The Federal Reserve Board has hit UBS AG with a civil monetary penalty of US$100 million for carrying out U.S. dollar banknote transactions with restricted jurisdictions, such as Cuba, Libya, Iran, and Yugoslavia.

UBS, without admitting to any allegations, consented to the issuance of the order. The transactions were conducted through UBS’s Extended Custodial Inventory facility in Zurich, which was operated pursuant to a contract with the Federal Reserve Bank of New York. The Reserve Bank determined that certain former officers and employees of UBS engaged in intentional acts aimed at concealing the transactions and terminated the contract in October 2003.

In a statement, UBS says it is sorry. Several employees have been dismissed. Disciplinary measures were taken against other employees. In addition, 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. The banknotes trading to be discontinued is an immaterial part of UBS’s foreign exchange business. UBS has no intention to re-enter this business.

The firm’s CEO, Peter Wuffli, said: “UBS recognizes that very serious mistakes were made. We accept the sanctions, take full responsibility, and would like to express our regret. We have already instituted a number of corrective and disciplinary measures. The behavior highlighted by the investigation cannot and will not be tolerated in UBS. We will do everything we can to prevent similar incidents and put this matter behind us.”