updated 10/25/2004 7:39:00 PM ET 2004-10-25T23:39:00

Radically changing the way business has been done in Cuba over the past decade, the communist government announced Monday night that starting Nov. 8 U.S. dollars will no longer be accepted at stores or other businesses.

With President Fidel Castro looking on, the leader's chief aide Carlos Valenciaga and state television personality Randy Alonso read the resolution by Cuba's Central Bank, which now calls for all such transactions to now be done in a local currency known as convertible Cuban pesos.

The American greenback has been a primary form of currency in Cuba since the early 1990s, when the island government was forced to implement liberal reforms to cope with the loss of Soviet aid and trade. The possession of U.S. dollars was legalized in 1993 to draw hard currency from tourism and from family purchases at state stores.

The government said the change taking effect in two weeks was necessary to protect its economy in the wake of stepped-up measures by the U.S. government to punish banks that ship U.S. dollars to Cuba, which has been under a U.S. trade and financial embargo for more than 40 years.

Cubans and others on the island will still be allowed to hold U.S. greenbacks in unlimited quantities. But beginning Nov. 8 they must be changed into convertible pesos with a 10 percent change at banks or changing houses to be used at businesses across the island.

Before then, dollars can be changed into convertible pesos at a one-to-one rate with no extra charge, according to the resolution.

The measure was tied to the U.S. Federal Reserve's decision in May to fine Switzerland's largest bank, UBS AG, US$100 million for allegedly sending American dollars to Cuba, Libya, Iran and Yugoslavia in violation of U.S. sanctions against those countries.

UBS operated a trading center for dollars in its Zurich headquarters under contract with the Federal Reserve Bank of New York, to help the circulation of new U.S. notes and the retirement of old ones. One condition was that the Swiss bank not deliver or accept dollar notes through the depot to or from banks in countries that are under U.S. trade sanctions.

The U.S. Federal Reserve at the time said that UBS had violated the agreement and that some former bank officers and employees concealed the transactions by falsifying UBS' monthly reports to the U.S. central bank. The individuals were not part of the order, in which UBS agreed to pay a US$100 million civil fine without admitting to the allegations.

The violations allegedly occurred throughout the duration of UBS's contract with the New York Fed, from 1996 through October 2003, when the U.S. Federal Reserve concluded it.

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