Probers Want U.S. To Block Assets Of Cuba at UBS
The New York Sun

October 14, 2005 Edition > Section: Foreign > Printer-Friendly Version

BY MEGHAN CLYNE - Staff Reporter of the Sun
October 14, 2005
WASHINGTON - Congressional investigators probing whether the world's largest "wealth management" firm, UBS, may have laundered $5 billion in American currency for state sponsors of terrorism are pushing for the American government to block or seize any assets that may be held by the Castro regime at the Swiss bank's vault in Zurich, according to correspondence obtained by The New York Sun.
The efforts are part of an ongoing probe into alleged money laundering by the Swiss bank that gained steam this week after Rep. Ileana Ros-Lehtinen, a Republican of Florida, announced that the House International Relations Committee will launch an investigation this session.
In April 2003, American troops liberating Iraq found $762 million in American cash in hideouts belonging to Saddam Hussein. American investigators traced the banknotes to UBS and the Extended Custodial Inventory Program. The program, run by the Federal Reserve Bank of New York in cooperation with international banks, allowed clients to exchange old banknotes for new ones. One condition of the program was that American currency neither be distributed to nor accepted from nations against which America maintains economic sanctions.
It was in violation of those terms that UBS procured $3.9 billion in American banknotes for Cuba, $1 billion for the Islamic Republic of Iran, $30 million for Libya, and less than $1 million for Yugoslavia in transactions discovered by American investigators as they probed the mysterious Iraqi stash. UBS was sanctioned by the Swiss Banking Commission and the Federal Reserve, to which the Swiss bank paid a $100 million fine in May 2004.
Cuba, Iran, and Libya appear on the State Department's official list of state sponsors of terrorism. As a result, Ms. Ros-Lehtinen has asked that regulatory agencies investigate the possibility of seizing or freezing any assets remaining in those accounts.
In a letter from November 2004 to Treasury Secretary Snow, Ms. Ros-Lehtinen wrote that "since the ECI deposits to the Cuban and Iranian accounts in UBS were illegally obtained, Treasury should consider seeking to seize the funds in these accounts in an amount equal to the total value of the illegal transactions - an amount close to $5 billion."
In a response dated January 2005, the director of the Treasury Department's Office of Foreign Assets Control, Robert Werner, wrote that while under the Iranian Transactions Regulations there are no provisions for blocking assets in the Iranian UBS account, "Funds in accounts under U.S. jurisdiction in which there is an interest in the government of Cuba or a Cuban national are required to be blocked under the Cuban Assets Control Regulations by operation of law."
Mr. Werner continued: "Regarding possible violations of the Trading with the Enemy Act or the International Emergency Economic Powers Act, with respect to Cuba, if it is found that a person subject to U.S. jurisdiction is involved, appropriate action will be taken."
UBS has maintained that it "strongly rejects" any allegations of wrongdoing, adding that the bank has not been found to have laundered money.
Treasury Department officials said yesterday that, with certain exceptions, American jurisdiction obtains in cases involving a "U.S. person," including American citizens abroad or foreigners operating in America. For the purposes of determining jurisdiction, they said, American institutions and banks count as "U.S. persons." Foreign branches of American banks, they said, are subject to jurisdiction, as are American branches of a foreign bank.
According to press accounts, the Justice Department has been investigating the possibility that a New York "nexus" was involved in the UBS transactions. The Treasury Department would not comment on the specifics of the UBS case, which, it said, has been transferred to the Justice Department. Treasury, it added, can freeze assets only as part of a civil action, whereas the seizure of funds in the Cuban ac count would have to be handled by a different branch of the American government with the authority to prosecute criminal infractions, such as the Department of Justice.
A Justice Department official said yesterday in an e-mail: "We claim the right (supported by our statutes) to seek forfeiture of any funds involved in terrorist financing or US embargo violations, even if it is located in foreign bank accounts." The official declined to comment on specifics of the UBS case.
According to congressional staff familiar with discussions between UBS and investigating congressmen, the Swiss bank has yet to indicate that the Cuban account - fed by monthly shipments of American banknotes flown from Havana to Zurich on a jet designated by the Castro regime specifically for that purpose, according to congressional investigators - has been closed. Lawmakers have expressed concern that the account with UBS may still be used to launder money for various illegal activities undertaken by the Castro dictatorship, such as narco-terrorism, using non-American currency.
On October 22, 2004, six months after UBS paid the $100 million fine, the International Financial Action Task Force Against Money Laundering adopted Resolution IX, which, according to a Task Force press release, "calls on countries to stop cross-border movements of currency and monetary instruments related to terrorist financing and money laundering and confiscate such funds."
According to the release, the resolution "also calls for enhanced information-sharing between countries on the movement of illicit cash related to terrorist financing or money laundering."
Three days later, on October 25, Mr. Castro announced that he was ending the use of American dollars as the currency of the Cuban economy, encouraging the use of Euros, Swiss francs, and other foreign banknotes instead.
A congressional staffer said the Swiss bank has pointed out that it is not illegal for Cubans to hold Swiss bank accounts, and that the problem stemmed from the involvement of the Federal Reserve program and American banknotes.
A spokeswoman for UBS, Christine Walton, told the Sun earlier this week, referring to the Federal Reserve program: "UBS has already confirmed it has exited the banknotes business," adding that "UBS has no relationships with Cuban individuals who would classify as 'politically exposed persons,'" such as Mr. Castro. Ms. Walton said that this means no accounts in the names of Cuban "politically exposed persons" are held at UBS, but she said this did not include institutions of the Castro regime such as the Cuban National Bank. Ms. Walton said UBS declined to comment on individual account holders.
Reached late yesterday afternoon, Ms. Walton declined to comment on the status of the Cuban account or about the pressure from Capitol Hill to freeze or seize Cuban assets that may remain in the Cuban UBS account if it has not yet been closed, citing the difficulty of reaching the appropriate UBS officials late in the day.
October 14, 2005 Edition > Section: Foreign > Printer