UBS in drug money laundering case: Employee suspended - Police arrest Colombian woman - dollars 150m account frozen

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UNION Bank of Switzerland was yesterday caught up in the biggest drugs money laundering case in Swiss history, when it emerged that police have arrested a Colombian woman and frozen a dollars 150m ( pounds 103m) account at the bank.

UBS, Switzerland's biggest bank, also confirmed that one of its employees, believed to be a vice-president of the bank, had been arrested and suspended from work.

Jacques Antenen, examining magistrate in the Vaud region, said an investigation had been under way since last June into a Colombian group with links to the notorious Medellin Cartel.

Mr Antenen said that the detained woman, who invested around 1m Swiss francs ( pounds 485,000) in shares and property in Lausanne, was one of a number of Colombians under investigation, although the others were not in Switzerland. The second key person under investigation has never left Colombia.

It emerged that the UBS account where the money was traced was opened 15 years ago and had been little used in the past 10 years, with only small sums paid in and out.

A substantial part of the dollars 150m now with the bank represents investment returns made over the period, suggesting the original deposits may have come from drugs business as long ago as the early 1980s, when the trade was much smaller.

The bank confirmed that its own procedures for detecting money laundering failed to show anything suspicious, and it took action when it was told by the authorities.

Gertrud Erismann, UBS spokeswoman in Zurich, said the account was a long-standing client relationship which, when it began, involved a real Colombian business. 'It was a normal account - a big one, but we have other big ones. We had no reason for being suspicious,' she said. 'When the account was opened it was checked as far as possible, and as there was a business behind it we had no reason to refuse.'

The Swiss Banking Commission, which supervises the country's banks, is expected to launch its own investigation into UBS's handling of the account and may look at its internal procedures for detecting money laundering - against the background of an international drive by central banks to raise the standards of vigilance among financial institutions.

The bank monitors accounts for unusual movements of money. But the inactivity of the frozen account may have helped it to pass scrutiny.

The magistrate, based in Lausanne, said the Colombians were suspected members of a criminal organisation operating from the Colombian town of Barranquilla, trafficking in marijuana and cocaine.

Mr Antenen said a Colombian woman was arrested on 23 February, the day police began a nationwide investigation. He said the woman could not be named.

After her arrest, Vaud authorities had obtained the freezing of more than dollars 150m - which he said was possibly the largest amount to have been seized or frozen in a Swiss money-laundering investigation.

Ms Erismann said the bank had been informed by Zurich authorities 'some time ago' that there was a criminal case, and it was working in co-operation with them.

The employee of UBS had been arrested in February and later released pending trial. The bank had suspended him. Under Swiss procedures it was not permissible to release the name.

Ms Erismann said it was not in UBS's interest to have illicit money on its books. 'At all banks in the world there is criminal money but the problem is you do not see it.'

The inquiry was conducted in collaboration with police in Zurich, Geneva and Neuchatel.

Mr Antenen said that the 'competent authorities' in the US, who hold information on the Barranquilla organisation, had also helped.

He added that the investigation was continuing but had been made public because 'we felt it was of interest to the public' and because it was difficult to keep secret.

'Besides, it's an extraordinary operation. It's not every day we have results of this kind.'

UBS bearer shares slipped only marginally on the news.

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