UBS Dealings in Iran, Cuba
to Be Probed
By Meghan Clyne - Staff
Reporter of The
New York Sun. October 10, 2005.
WASHINGTON - The world's largest "wealth
management" firm, UBS, will be investigated
by Congress for possibly laundering money
for two state sponsors of terrorism, Cuba
and Iran, lawmakers here told The New York
Sun.
The Swiss bank, which operates a large
financial services business in America,
will be pressed about $3.9 billion deposited
in UBS accounts by the Castro regime, according
to Rep. Ileana Ros-Lehtinen, a Republican
of Florida, who first announced the impending
investigation on Friday. Possible improper
financial dealings with the Islamic Republic
of Iran and Saddam Hussein's Iraq will also
be subject to scrutiny, she said.
In 2003, American soldiers liberating Iraq
discovered $762 million in American currency
stashed in hideouts belonging to Saddam.
According to Ms. Ros-Lehtinen, a Federal
Reserve Bank probe traced the cash to UBS
and other international financial firms.
While investigating the Swiss bank's possible
business relationship with Saddam's dictatorship,
it was discovered that the firm - as part
of a program with the Federal Reserve Bank
of New York, in which UBS allowed clients
to retire old banknotes and replace them
with fresh currency - had also conducted
transactions with Cuba, Iran, Libya, and
Yugoslavia.
The business relationships were a violation
of the agreement with the Federal Reserve,
which had stipulated as a condition of the
program that UBS neither accept cash from
nor transfer it to countries against which
America maintains sanctions.
Cuba, Iran, and Libya are on the State
Department's list of state sponsors of terrorism,
and, according to UBS, employees of the
bank had filed false accounting reports
with the Federal Reserve to conceal the
transactions with the prohibited clients.
As a result, the Federal Reserve Board and
the Swiss Federal Banking Commission sanctioned
UBS, which settled the matter by paying
a $100 million fine to the Federal Reserve.
To Ms. Ros-Lehtinen, however, the matter
is anything but settled. The congresswoman,
who is a Cuban-American and a member of
the House International Relations Committee,
said yesterday that the decision to go forward
with the investigation resulted from nearly
a year of unfruitful meetings with the UBS
officials, including the bank's vice chairman,
Phil Gramm, a former Republican senator
from Texas.
For several months, Ms. Ros-Lehtinen said,
she has pressed representatives of the Swiss
bank for details surrounding the $3.9 billion,
which, according to press accounts, was
deposited by the Castro regime into one
official Cuban government account with UBS.
The deposits took place over the course
of 1,900 transactions between 1996 and 2003.
While officials of the Castro regime have
maintained that the deposits involve legitimate
revenue derived from Cuba's tourism industry
and remittances sent by Cuban-American exiles
to their families on the island, Ms. Ros-Lehtinen
told The New York Sun yesterday that the
amount of the deposits far exceeds Mr. Castro's
potential legal revenue in American dollars.
One of the Cuban-American congressional
leaders involved in the discussions with
UBS, Rep. Lincoln Diaz-Balart, a Republican
of Florida, said yesterday in a phone interview
with the Sun that money laundering is "one
of Castro's main businesses." In addition
to funneling cash for drug traffickers,
Mr. Diaz-Balart said, Havana's strongman
abets Latin-American narco-terrorist organizations,
such as the FARC and ELN in Colombia. Corrupt
Latin American leaders, too, are clients
of Mr. Castro's money-laundering operations,
he said.
The mysterious $3.9 billion, Mr. Diaz-Balart
added, is "just one tip of the iceberg."
He expressed frustration that America's
intelligence services had neglected to probe
the dictator's money laundering services
for terrorists, leaving the UBS investigation
to Congress.
Ms. Ros-Lehtinen said that, since UBS's
possible money laundering for state sponsors
of terrorism posed a threat to American
security, it was essential that the bank's
alleged connections to Cuba, Iran, and Hussein's
Iraq not be left unexplored, quieted by
a $100 million fine.
In particular, Ms. Ros-Lehtinen told the
Sun, she has consistently pressed UBS for
more information about how the potentially
illegal business relationships were entered
into; whether the bank made any inquiries
of the Cuban, Iranian, and Iraqi clients
to ensure that the money deposited was obtained
legally; and whether the Swiss bank has
closed all of its accounts with Cuba and
Iran.
On the last question in particular, Ms.
Ros-Lehtinen said she has met with reticence
from UBS, which, she said, is "really
not forthcoming with information."
To get answers, Ms. Ros-Lehtinen said she
and Rep. Dana Rohrabacher, a Republican
of California, will hold joint hearings
on the transactions. Ms. Ros-Lehtinen is
chairman of the House Subcommittee on the
Middle East and Central Asia, which will
probe the possible UBS connections to Iran
and Iraq. Mr. Rohrabacher is chairman of
the House Subcommittee on Oversight and
Investigations, which will investigate the
ties to the Castro regime, Ms. Ros-Lehtinen
said. Both are part of the House International
Relations Committee, and the congresswoman
said she hopes to begin the inquiries before
the second week of December, when Congress's
session ends.
Rep. Sue Kelly, a Republican of New York,
also will participate in the investigation,
Ms. Ros-Lehtinen said. Ms. Kelly, the chairman
of the House Committee on Financial Services's
Subcommittee on Oversight and Investigations,
has conducted previous UBS inquiries.
Ms. Ros-Lehtinen added that she is also
inquiring about the status of a criminal
investigation into the UBS matter she believes
is being conducted by the Manhattan district
attorney, Robert Morgenthau. Calls to Mr.
Morgenthau's office and home last night
were not returned.
The purpose of the House investigation,
Ms. Ros-Lehtinen said, is to "discourage
international banks, or any financial institution,
from having these kinds of clients - Castro,
Saddam Hussein, and their ilk." Moreover,
"it will make it harder for the likes
of Fidel Castro to funnel money to legitimate
institutions" if the international
financial-services industry understands
that such business relationships will be
investigated and that illegal activities
will carry consequences, the congresswoman
said.
A spokeswoman for UBS, Christine Walton,
said yesterday that the bank had not been
informed officially of the investigation,
and declined to comment on whether UBS had
begun any internal probe into the $3.9 billion
from Cuba and the possible connections to
Iran.
As for the violations of the agreement
with the Federal Reserve Bank of New York,
Ms. Walton said: "We've already paid
a fine for it. If there's a separate line
of inquiry from any other government institution,
we're unaware of it." Since the bank
had not been informed of any investigation,
Ms. Walton declined to "speculate,"
but said it is UBS policy to cooperate with
government inquiries.
In testimony before the Senate Finance
Committee on July 21, 2004, Mr. Morgenthau
said, "The banks need to do a better
job. Some oversight failures at the banks
may be due to ignorance or simple negligence.
But it is difficult to discount the influence
of the considerable fees that banks can
earn through the international money transmittal
business." In an editorial that ran
shortly thereafter, the Wall Street Journal
urged regulators and prosecutors to get
tough on money laundering, which the newspaper
said "has been aided and abetted by
U.S. banks for years."
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