Inner City Press Finance Watch Report- December 19, 2005

  Politics and money laundering (charges) rear their head in Tbilisi: all Russian banks operating in Abkhazia will be declared non grata and their accounts will be closed, President of Georgia's National Bank Roman Gotsiridze told journalists on December 15. The measure, he said, is “aimed at revealing what the banks find more profitable: operation abroad at a profit, or in Abkhazia for political reasons with tiny proceeds.” Tbilisi has repeatedly alleged that Russian banks based in Abkhazia were engaged in money laundering and were probably financing terrorism.

Last month at a joint American Bar/Bankers Association conference on money laundering, the new rules on insurers were discussed. The American Banker reported that some attendees were “blunt. ‘It does kind of have the spread-the-misery satisfaction,’ said one banker from Hawaii, who would not give her name because she said she was not authorized to speak to the news media. The rules are expected to be published soon in the Federal Register and would take effect six months later... The Patriot Act extended money-laundering rules to a host of additional industries - including securities, insurance, money-service businesses, casinos, and pawnbrokers - but it has taken years to implement the 2001 law. Under the new rules, insurers must designate a compliance officer, issue written internal guidelines, train employees on the rules, and perform independent tests of their new systems.”

The House International Relations Committee is opening an inquiry into UBS’ practices under the Extended Custodial Inventory Program run by the Federal Reserve Bank of New York. The Fed program allowed clients to exchange old banknotes for new ones. One condition of the program was that the international banks were not allowed to accept cash from countries against which America maintains sanctions. They also were not allowed to transfer cash to such countries. But after American troops liberating Iraq in 2003 found $762 million belonging to Saddam Hussein, the cash was traced to UBS and the FRBNY program. American investigators subsequently discovered that the firm had conducted transactions with Iran, Libya, and Cuba in violation of the Federal Reserve's requirements. UBS was fined $100 million, and hired David Aufhauser, former Treasury Department general counsel. Mr. Aufhauser declined to cooperate with the Congressional inquiries, claiming that he couldn’t within one year of his hiring by UBS. Last week Aufhauser told the NY Sun: "UBS approached me at my law firm of 23 years some 10 months after I had left government. The overture was at the tail end of an apparently long and extensive search. With 23 years of trial experience, and close to an additional three years as the chief banking, international finance, and tax lawyer to two secretaries of the Treasury, I was recommended as a good candidate by an executive search firm to serve as counsel to the Investment Banking arm of UBS.”