physical delivery to financial institutions in Switzerland and Liechtenstein.

"UBS has no intention to re-enter this business."