Fair Finance Watch / Inner City Press

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February 22, 2010 --

Denying Corruption of Citigroup, Wells and BofA, Obiangs Cite Obama, ExxonMobil's Investment

By Matthew Russell Lee

UNITED NATIONS, February 15, 2010 -- Ten days after the release by the U.S. Senate of a reporting on evasion by the son of Equatorial Guinea's President for Life Teodoro Nguema Obiang Mangue of anti-money laundering controls by and at Citigroup, Bank of America, Wachovia / Wells Fargo and others, the Obiang regime fired back, calling the report racist and citing in its defense the election of Barack Obama.
  Inner City Press is putting the Obiangs' memo online, here.

  The Senate report exhaustively shows how Teodorin and his lawyers moved tens of millions of dollars through Citibank and Wachovia (owned by Wells Fargo since the financial meltdown), and used accounts at Bank of America, City National and other banks. The report described how Teodorin

"brought over $100 million into the United States using wire transfer systems at just two U.S. financial institutions, Wachovia Bank and Citibank. Neither system had been programmed to detect or block wire transfers bearing his name. In 2009... Citibank declined to take the same action due to projections that identifying, freezing, and investigating these wire transfers would generate too much work for its anti-money laundering staff...From 2004 to 2007, Mr. Obiang used accounts at three U.S. banks, Union Bank of California, Bank of America, and Citibank, often with Mr. Berger’s assistance, to deposit, transfer and spend nearly $10 million. Most of these funds were wire transferred from accounts in Equatorial Guinea held in the name of Mr. Obiang or two EG companies he controlled, Somagui Forestal and Socage."

  To this, the Government of Equatorial Guinea in a communique sent to the Press on February 15, the President's Day holiday in the U.S., argues that

"According to Equatoguinean legislation, as occurs exactly in the most of the world, the natural and legal persons, as occurs in this case with the Ministry of Agriculture and Forestry, are perfectly authorized to do business and maintain other types of jobs at the margin of their Ministerial obligations."

  Teodorin's "marginal" business includes a $30 million mansion in Malibu, a jet and recording studio, among other things. Previously he and his president for life father Teodoro Obiang Nguema Mbasogo moved their money, like Pinochet, into the U.S. through Riggs Bank.

  Inner City Press and its Fair Finance Watch dug into these connections, including to Spain's Santander Bank and HSBC, when the Obiang disgraced Riggs was being sold to PNC Bank. Click here for coverage in Le Monde, in French.

  The U.S. Federal Reserve did little at that time. With the major banks it regulates now implicated again in corrupt money laundering, what will the supposedly chastened Federal Reserve do?

  The "Equatoguinean" response complains at the Senate report deals only with African corruption -- Angola with HSBC, Gabon's Omar Bongo with Citigroup, Nigeria's Abubakar with Suntrust and the ubiquitous Citibank -- and not any other continent. In this, it echoes the defenders of Sudan's Omar al Bashir, that the International Criminal Court and its prosecutor Luis Moreno Ocampo have so far indicted only African defendants.

But Equatorial Guinea goes further. Its cover email to Inner City Press argues that "it can be considered as an authentic insult to Africa, and more so after the people of the United States have voted in the majority for a President of African origin."

Then, in capital letters, Equatorial Guinea screams that

"In Africa and in Equatorial Guinea we are tired of BEING TREATED FOR CENTURIES LIKE INHUMAN BEASTS, ON WHICH ALL THE BRUTAL AND EVIL BEHAVIOURS POSSIBLE ARE BLAMED. This is again so verifiable in this case that even different media of the United States have written these days, in regards to this case, THAT THE FAMILY OBIANG PRACTICES CANNIBALISM."

  Another of the ICC's and Ocampo's indictees, Jean Pierre Bemba the previous Vice President of the Congo, argued during his campaign against Joseph Kabila that, "I am not a cannibal!"

  The Equatoguinean defense that's closest to the mark is that

"We also wish to put on the record that the United States is the country from which comes the highest foreign investment in Equatorial Guinea, which exceeds 12 billion USA dollars, and that no American corporation has complained of fraudulent behaviour of the Government. We also expect the Senate Subcommittee to be consistent with the criteria of the North American companies."

  Or should it be the other way around? Major U.S. investors with the Obiangs include ExxonMobil, Marathon Oil, Hess Corporation, and Noble Energy. We will have more on all this.

September 11, 2008 -- As US Tightens Insurance Sanctions on Iran, Lloyd's of London Writes Myanmar Policies

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, September 11 -- As the U.S. tries to tighten sanctions on Iran, including by pressuring insurance companies, it is not clear what is being about Myanmar. That nuclear concerns outweigh human rights is not surprising to many. At the UN on September 10, Inner City Press asked Daniel Glaser, deputy assistant Treasury secretary for terrorist financing and financial crimes what steps the U.S. is taking with insurance companies, and whether these steps might include the U.S. sanctions on the Myanmar military government of General Than Shwe.  Glaser said professorially that "insurance is a financial service, and UN Security Council resolutions relate to financial services. It is important for the insurance sector to take into account all of the safeguards" in the Council's resolutions.

  Glaser's boss Stuart Levey, undersecretary for terrorism and financial intelligence, has spoke about both maritime insurance and, months ago, about Myanmar. In March 2007, for example, Levey spoke in connection with blocking correspondent accounts under Section 311 of the Patriot Act with the ironically named Myanmar Mayflower Bank. Inner City Press' question to Glaser on September 10 about Myanmar, however, went unanswered. Glaser said, "we and our partners have started a dialogue with the international insurance community to make sure that they are taking the steps that they need to take. It's going to be important for insurance companies to be as vigilant as possible, particularly on maritime insurance and re-insurance." On Myanmar, nothing.

   Lloyd's of London publicly admits to writing insurance on shipping and aviation in Myanmar. Its spokespeople say that the UK government have not initiated any discussions to curtail this business. That nuclear concerns trump human rights may not be surprising -- but that doesn't make it right.

  At the UN's symposium on supporting the victims of terrorism on September 9, Ingrid Betancourt, recented freed from the FARC in Colombia, said that the UN must more to free Aung San Soo Kyi in Myanmar. Inner City Press asked if she meant that Myanmar is engaged in state terrorism. Ms. Betancourt indicated that yes, Aung San Soo Kyi's house arrests is not unlike her captivity in Colombia in being arbitrary.
  So perhaps the distinction is not around terrorism, but nuclear proliferation...

Watch this site, and this (UN) debate.

May 19, 2008

  Sometimes the attempt to crack-down just keeps a story alive. It is not clear if that's the case regarding the barring from Russia of Moldovan journalist Natalya Morar for her reporting on the covering up of murder links to money laundering through Russian bank Diskont and Austrian bank Raiffeisen (see, "Strange Games", The New Times, August 20, 2007). Morar has been fighting the expulsion in court, without success. We aim to continue to follow this story.

May 12, 2008

  The U.S. "Country Reports on Terrorism," has been closely watched in recent years after the U.S. offered to take the North off the list. North Korea was put on the list, joining Cuba, Iran, Sudan and Syria, in January 1988 after its agents bombed a South Korean airliner in November the preceding year. All 115 people aboard the plane were killed. The report said North Korea is not known to have sponsored any terrorist acts since then. Getting off the list is one of Pyongyang's most coveted benefits, since it would lift wide-ranging prohibitions that effectively restrict economic assistance and diplomatic interchanges. After striking a September 2005 deal under which Pyongyang agreed to eventually abandon its nuclear programs, the U.S. toned down the segment on North Korea by striking out detailed accounts of the country's past abductions of Japanese citizens. This year, the report gave more emphasis to the U.S. commitment to delist Pyongyang once conditions are met. 'As part of the six-party talks process, the United States reaffirmed its intent to fulfill its commitments regarding the removal of the designation of DPRK (North Korea) as a state sponsor of terrorism in parallel with the DPRK's actions on denuclearization and in accordance with criteria set forth in U.S. law,' said the report. We'll see.

April 21, 2008

  HSBC bragged last week that it is launching a new private bank in Ireland. "Ranked the third largest private bank in the world by Euromoney, HSBC Private Bank offers wealth management, banking and trust services in over 93 locations around the world" -- including some breakaway republics, with the presumptive offer of creative money washing...

March 31, 2008

 From last week's LA Times: " Overall, it is nearly impossible to distinguish funds meant for potential terrorism from legitimate transactions, said a senior State Department official, who, like some of the those interviewed, spoke on condition of anonymity because of prohibitions against commenting on the record on counter-terrorism." What prohibitions?

March 17, 2008

  So how did Eliot Spitzer get caught? North Fork Bank, recently re-branded Capital One, filed a Suspicious Activity Report last July. Like most SARs, it went nowhere. Until HSBC filed its own, about transactions with shell companies QAT International and QAT Consulting Group, connected to Emperor's Club VIP. Now investigators took an interest, tracing back to Spitzer. Why was he banking with North Fork, of all places?

March 10, 2008

Barclays has been contacted by the Department of Justice and the New York district attorney with questions about payments made in dollars through its New York branch. The payments may have been made by people or companies from states which are on the U.S. blacklist of nations it believes sponsor terrorism. The probe referred to in Barclays' notes to its annual 2007 results on February 19, where it warned "the potential financial effect of any resolution could be substantial''.

ABN Amro was fined $80 million in civil penalties in 2005 for transactions through its New York offices which the U.S. government said failed to meet the necessary controls on money laundering. RBS said in its annual results published last week that ABN is the subject of an ongoing criminal probe by the DoJ over the same issue. Negotiations over a possible $500 million settlement are ongoing, RBS said.

            HSBC yesterday noted in its results that it has a "small representative office in Tehran''. HSBC said it recognized that should it break the U.S. rules on sanctions, there would be "serious legal and reputational consequences''.

March 3, 2008

A Singaporean citizen and 10 companies she owns have been targeted under new US sanctions aimed at the Myanmar regime. Cecilia Ng is married to the incongruously-named Steven Law, whose father Lo Hsing Han is "known as the 'Godfather of Heroin'," according to the US Treasury Department. The department's Office of Foreign Assets Control (OFAC) said in a Feb. 25 notice that Ng, born in 1958, is a Singaporean citizen who owns 10 companies including Golden Aaron Pte Ltd. State media in Myanmar reported in December 2004 that Singapore's Golden Aaron Pte Ltd was part of a consortium that signed an oil and gas exploration contract with military-ruled Myanmar. OFAC listed Ng's other companies as including: G A Ardmore Pte Ltd, G A Capital Pte Ltd, G A Foodstuffs Pte Ltd, G A Land Pte Ltd, G A Resort Pte Ltd, G A Sentosa Pte Ltd, G A Treasure Pte Ltd, G A Whitehouse Pte Ltd, and S H Ng Trading Pte Ltd. Ng could not be immediately contacted for comment on the allegations. A woman who opened the locked door at Ng's offices in Singapore's business district to AFP said she was not there. A plaque visible through the door listed Golden Aaron, S H Ng Trading and another firm, Kokang Singapore Pte Ltd. The Monetary Authority of Singapore (MAS) said, "our rules are vigorously enforced. Should there be links with illicit activity, MAS will not hesitate to take necessary action." No mas!

February 25, 2008

  The story of the week was Germany's payment for a CD-ROM of its citizens with money in Lichtenstein. Enabling tax evasions as an act of war? And what of Lichtenstein's posture at the UN of being in favor of international law? And what of the multi-million dollar penthouse owned by Lichtenstein, on 40th Street and 2nd Avenue, and the diplomats regaled there?

February 18, 2008

    U.S. proposed rules requiring government contractors to report any fraud of $5 million or over that they find have a gaping loophole: they specifically exempt "contracts to be performed outside the United States," according to a notice published last month in the Federal Register. Can you say, for example, Lockheed Martin?

February 11, 2008

 Now the Credit Union National Association says the emperor has no clothes:  Section 326 of the USA Patriot Act requires institutions to check "a list of known or suspected terrorists or terrorist organizations issued by any Federal government agency and designated as such by Treasury in consultation with the Federal functional regulators." But did the federal government ever issue a Section 326 List? "To date, no such list has been issued," says Valerie Moss CUNA's director of compliance information....

February 4, 2008

More Russian action -- The Central Bank of Russia (CBR) has revoked the banking license of Moscow-based Industrial Development Bank (IDB), the CBR said last week. The CBR said that the bank had repeatedly violated the federal law on the prevention of money laundering and financing of terrorism. IDB also did not report to the Federal Service for Financial Monitoring on transactions subject to obligatory reporting and made other violations, the CBR said. The CBR has appointed a provisional administration to run the bank until an arbitration court rules to declare it bankrupt or to appoint a liquidator of the bank.

January 28, 2008

While the UN Development Program operated in North Korea, government officials monitored UNDP's communications and searched its employees' houses, according to a Senate report release Wednesday night on the eve of testimony by UNDP and other United Nations officials. The report, co-issued by Democrat Carl Levin of Michigan and Republican Norm Coleman of Minnesota, largely confirms the charges leveled over the past year at UNDP for its North Korea programs: that UNDP paid workers' salaries directly to the government in hard currency, had only limited access to sites of projects it funded and no access to its own bank accounts, and paid a vendor asserted by the U.S. State Department to be involved in Kim Jong-Il's weapons programs. The specifics about wiretapping and unannounced searches are new, as are some of the details about the flow of UNDP's funds through Banco Delta Asia, a Macao institution later frozen as a money laundering concern.

January 21, 2008

  From U.S. Congressman to stealth diplomat for Ban Ki-moon to Khartoum, to indictment for money laundering -- the story of Mark D. Siljander needs to be further probed. "UN Adviser on Sudan Charged with Terror Money Laundering" -- it's a headline the first part of which the UN would be sure to object to. But from LA Times: "He offered voluntary, informal advice," said the senior U.N. official responsible for coordinating the meetings, who spoke on condition of anonymity. Developing...

January 14, 2008

            BB&T Corp. recently paid the U.S. government $10,000 to settle allegations that it allowed funds to be withdrawn from an account held by a known terrorist. The Treasury Department's Office of Foreign Asset Controls says BB&T permitted an automatic debit "against an account held for a specifically designated global terrorist," and did not voluntarily disclose the matter. Question: so BB&T got fined only $10,000? Some deterrent...

    On another front,  currently the U.S. Foreign Sovereign Immunities Act permit such suits only against countries that the State Department has named state sponsors of terrorism. One theory likely to get attention now is whether Saudi Arabia's alleged money laundering for Al Qaeda counts as commercial activity, which falls under an exemption to the Foreign Sovereign Immunities Act...

January 7, 2008

  Regulators to bankers, at the FRBNY: "Since the FBI considers SARs to be like informants, and we normally pay informants, I’m here to pay you," deadpanned FBI special agent Eugene Casey. "Not with money, unfortunately, Congress hasn’t given us a budget yet for this fiscal year, but to pay you compliments and my respect. So thank you. Thank you for filing SARS." Casey and his colleagues took the stage at the NY Federal Reserve conference center in mid-December at the invite of the NY Metro InfraGard Alliance, an FBI-sponsored public-private alliance that urges security and technology chiefs from all sectors to build relationships with law enforcement. The quartet told some tales from the street: Bangladeshi mortgage fraud rings in Queens, $280 million in cash seized in Mexico City earlier this year, and even an ID thief who, when he heard the FBI pounding on his door, escaped out the window naked, pausing only to grab a Ziploc bag containing 400 credit reports. The common thread in most money laundering arrests, the agents attested, was the value of SARs in helping them pursue their cases. Informers, eh?

December 24, 2007

  The Central Bank of Russia (CBR) has revoked the license of Moscow-based Bank Kitezh, the CBR said Thursday. The CBR said that Bank Kitezh had repeatedly violated over one year requirements of the federal law on the prevention of money laundering and financing of terrorism. Bank Kitezh did not report to the Federal Service for Financial Monitoring on transactions subject to obligatory reporting, the CBR said. The CBR has appointed a provisional administration to run the bank until an arbitration court rules to declare it bankrupt or to appoint a liquidator of the bank. The CBR could revoke 50-80 banking licenses this year, the CBR's First Deputy Chairman Gennady Melikyan said in November, adding that the bank revokes a similar number of licenses every year. The CBR had revoked 40 licenses as of early November since the beginning of the year, Melikyan added.

December 17, 2007

  Othman Ahmed Othman al Haidar, who is wanted by the Bosnian authorities, continued to visit Kosovo but changed his mode of transport - he travelled by air instead of land. Express newspaper sources from Prishtina International Airport have advised that even though that person officially was expelled from Kosova in 2004, he returned through this airport in 2005. The Revival of Islamic Heritage Society (RHIS/P) which has branches/offices in 54 countries, including Kosovo, is on the black list of the US State Department as an NGO that may have ties to Al-Qaeda. The organization has been under investigation by a court in Bosnia-Hercegovina on money laundering charges since 1994. A police official has advised that Othman Ahmed Othman al Haidar was in Kosovo even this year - more specifically, around four weeks ago, and was seen on at least one occasion in the company of a former UNMIK police officer from Pakistan...

December 10, 2007

  The president of human rights group Freedom Now, raised the prospect of Washington imposing sanctions, such as those used against a Macau bank accused of money laundering for nuclear-armed North Korea, on a Southeast Asian state-owned bank suspected of links to Myanmar's military rulers. "Anecdotally in conversations with diplomats in ASEAN countries, I know there is a deep concern about the prospects of the United States doing to a state-owned bank what happened to Banco Delta Asia in Macau because of its laundering of North Korean funds," a DC hearing was told...

December 3, 2007

The Central Bank of Russia has revoked banking licenses from three Russian banks for money laundering:  Samolyotbank and BIKBANK... Meanwhile, UAE-based banks are reluctant to deal with companies that are likely to import goods into Iran, says Nasser Hashempour, vice-president of the Dubai-based Iranian Business Council....

November 26, 2007

 Singapore has no plans to change banking secrecy laws, an official at the Monetary Authority of Singapore (MAS) said last week. "They allow for the necessary transparency in combating criminal activity, while safeguarding investors' interest for safety and security," the official said. The EU is pressing for more transparency in Singapore's banking regime and participation in the EU savings tax directive, so the MAS position could undermine talks for a trade agreement between Singapore and the EU. Singapore insists that it won't become a shelter for money laundering, particularly with the opening of two multi- billion dollar casinos in 2009 and its proximity to countries that are battling terrorist groups. Singapore is resisting pressure to join in the EU withholding tax arrangements, introduced in 2005, which impose a tax on the investments of EU nationals residing in another EU country. They are seen as the main stumbling block to a trade agreement. Switzerland caved in to the pressure and now collects withholding tax for remittance to the member states of the EU. In its statement, the MAS noted: "The Singapore constitution does not allow us to collect taxes on behalf of a foreign country."

November 18, 2007

            North Korean officials are to meet US diplomats, Treasury officers and Secret Service agents in talks in New York this week to discuss steps Pyongyang could take to abandon counterfeiting and money laundering activities for it to be integrated into the global financial system. The two-day talks from Monday, convened at Pyongyang's request, will be "related to money laundering and other forms of illicit finance," a US State Department official said. The US team will be led by the Treasury's deputy assistant secretary Daniel Glaser North Korea will be represented at the talks by a six-member delegation led by Ki Kwang-ho, a director at Pyongyang's finance ministry, South Korea's Yonhap news agency reported -- hopefully, it might be added.

November 12, 2007

            In Athens, US embassy spokesperson Carol Kalin said Greek authorities have been asked to "investigate" the bank as US allies have been urged to take "similar or comparable measures" to those adopted by Washington. The US last month blacklisted Bank Melli and Bank Mellat, accused of providing banking services for Iran's nuclear agencies, and Bank Saderat, which allegedly funnels funds to Hezbollah, Hamas, PFLP-GC, and Palestinian Islamic Jihad. The bank from 2001 to 2006 transferred 50 million dollars from the Central Bank of Iran to its branch in Beirut via London for the benefit of Hezbollah fronts in Lebanon, and has also transferred several million dollars to Hamas, the State Department says. "As we announced on October 25, we had a new round of US sanctions on certain Iranian entities, including Bank Saderat. This is part of our effort to advance diplomacy on Iran," Kalin said. "We have asked our allies to take similar or comparable measures to those we've taken."

November 5, 2007

  From a Q&A with Chris Hill in Beijing last week:

Q You mentioned discussion of the financial issues. The last time that issue came up with BDA the Six-Party Talks stalled for over a year. Are you concerned that some of those things might scuttle talks again this time?

MR. HILL: No, I think from their point of view they're interested in improved access to the international financial system. From our point of view, we're interested in assurances and actions on their part to deal with the problems of counterfeiting and other money laundering concerns, which I think have been prime issues in impeding them from access to the international financial system.

October 29, 2007

"We call on responsible banks and companies around the world to terminate any business with Bank Melli, Bank Mellat, Bank Saderat, and all companies and entities of the IRGC," U.S. Treasury Secretary Henry Paulson said in a statement. And in Toyko they wondered, how would they pay for and settle on the 10% of their energy that comes from Iran?

  Bank Melli has several subsidiaries: Bank Kargoshaee, in Tehran; Bank Melli Iran Zao, in Moscow; Melli Bank, in London; and Arian Bank, a joint venture with Bank Saderat in Kabul. Bank Mellat has branches in Armenia, Britain, South Korea and Turkey. Bank Saderat specializes in the financing of Iranian's foreign trade balance. Its international businesses are mainly concentrated in the Gulf countries and Lebanon, but it is also active in France, Germany and Greece....

October 22, 2007

  On the new U.S. list of Myanmar sanctions, Pavo Trading Pte Ltd, Air Bagan Holdings Pte Ltd and Htoo Wood Products Pte Ltd serve as "wake-up call" for Singapore. Also named is Air Bagan Ltd of Myanmar, which last month made Singapore its second international destination. The airline's chairman, Tay Za, arrived on the first flight. According to AFP, Tay Za has very, very strong links to the junta... The directory at a building in Singapore's central business district lists Air Bagan Holdings and the two other blacklisted Singapore-linked firms as operating from a suite on the 24th floor. But the suite carries no sign and workers in neighboring offices said they knew nothing about what type of company operates from there, although they have seen people coming and going on weekdays. An opaque blue sticker covered the door and obscured the interior. Phone and email messages to Pavo Trading were not immediately returned...

October 15, 2007

   Revolting revolving door: on the American Bankers Association's committee to weaken anti-money laundering laws are a slew of former regulators: Richard Small, the Federal Reserve AML "guru" who sold out to Citigroup then GE Money; William Fox, former Financial Crimes Enforcement Network (Fincen) director, now at Bank of America;  Werner, another former Fincen director and now at Merrill Lynch; and William Langford, a former director of regulatory affairs at Fincen and now a senior vice president of global AML at JPMorgan Chase. The three top banks, the biggest brokerage and GE Money all hired directly from the agencies, and now use them to lobby for de-regulation...

October 8, 2007

   A (hype?) search of UK-registered companies turned up 4,000 exact matches for terrorists, financial criminals and disqualified directors. Worldcheck's Rob Mitchell presented findings of the project his firm conducted into UK registered companies to an audience at Mount Murray Hotel. 'Some results were eye opening,' he said. Worldcheck compared the Companies House register with its own database of 589,000 organizations and individuals that have come to their attention through due diligence research, sanctions lists and the likes. Mitchell said: 'There were significant matches across all categories that go well beyond disqualified directors - although we did find 1,504 of these who were current directors of UK firms despite their disqualification.' In fact, the research turned up 4,000 exact matches including 13 for known or suspected terrorists and 154 for people involved in financial crime...

  Meanwhile, U.S. President Bush signed off on the first U.S. shipment of heavy fuel oil to North Korea in five years after the country agreed to complete an inventory of its nuclear programs and disable its existing nuclear facilities by the end of the year. The United States will send 50,000 metric tons of fuel worth about $25 million, according to the president's order...

October 1, 2007

  In a one-paragraph statement, the government in Macau, a former Portuguese colony that is a burgeoning gambling haven, said last week Banco Delta Asia had shown ''remarkable improvement'' during two years of government oversight. It said that Stanley Au, a former gold dealer who ceded control of the bank in September 2005, would be put in charge of the bank again on September 29...

September 24, 2007

            The UN's Ban Ki-moon has appointed Carlos Castresana Fernandez of Spain to head the International Commission against Impunity in Guatemala (CICIG), established under an agreement between the United Nations and the Government of Guatemala that entered into force on 4 September. Castresana was previously assigned to the Special Prosecutor's Office against Drug Trafficking, where he handled cases of criminal organizations charged with international drug smuggling and money laundering...

September 17, 2007

  In the same week that Bank of America set a record, jacking up its surcharge for the use of ATMs to three dollars, the Federal Reserve hauled off and delivered an approval, of BofA's takeover of LaSalle. The Fed seems to have ignored most of the issues raised. For example, the Fed states that ICP and Fair Finance Watch

"expressed concern about Bank of America’s connection to investigations and lawsuits related to the bankruptcy of Parmalat SpA, Parma, Italy. The commenter also expressed unsubstantiated concerns about Bank of America’s student loan policies [and] the handling of certain money transfers through the New York branch of Bank of America, National Association."

September 10, 2007

   Last week U.S. District Court Judge Victor Marrero ruled that the amended National Security Letters provisions of the Patriot Act that gagged those receiving the letters from disclosing the fact violated the First Amendment and the separation of powers. Since the gag-order provisions could not be meaningfully separated from authority to issue the letters, he struck down the whole law, while staying the implementation of his ruling pending any appeal or for 90 days if there is no appeal. Department of Justice Spokesman Dean Boyd said government lawyers were "reviewing the ruling and considering our options."

September 3, 2007

  In 2006, Paraguay imported $4.5 billion worth of goods and exported $1.7 billion. Most economists expect that would have sent the 6.7 million-person country's currency into free fall. That didn't happen, leading many to surmise that the bulk of those imports were re-exported without documents, for example through Cuidad del Este. The wholesalers there, according to McClatchy, include not only the hyped-up Lebanese, but also Koreans...

August 27, 2007

  On August 20, Royal Bank of Scotland told the Federal Reserve that its anti-money laundering policy should be withheld from ICP Fair Finance Watch. Quickly this counter-argument was filed:

RBS argues that its Anti-Money Laundering policy should be withheld, "since disclosure might provide information which might assist persons seek to circumvent those policies and procedures and to engage in money laundering."

  But Fortis and Santander provide their anti-money laundering policies. Therefore the record on this application contains a contradiction -- if RBS' argument is accepted, then Fortis and Santander are assisting and enabling money laundering. If, on the other hand, this is not what Fortis and Santander are engaged in, RBS' policy must be released.

 We note pervious RBS AML issues, including regarding sanctioned entities in Afghanistan. The policy should be released, including so that timely commenters, who timely requested the application, including but not only under FOIA, can review and comment on it.

            And lo and behold, by the end of the week RBS released its AML policy, which is now being analyzed...

August 20, 2007

  From Interfax -- "The Bank of Russia has revoked the licenses of the International Bank of Cooperation (MBS) and the Ermitazh Innovative Commercial Bank (both of which are Moscow-based) to carry out banking transactions... two of Ermitazh's clients transferred R1.2bn in a dubious goods deal to a British company." Is it the UK connection that led to the license revocation?

August 13, 2007

  This week, something different: bank regulators in Washington, pulled one way by injunctions to open up banking to the underserved, and pulled another way by anti-money laundering and FinCen, have come up with a plea. What to do with FinCEN's insistence that it is a crime for a person to have a Social Security number and non-SSI identification at the same time? The Office of Thrift Supervision says it is struggling with this, and asks for guidance...

August 6, 2007

  Hector Orlansky was sentenced in Miami on August 3 by U.S. District Court by Judge Adalberto Jordan for fraudulently inflating the value of collateral used to obtain loans through Espirito Santo Bank of Florida....

July 30, 2007

  In the same week in which Deutsche Bank announced it is leaving Iran, ostensibly due to "spiraling costs," Banco Santander was reported to have continued to do business with sanctioned Bank Sepah until at least March 2007.  How this might impact the Santander - RBS - Fortis bid for ABN Amro, including their pending applications before the U.S. Federal Reserve, remains to be seen...

July 23, 2007

  Many Kims and money laundering (and counterfeiting) apparently forgotten -- on July 14, Kim Myong-gil, deputy chief of the North Korean mission to the United Nations in New York, stated that North Korea had notified the U.S. of shutting down its nuclear facilities at Yongbyon (they still want a light water reactor). "The shutdown came at a time when the first shipment of 6,200 tons of heavy fuel oil arrived in the North," he said. The second stage of the deal calls for North Korea to disable the aging Soviet-era reactor and four other nuclear facilities and provide a full account of its nuclear programs in exchange for an additional 950,000 tons of fuel oil or equivalent aid. North's Foreign Ministry spokesman in the KCNA report stressed on July 15 that the oil is not aid and but "compensation for the DPRK's suspension of its nuclear facilities." In other compensation news, in Beijing, the chief nuclear envoy of South Korea, Amb. Chun Yung-woo, and his North Korean counterpart Kim Kye-gwan began a bilateral meeting.

   Again, In 2005, the U.S. blacklisted the Banco Delta Asia, a small bank in the Chinese-controlled territory, as a money-laundering concern. That caused about US$25 million in North Korean funds to be frozen in the bank. No commercial banks -- not even Wachovia -- came forward to help transfer the money. The money was sent to the Russian central bank from the U.S. Federal Reserve in New York, then transferred in late June to a bank in Russia's Far East, where North Korea has an account. So, the Federal Reserve can "work around" Section 311 of the PATRIOT Act...

  Next step? Kim Myong Gil at North Korea's United Nations mission in New York said his government would only disclose the full extent of the country's nuclear program and disable the reactor if Washington takes actions "in parallel. We will discuss about the economic sanctions lifting and removing of the terrorism list. All those things should be discussed and resolved," he said...

July 16, 2007

  Time reports that Kim Jong-il's "criminal businesses not only stretch across Asia but also have managed to gain footholds in Russia, Europe and the U.S. Among the regime's illicit activities are the production and trafficking of opium and heroin to dealers around the world, the manufacture and sale of billions of counterfeit cigarettes and the production of tens of millions of dollars in forged U.S. currency sophisticated enough to evade detection by U.S. banks. In many cases, the transactions are conducted not by rogue gangsters but by North Korean government officials, including members of the country's diplomatic corps stationed overseas... North Korea requires that its missions abroad be self-financing, meaning they need to earn enough money to stay afloat without help from Pyongyang... FOR MOST OF THE YEAR, KIM IN-HO, 42, A defector from North Korea who now lives in Seoul, was an ordinary worker in a state-owned textile factory in Haesan City in Yangang province, not far from the border with China. Yet each summer, Kim and his colleagues left the looms and were sent to nearby farms to collect the year's harvest. It wasn't food they were gathering, he says, although North Korea has chronic food shortages, but "white bellflowers," or poppies, the vital feedstock for opium and heroin processing. North Korean poppies are the starting point of an elaborate chain of production whose result ends up on the streets of Russia, China and beyond... Government trucks transport the opium harvested in North Hamgyong province to a factory outside Pyongyang run by Raemong Pharmaceuticals, a government-owned firm. A North Korean defector who claims he was a key middleman in the narcotics business alleges that Raemong is mainly a normal drug company. But, he says, it also converts opium into heroin headed abroad."

   And not long ago, UN officials claimed they had visited and upheld N. Korea's production of "a small amount" of opium, for medicinal purposes...

July 9, 2007

   This week, two quotes from ex-regulators monetized their expertise and access. "If it's now 2007 and the control failure occurred in 2005, 2004 ... is there going to be any value to law enforcement, any value to the government in finding things that happened two or three years ago and reporting it now?" The speaker of these words was identified by the American Banker newspaper as "Richard Small, the global anti-money-laundering leader at GE Money, the consumer and small-business financial services division of General Electric Co., and a former top anti-laundering official at Citigroup Inc. and the Federal Reserve Board, where he was a deputy associate director in the division of banking supervision."

    A related quote: "Was it really worth it? If you make one or two cases out of 5,000 reviews," said Robert Serino, identified by the American Banker only as "a counsel at Buckley Kolar LLP." He was also a lawyer at the OCC...

 July 2, 2007

  Treasury's Paulson defense last week of using the Federal Reserve System to get around the Patriot Act was that "in April, the Macanese made the decision to release the funds. The Treasury supported that as a way to move the six-party talks forward." Now the Government Accountability Office is going to evaluate whether the U.S. government ran afoul of its own anti-money-laundering rules. Paul Anderson, a spokesman for the GAO, said Congress's investigative arm will decide whether to proceed with an investigation within the next week to 10 days. Molly Millerwise, Treasury spokeswoman, said, "we appreciate Congress's interest in safeguarding the U.S. financial system from abuse. The transaction the U.S. government helped to facilitate is fully consistent with all applicable laws and regulations." We'll see...

June 25, 2007

  We take a brief detour for this, from the Straits Times of Singapore:

"ON JUNE 8, my father went to HSBC Jurong East branch to help me deposit money in my bank account, which I had just opened recently. A bank teller first asked about the origins of the money and then remarked that she was afraid my dad was a terrorist. My dad had a rude shock. Although I understand banks are required to carry out Customer Due Diligence (CDD) measures under MAS Act Cap 186 Prevention of Money Laundering and Countering the Financing of Terrorism, the bank teller could have handled the matter more appropriately. After I gave my feedback to HSBC, its reply was less than satisfactory. Instead of accepting responsibility for poor customer service, the customer service manager of Jurong East branch explained in a phone conversation that the teller was temporary and even suggested my dad go to the branch to receive an apology. In a subsequent letter, she advised me of the bank's requirement to seek details of the source and use of funds to comply with strict international regulations regarding money laundering and terrorism. A check on MAS Act Cap 186 reveals that banks undertake CDD measures only if the transaction exceeds $20,000. However, my dad's transaction was less than this amount... With all the government initiatives to make Singapore the regional banking centre and service centre, it is worrying that a temporary employee, I would think not properly trained by HSBC, is allowed to handle sensitive banking transactions. Even more disturbing is how HSBC management handles customer feedback."

June 18, 2007

  A new low for the Federal Reserve, it prosecutes money laundering while allegedly engaging in it, since unlike banks it is not subject the USA Patriot Act: " The decision to use the Federal Reserve Bank to return the [North Korean] money to the original account holders came after government lawyers concluded that the Federal Reserve was not subject to the same legal provisions as the commercial banks." LAT....

June 11, 2007

   The UN Counterterrorism Committee has warned Bangladesh of the danger of terror-financing through remittances sent by expatriates. The committee also warned of the possibility of militants being financed through donor agencies. Elizabeth Joyce, a senior UN legal official led the three-member team of the UN Counterterrorism Committee. In the meeting Joyce said, "Bangladesh is among the leading countries when it comes to cash transactions. 80 to 90 per cent of all transactions are in cash. They include bank and non-bank transactions. Bangladesh receives around 600 crore [1 crore equals 10m] dollars in expatriates' remittances. This can easily be used for financing terror."

  The UN's interesting in money laundering in Bangladesh happens as UN special rapporteur Hina Jilani is not allowed to leave the country...

June 4, 2007

  Quotes of the week -- U.S. Ambassador to South Korea Alexander Vershbow said on May 30 "We're ready to begin the process of removing North Korea from the list of state sponsors of terrorism and from the application of the Trading with the Enemy Act."

            In email to US Banker, from US Treasury spokeswoman Molly Millerwise, noting that the agency has worked with Macanese authorities for 18 months, during which they turned over 300,000 related bank documents: "We said at that time we'd be willing to review and possibly lift the rule if our concerns were addressed."

   And the concerns, beyond BDA in Macao, were centered on Yongbyon...

  It is FT-reported that "since 2001, the State department has had a method of electronically transferring cash from its credit union to the Foreign Trade Bank in Pyongyang"....

May 28, 2007

 The U.S. negotiator in North Korean disarmament Christopher Hill talks and a delegation from Pyongyang attended Asia's security forum in Manila on Friday, but the American diplomat ruled out separate bilateral meetings. Hill told reporters when he arrived late Thursday that he had no plans to meet the North Koreans on the sidelines of the forum. "Those are different North Koreans from the ones who deal with at the six-party talks," he said earlier this week in Vietnam. Hill bragged that the U.S. will not let a dispute over $25 million in North Korean funds, allegedly tied to money laundering and counterfeiting, stand in the way of achieving progress in the North's nuclear disarmament. The money has since been freed, but the transfer has been delayed because other banks are apparently hesitant to touch the tainted funds.

  But maybe not Wachovia...

May 21, 2007

  Bank of New York, now sued for $22 billion by the Russian customs service, still argues that its merger application to acquire Mellon should go forward, without even a re-opening of the Fed's comment period. We'll see.

Strange days: on May 17, Wachovia's spokeswoman Christy Phillips-Brown announced that Wachovia was asked "by the U.S. State Department to help them process an interbank transfer of funds held at other banks, which are the subject of negotiations with North Korea. We have agreed to consider this request and our discussions with various government officials are continuing." Since dealing with Banco Delta Asia is still illegal, one wonders both how the U.S. could cynically waive the law for one transaction, and what it would owe Wachovia for this "service." It creates conflicts, which will be explored...

May 14, 2007

 Kyodo News says the US is considering letting an unnamed American bank handle the money at Macau's Banco Delta Asia, waiving its own Patriot Act. If the deal is approved, the Macau bank would transfer the cash to a US bank which would in turn send it to a third country, Kyodo News said.

Asked whether the United States would make an exception to let a US bank handle the money, State Department spokesman Sean McCormack said it was up to the Treasury Department. "It's a heck of a lot more complicated than anybody would have ever thought," McCormack said of unfreezing the money. Yep...

May 7, 2007

  According to Nikkei, leading Japanese banks are stepping up monitoring to prevent money laundering following the recent punishment by U.S. authorities of blue-chip financial institutions Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Banking Corp. Bank of Tokyo-Mitsubishi UFJ this month created an anti-money-laundering office of about 20 employees, while SMBC is considering upgrading the monitoring system it introduced in 2004. Last December, Mizuho Bank installed a computer system capable of comparing sender and recipient names against a blacklist that includes terrorism-linked individuals and missile-related North Korean organizations. We'll see...

April 30, 2007

   Quote of the week : Japanese Prime Minister Shinzo Abe describing his impression of Kim John Il based on a meeting with him in 2002 -- "I regard Mr. Kim Jong Il as a person who is capable of rational thinking. I think there are people there who can make logical decisions, so I believe a policy of dialogue and pressure vis-a-vis the North will be effective."

 North Korea will likely be discussed when Abe meets Bush on Thursday. In February, North Korea pledged to begin abandoning its nuclear program in return for energy aid and political concessions, but it missed an April 14 deadline to shut down its nuclear reactor. The North has refused to act until it receives US$25 million in cash frozen after a Macau bank was blacklisted by the United States for allegedly helping the North with money laundering and counterfeiting. The funds have been freed for withdrawal, but for unknown reasons the North has not yet acted to recover the money. Developing...

April 23, 2007

The Egmont Group is getting legislation and regulations from the Canadian government granting immunities to the group and its officials, meaning the group's yet-to-be-named executive secretary and his or her family will have the same privileges and immunities as diplomats. In addition, the Egmont Group's officials will have legal immunity for anything they say or do in their official capacity and non-Canadians who are not permanent residents of Canada will be exempt from taxes on their salaries. All property and assets of the organization will be immune from any legal process. More than 24 organizations have been granted similar immunity ranging from the Caribbean Development Bank to the International Civil Aviation Organization.

  Question: how can Canada grant Egmont Group's officials "legal immunity for anything they say or do in their official capacity"?

April 16, 2007

  The WSJ reports the "the Macau Monetary Authority set up a team to investigate BDA, and two days later, took over its management and froze more than 50 North Korean accounts with about $25 million in deposits. Among them were 20 accounts held by North Korean state-owned banks, 11 held by trading companies and nine held by individuals. State-run Zokwang Trading Co., accused by the U.S. in 1994 of passing hundreds of thousands of dollars in counterfeit U.S. currency into Hong Kong, held a number of accounts. Treasury has alleged that another account holder, state-owned Tanchon Bank, has financed North Korea's weapons programs... Foreign aid organizations tied to the United Nations faced difficulties bringing foreign currency in and out of the country. Some innocent businesses got caught up in the dragnet. Daedong Credit Bank, a joint venture between North Korea's state-owned Daesong Bank and a Hong Kong-based investment company, says about $7 million of its funds were frozen in BDA. Of that figure, $2.6 million were funds owed to its client, British American Tobacco PLC. BAT runs a small manufacturing facility in Pyongyang in a joint-venture with a North Korean trading firm... In February 2006, Mongolian intelligence officials detained Daedong couriers seeking to deposit $1 million and 20 million yen ($168,000) at Ulan Bator's Golomt Bank. The Mongolian officials charged the couriers with moving counterfeit currency, and froze the funds. Daedong says its couriers were carrying cash to Mongolia because North Korea doesn't have any computerized systems to make money transfers." Who knew?

April 9, 2007

  Regarding North Korea's April 15 deadline, Susan Stevenson, a U.S. Embassy spokeswoman in Beijing, said on April 6: "Our discussions and common efforts with all parties continue. We believe that it is possible to meet the 60-day deadline and are working with the other parties to accomplish that goal." Also Friday, a news report in Seoul that said the money will be returned to Pyongyang via a bank in Hong Kong. South Korea's JoongAng Ilbo newspaper reported, citing an unidentified high-level government official, said the United States, China and Banco Delta Asia came to the agreement during the Beijing talks.

            The South Korean Foreign Ministry, as usual, refused to comment, to the AP much less anyone else...

April 2, 2007

  At deadline, US officials remain tight-lipped about the talks between a delegation led by Daniel Glaser, the deputy assistant secretary for terrorist financing and financial crimes, and Chinese officials. Glaser was still in Beijing 6 days after arriving and holding  talks with officials from China's foreign ministry, the central bank and the country's banking industry regulator. The 25 million dollars was supposed to be transferred quickly to a North Korean account with the Bank of China but the state-owned lender has, AFP reports, refused to accept the money...

March 26, 2007 -- At the UN, Questions of Iran Sanctions' Secondary Effect, On Bank Sepah's Depositors

UNITED NATIONS, March 24 -- As the UN Security Council unanimously imposed further sanctions concerning Iran's nuclear programs, a question arose about the impact of including a financial institution, Bank Sepah, in the annex to the resolution. Following Saturday's 15-0 vote, Iran's foreign minister Manoucheher Mottaki delivered a lengthy speech, which along other things said "what can harming of hundreds of thousands of depositors in Bank Sepah, with 80 year history in Iran, mean other than confronting ordinary Iranians?"

            At the Security Council stakeout, Inner City Press asked this month's Security Council president, South African Ambassador Dumisani Kumalo, whether these sanctions would impact Iranian civilians. Amb. Kumalo responded that South Africa's "understanding of these sanctions is that they were aimed at trade... not at somebody who has ten dollars in the bank." He noted, "Remember, we as South Africa had asked for this to be removed." Video here, from Minute 7:33. As with most of South Africa's requests, this was not accepted by the resolution's proponents and initial negotiators, the five Permanent Five members, any one of which could have vetoed the resolution, and Germany.

            Inner City Press asked the Ambassador of P-5 member Russia, Vitaly Churkin, whether the financial sanction were, as he'd said, "carefully crafted," and whether civilian depositors would be impacted. Amb. Churkin responded that, "Unfortunately, there is this sanctions list, and when you get into sanctions, there can be secondary effects. Life without sanctions is much more comfortable. The way to get out of these nuisance is to have a negotiated solution to the problems posed by the Iranian nuclear program at this point." Video here, from Minute 11:35.

            A question remains, whether impacting depositors of Bank Sepah is reasonably calculated to bring about a negotiated solution. A chapter on the financial sanctions imposed by the UN's Counter-Terrorism Committee in "International Sanctions" (London: 2005, Frank Cass) speaks of the difficulties with such financial provisions. The U.S. recent on-again, off-again approach in connection with the Six Party Talks with North Korea to Banco Delta Asia shows the arbitrary nature of such sanctions. Their impact in this case on regular deposits remains to be seen -- and to be tracked.

            Bank Sepah has branches in London, Paris, Frankfurt and Rome.  When earlier this year the U.S. first applied its own sanctions, Bank Sepah objected to "fabricated statements based on purely hypothetical pretext, made out of political inducements" and said that the bank will "continue with its efficient performance with due observance of internal and international regulations as before." We'll see.

March 19, 2007

  From the Hong Kong Standard of March 17: "A Japanese delegate said the IAEA had urged countries attending the six- party talks to lift their sanctions on Banco Delta Asia."

 Question: is that the IAEA's role?

"We deeply regret the United States' insistence on using American domestic law to apply a ruling on Banco Delta Asia," China's Foreign Ministry spokesman Qin Gang said in a regular press briefing last week.

March 12, 2007

   After last week's U.S.-North Korea working-group meeting with North Korean Vice Foreign Minister Kim Kye Gwan, U.S. assistant secretary of state for East Asian and Pacific affairs Christopher Hill quipped, This process that we're on, you know, not unlike a video game, gets more and more difficult as you go into more and more levels," Hill said. The State Department's declassification of North Korea as a sponsor of terrorism would award the impoverished country access to assistance from the International Monetary Fund and the World Bank. North Korea is also pushing to have U.S. financial sanctions on its accounts at Macao's Banco Delta Asia SARL lifted as soon as possible. The curbs were imposed in September 2005 for alleged money laundering and distributing counterfeit U.S. currency. Immediately after the six-party accord, Hill said the United States would resolve the financial curbs it imposed on the bank in September 2005 within 30 days. We'll see.

March 5, 2007

  This week's U.S.-North Korea working group session will serve as the venue for the direct bilateral talks Pyongyang has long sought. It is to be led by Christopher Hill, U.S. assistant secretary of state for East Asian and Pacific affairs, and North Korean Vice Foreign Minister Kim Kye Gwan.

 Inner City Press: a portion of the UN press corps has been in a frenzy tracking the foreign minister of the Kim Jong Il government of North Korea, from San Francisco to New York, where he's slated to meet with Christopher Hill at the U.S. Mission. In San Francisco, Japan's NHK television is said to have rented five motorcycles to try to find Minister Kim.  In New York, reporters flocked out to the airport, awaiting a certain (or uncertain) United Airlines flight, and then camped out in front of the Millennium Plaza hotel, in the same structure at UNDP, and awaited him. They got a wave, and not much more.

            Achieving full diplomatic relations is no easy task in view of the complexity of resolving pending bilateral issues, such as removing North Korea from a U.S. list of "state sponsors of terrorism." The State Department's declassifying North Korea as a sponsor of terrorism is North Korea's main area of interest. In addition to trade with the United States, the declassification would give the impoverished country access to assistance from the International Monetary Fund and the World Bank. North Korea is also eager to have U.S. financial sanctions on its accounts at Macao's Banco Delta Asia SARL lifted as soon as possible. The curbs were imposed in September 2005 for alleged money laundering and distributing counterfeit U.S. currency. Immediately after the six-party accord, Hill said the United States would resolve the financial curbs it imposed on the bank in September 2005 within 30 days. But he cautioned Wednesday that any continued money laundering or counterfeiting will be met with additional financial sanctions.

February 26, 2007

            Colombian Foreign Minister Maria Consuelo Araujo Castro resigned Monday, just days after authorities arrested her brother for alleged ties to illegal right-wing paramilitary forces and announced they also would investigate her father and cousin for similar activities. "I believe that the judicial process needs to be free of interference," Araujo said in her resignation letter to President Alvaro Uribe. "The certainty of the innocence of my father and brother forces me to leave, so I can be free to be by their side and help them as a daughter and a sister." In addition to the arrest of her brother, the attorney general announced last week the investigation of former minister Araujo Castro's cousin, Hernando Molina Araujo, governor of Cesar province, on suspicion of murder and money laundering. Witnesses have told authorities that before Molina became the governor he was a paramilitary leader under the nom de guerre "Commander 35."

February 19, 2007

  From a February 8 letter from Bank of America to the Federal Reserve: "ICP notes accounts of anti-money laundering investigations related to South American money service businesses. Bank of America provided to the Board information about its anti-money laundering policies and practices [and] has routinely demonstrated its strong commitment to anti-money laundering compliance." Oh, really?

February 12, 2007

  Jiji says that the United States has started showing a flexible stance on lifting its financial sanctions against North Korea, imposed for suspected money laundering involving a Macau-based bank, so discussions on the matter could become complicated... The stance of Japan, a key U.S. ally, at the upcoming G-7 meeting appears different from that of the United States as Tokyo is determined to maintain a tough stance on North Korea, insisting that Pyongyang resolve issues related to its abductions of Japanese nationals. Meanwhile, Japan may be urged by other G-7 nations to strengthen its measures against money laundering, after major Japanese banks such as Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp. received business improvement orders from U.S. financial regulators for failing to take appropriate steps on the issue...

February 5, 2007

            Bank of America's offshore tax shelter scheme has led to a too-small $3 million fine for money-laundering. The National Association of Securities Dealers found that Banc of America Investment Services failed to obtain customer information about 34 accounts involving trust and private investment corporations based in the Isle of Man. BofA "fundamentally failed to meet its obligations with these high risk accounts by failing to adequately investigate and pursue red flags," James Shorris, the NASD's head of enforcement, said-in-a-statement. The Senate's Permanent Subcommittee on Investigations said it thought the accounts were controlled by two billionaire Texas brothers, Sam and Charles Wyly. As part of a 375-page report on offshore tax havens, the committee said the brothers, who helped build craft retailer Michael Stores Inc., used the accounts to shield stock option gains from taxes. Sen. Carl Levin, D-Mich, the chairman of the subcommittee, said that the fine "sends a strong message to U.S. securities firms that when they open accounts for offshore entities and transfer offshore dollars across U.S. lines, they have a legal obligation to know who is behind those accounts or risk millions of dollars in fines and other enforcement action." And now BofA wants to buy another secretive private bank, US Trust? See, "Protest filed against BofA's deal for U.S. Trust," by Rick Rothacker, Charlotte Observer, Jan. 27, 2007

January 29, 2007

  On the DPRK, "South Korean's foreign minister, Song Min-soon, said the second round of arms talks may be held before Feb. 10, according to a news report on Friday from the Yonhap news agency. The financial action that the United States took in 2005 that so angered North Korea was against a bank -- Banco Delta Asia SARL -- in Macau, a special administrative district of China. The United States alleged that the bank helped North Korea distribute counterfeit currency and engage in other illicit activities. The bank had provided financial services for more than 20 years to North Korean government agencies. As a result of the U.S. clampdown, some $24 million in North Korean accounts has been frozen at the bank."  Click here for Inner City Press' coverage of the North Korea funding scandals involving the UN Development Program...

January 22, 2007

  Royal Bank of Canada has been refusing to open U.S. dollar accounts for some Canadians who are also citizens of countries facing American sanctions: Iran, Iraq, Cuba, Sudan, North Korea and Myanmar. RBC spokesman David Moorcroft claimed that U.S. authorities expect RBC to live up to a higher standard than others because the bank is the largest provider of U.S. dollar accounts in Canada. Moorcroft also said RBC aims to be a leader in the efforts to crack down on money laundering and terrorist financing. Yeah, right...

January 14, 2007

   A company dropped at the last minute from the UN Security Council's Iran resolution showed up in comments by a top U.S. Treasury official last week. Stuart Levey, treasury undersecretary for terrorism and financial intelligence, told a news conference that Iran's state-owned Bank Sepah had facilitated business between Iran's Aerospace Industries Organization and North Korea's alleged missile-related exporter, the Korean Mining and Industrial Development Corp. "There's a real concern there...one would have to be concerned about these sorts of links between North Korean proliferators and Iranian proliferators and the financial intermediaries who might be handling that business," Levey said. Click here for Inner City Press' story reported from the UN about the dropping of Aerospace Industries Organization from the Iran resolution...

January 8, 2007

  From a Lud(dwig)ite op-ed about the revolving door at FINCEN: " When Mr. Werner was at the OFAC, he collaborated with Mr. Fox, Fincen's director at the time... Treasury should work with Congress to determine whether effective synergies could be developed through a merger. An additional benefit of a merger that created a more effective agency would be elevating the importance of the director's role -- and making it more likely that the director would stay in place longer." So that's why they leave? Not enough prestige? Or a lack of any post-employment restriction a/k/a anti-revolving door safeguards?

January 1, 2007

  Just as UNDP said no to meeting in New York (click here for Inner City Press' story of UNDP junket to Goa), the North Koreans don't want New York as venue for financial sanctions talks. "We have no intention of going to New York. The two sides should find another place," the Dong-A Ilbo quoted Kim Kye Gwan as saying Saturday before leaving China after attending the six-party nuclear talks, which failed to produce tangible progress. The North Korean vice foreign minister made the remarks in an interview with the newspaper at the airport in Beijing. Asked if North Korea wants the next session with the United States to be held in the Chinese capital, Kim nodded in approval...

December 25, 2006

            So now BNP Paribas is subject to a $220 million class action lawsuit for its role in the UN - Iraq Oil for Food scandal...

            From the Economist, on politics: " On December 14th the Serious Fraud Office reluctantly ditched its investigation into allegations, denied by the company, that BAE paid bribes to Saudi Arabian officials in exchange for an agreement to supply, organize and train the Saudi air force, a deal that has produced up to £43 billion ($84 billion) over almost two decades for BAE. The decision came after weeks of intense lobbying by BAE and the Saudi government, which reportedly threatened to cancel a follow-on purchase of 72 Eurofighter Typhoon jet fighters.  Tony Blair said the investigation had been halted because it threatened to harm relations with Saudi Arabia, a key ally in the fight on terrorism and a partner in the Middle East peace process. But suspicions linger that an equal motive was protecting thousands of British jobs."

December 18, 2006

  From Yomuiri, The United States and North Korea will set up a separate working-level mechanism in Beijing to discuss U.S. financial sanctions against the North in parallel with the planned restart of the six-way talks on Pyongyang's nuclear program, Christopher Hill, assistant secretary of state for East Asian and Pacific affairs, said Wednesday.  Washington, which is determined that the six-nation talks that are likely to resume Monday will yield results, has made concessions to the North in the hope of winning concessions from Pyongyang to suspend the operations at its nuclear facilities. The United States, however, has refused bilateral talks with North Korea and has opposed addressing the issue through talks on the ground that financial sanctions are a legal punishment for the North's illegal activities, including money-laundering.

 At the news conference in Washington, Hill said that when the six-way talks resume in Beijing, a two-nation mechanism apart from the six-way talks will be established for preliminary talks on the financial sanctions. He said Washington wanted to solve the problem. Instead of Hill, Daniel Glazer, an assistant to the deputy secretary of the Treasury specializing in terrorist funding and financial crime, will represent the United States in the bilateral talks, according to officials of the U.S. Treasury....

December 4, 2006

  From the official Chinese news agency Xinhua: A senior central bank official said recently that China's membership of the world money policing agency, the Financial Action Task Force on Anti-Money Laundering (FATF), would benefit the FATF as well as China. China attaches great importance to combating money laundering and the financing of terrorism, claimed Xiang Junbo, vice-governor of the People's Bank of China (PBOC), at a symposium held in Shanghai. Voting will take place next June...

November 27, 2006

  The revolving door is making a mockery of anti-money laundering enforcement. Robert Werner, after a mere nine months as director of the U.S. Treasury Department's Financial Crimes Enforcement Network, announced last week that he will leave the agency in January to cash out at Merrill Lynch. Werner is the second agency head to leave in less than a year. A former Fincen official has since been quoted that "It would be nice to have some continuity. I do hope that the next director will be there for the long haul." Without anti-revolving door safeguards, that's unlikely...

November 20, 2006

 In the Czech Republic, the planned cancellation of the financial police is criticized not only by its heads, but the Financial Ministry expressed its dissatisfaction, too, the daily Pravo has reported. Karel Korynta, head of the ministry's financial and analytical department, said that this step may affect the fight against money laundering and financing of terrorist activities. "The Interior Ministry should now clearly say who will be our new partner. It is high time to do it," Korynta told the paper. "We will demand a continuity. We need to know in advance who will be our partners in curbing money laundering and financing of terrorism," Korynta's deputy Josef Bazant told Pravo. Interior Minister Ivan Langer argues that the cancellation of the financial police and transfer of its employees to other police units will speed up investigation of financial crimes and make it more efficient. Langer and Police President Vladislav Husak say that the financial police work well, but not quickly enough. Reservations against the step were voiced by the Social Democrats (CSSD). As from 2007, part of the financial police is to merge with the anti-corruption police, while other employees are to join the organized crime police or the anti-drug unit.

Last week Inner City Press sat down for an interview with the president of the Nagorno-Karabakh Republic, Arkady Ghoukasyan, and asked him about the fires, about the United Nations and other breakaway republic matters. Click here for the footage, on Google Video.

November 13, 2006

  Europe's EcoFin Council has adopted by a qualified majority (Germany and France abstained) a regulation establishing the information requirements to accompany the transferring of funds in order to prevent money laundering and the financing of terrorism (EP-Council 3630/06, 14023/06 ADD). The new regulation will complete Directive 2005/60/EC on money laundering and will be applicable from 1 January 2007 in compliance with the recommendation by the G7 Financial Action Task Force adopted in 2001, the day after the 11 September airplane attacks...

November 6, 2006

  In the summer of 2007, the UK will assume presidency of the Financial Action Task Force (FATF), the inter-governmental policy-making body founded by the G-7 Summit in 1989. In this role, the UK will promote its new anti-terror measures  and urge FATF to hold accountable the countries that have insufficient terror financing controls.

  Inner City Press continues to await the U.S. State Department's promised comment on the FATF last month removing Myanmar from the money laundering blacklist...

October 30, 2006

    Gold worth over $1 million extracted by Chilean dictator Augusto Pinochet has reportedly been found in HSBC, whose spokesman Gareth Hewett said, "Al insistírsele sobre el particular, aseguró: "No puedo confirmar ni desmentir. Sin comentario" (no comment). Later HSBC claimed the Chilean documents are forgeries, but another maintained their authenticity. We'll see.

  In Kenya, a senior U.S. embassy official, who requested not to be named, said: "The United States enjoys a robust working relationship with Kenyan law enforcement officials. We have not been formally requested to assist in the Charterhouse affair. If we are formally requested to assist in the future, we will do so to the best of our abilities." But the government said it would not engage the services of US agencies. Foreign Affairs Assistant Minister Moses Wetang'ula said the government would instead turn to Interpol to which it is a member. "As a sovereign state, it would be laughable to invite a foreign country to come and assist on such minor issues as bank fraud while we have sufficient investigative agencies to do the job," he said.

Already, three bank officials who blew the whistle on the 18bn-shilling [250m-dollar] Charterhouse Bank affair, have fled the country citing fears over their lives. Before fleeing Kenya, officials believed to be from the US Drug Enforcement Administration, interviewed the trio in their Nairobi hideouts. It was then that a decision was reached to fly them to South Africa where travel documents for the asylum-seekers were processed to enable them fly to the US.

October 23, 2006

  On October 13, the FATF dropped Myanmar from its money laundering blacklist. On October 17 at the UN, Inner City Press asked U.S. Ambassador John Bolton for his reaction to the FATF's decision. Amb. Bolton had cited Myanmar's money laundering as one of the reasons that Myanmar should be put on the agenda of the UN Security Council, as a threat to international peace and security. Amb. Bolton on Oct. 17 said he hadn't heard of the FAFT decision. His staff gestured to call or email him. Inner City Press emailed the staffer press accounts of the FATF decision and was told that a comment will be forthcoming.

October 16, 2006

  Georgia's foreign minister Gela Bezhuashvili said last week, "Branches of Russian banks are continuing to operate in Abkhazia, unlawfully. Money-laundering is still happening there. Counterfeit money is still being printed in South Ossetia." Meanwhile at the UN, a Georgian representative promised Inner City Press to provide information on this alleged money laundering. Inner City Press asked six questions of Georgia's UN ambassador, click here to view. Until next report, for or with more information, contact us

October 9, 2006

   In Federal court in Brooklyn, NY, Judge Charles P. Sifton in Brooklyn has in the past two week denied motions to dismiss terror-related charges by RBS' NatWest and Credit Agricole. The latter e suit, filed in February under the Anti-Terrorism Act, portrays Credit Agricole of improperly doing business with a French-based charity that has been designated a terrorist organization.

In court papers, the bank claimed it suspected the charity, CBSP, might be involved in money laundering, but not terrorism. The judge said in his ruling that 'it is reasonable to believe that when the bank noticed 'unusual activity' on CBSP's accounts, the bank would have investigated the organizations receiving the large transfers, "including designations of terrorist organizations made by the government whose country was experiencing the terrorism." Ah, RBS and Credit Agricole...

October 2, 2006

  Bank of America admitted last week that its lax operations allowed South American money launderers to illegally move $3 billion through a single Midtown Manhattan branch. BofA said that it ''takes seriously its anti-money laundering obligations'' and that it ''never knowingly does business with persons, organizations or businesses engaged in illegal activities and did not in this case.'' Most of the funds came from Brazil via a licensed money transmitter in Uruguay and then to the Bank of America branch, which allowed funds to reach unlicensed money transfer firms in the area...

September 25, 2006

 HSBC was tied with Citigoup and Bank of New York for first place in the highest number of fines for violations from the U.S. Office of Foreign Assets Control -- six each, from 2003 through August 2006.  And the Office of the Comptroller of the Currency, in approving a massive JPM Chase - Bank of New York application on September 15, on which Fair Finance Watch raised money laundering issues, does not even mention the issue. The OCC is a unit of the U.S. Treasury Department...

September 18, 2006

    New era? First deputy chairman of the Central Bank of Russia Andrei Kozlov was shot in Moscow on September 13 in the evening--

"This is the first attempt on the life of a high-ranking bank official in the Russian history. Observers and Kozlov's colleagues stated without a moment's hesitation that the attempt was bound up with his official activities. According to preliminary information, the attempt on Andrei Kozlov was made nearby a sports center Spartak on Oleniy Val Street at about 9.30 pm. His colleagues say that he took part in a corporate football match organized there by officers of the CBR and commercial banks every Wednesday. According to the data of the Chief Internal Affairs Department, when the match was over, two men walked into the sports center. When the official appeared on a parking place, they opened fire. The criminals managed to disappear. The Perekhvat plan was of no effect. In the capacity of the first deputy chairman of the CBR, Andrei Kozlov was in charge of bank supervision. As a matter of fact, the CBR's decisions about enforcement of such measures as a revocation of bank licenses depended on him."


September 11, 2006

   The U.S. Treasury Department announced on September 8 it has cut off Iran's Bank Saderat from access to the U.S. financial system to block terrorist funding, and is sending its officials worldwide to seek similar actions. Treasury Undersecretary for Terrorist and Financial Intelligence Stuart Levey said they will "consult with government and private-sector leaders on measures we should all be taking to protect ourselves from Iran's use of the international financial system to advance its dangerous policies. The United Nations is one avenue for imposing pressure on the Iranian regime -- an avenue we continue to aggressively pursue -- but like-minded states and even the global private sector may well decide to take additional measures outside of that context," Levey said. "We have some important success with North Korea," he added, referring to financial sanctions against North Korean companies for proliferating WMDs and a Macao-based bank for allegedly distributing counterfeit U.S dollars and laundering money for the North.

  That cut off preceded the test firing of missiles... In an approval order the Fed recited in footnote 13 that ICP Fair Finance Watch

"cited various news and congressional reports from 2003 through 2005 regarding allegations that ES Bank concealed assets and money laundering in connection with accounts held for the benefit of certain international individuals, including former Chilean President Augusto Pinochet."

   What a generous description, "international individuals."  

September 4, 2006

  In the shadows and interstices of UN Security Council resolutions, the U.S. is at work. 'There is sort of a voluntary coalition of financial institutions saying that they don't want to handle this business anymore and that is causing financial isolation for the government of North Korea,' Stuart Levey, the Treasury Department's undersecretary for terrorism and financial intelligence, told AP last week. 'They don't want to be the banker for someone who's engaged in crime, as the North Korean government is,' he said.  Banks in Singapore, Vietnam, China, Hong Kong and Mongolia are opting not to do business with North Korea, Levey said. We'll see.

August 28, 2006

    Who's in bed with whom? LAT: Wells Fargo's supposed safeguards for detecting illicit banking activities by terrorists, drug smugglers and other criminals were so weak that federal regulators should have publicly reprimanded the San Francisco-based bank, according to a Treasury Department report released last week. Instead, senior banking regulators met with Wells Fargo CEO Dick Kovacevich, then overruled their own staff by letting Wells off with an informal enforcement action -- sparing Wells the scrutiny and embarrassment suffered by other banks that have been forced to disclose that regulators faulted their oversight systems. 

"We believe that [the Office of the Comptroller of the Currency] should have acted more quickly and forcefully to require Wells to strengthen its compliance and that OCC's failure to take formal enforcement action against Wells sent the wrong message to the banking industry about OCC's resolve to ensure that banks comply" with the Bank Secrecy Act, the inspector general's report said. The OCC staff recommended Feb. 4, 2005, that a formal cease-and-desist order be issued to Wells Fargo. Dick Kovacevich met five days later with top OCC officials, including Acting Comptroller of the Currency Julie Williams, who was then running the agency. After that meeting, the OCC pulled the recommended action from consideration by its top supervisory review committee, according to the report. On April 12, 2005, a new memo was issued recommending that the agency take informal action. Who's put at risk by these cozy relationships?

August 14, 2006

The Bank of England on August 11 froze the assets of 19 suspects allegedly involved in the failed plot to blow up U.S.-bound planes. MW: "The Bank of England said financial institutions should check whether they operate bank accounts for the men or hold assets on their behalf in other ways. If so, those accounts and assets should be frozen and all information reported to the bank." The suspects' lawyers say they've barely gotten to see them, and they can be held for up to 25 more days without being charged. Developing.

August 7, 2006

 The French arm of Portuguese bank Caixa Geral de Depositos (CGD) has been given an official warning and a fine by the banking commission in France for failing to meet requirements on the prevention of money laundering. The fine to be paid by CGD totals 400,000 euros. According to the banking commission, the bank infringed several vital regulations concerning the fight against money laundering and the financing of terrorism.

July 31, 2006

  Sloppy UN Security Council echoes -- U.S. Undersecretary of Treasury Stuart Levey told the Yonhap News Agency last week that

"UN member states should freeze assets of 11 North Korean entities that the United States designated last year as missile and weapons of mass destruction (WMD) proliferators as the first step in implementing the UN Security Council resolution adopted this month... Levey said China has taken "responsible action" in responding to concerns over North Korea's alleged illicit activities and that he hoped to visit Beijing. 
Levey, in charge of terrorism and financial intelligence, was in Asia this month, stopping in South Korea, Japan, Vietnam and Singapore. His trip followed the unanimous Security Council resolution to condemn North Korea's ballistic missile launches on 4 July (Washington time). The resolution requires all UN member nations to prevent the transfer of funds, material and technology that could help North Korea's missile and WMD programmes. 
Under an executive order, the US froze assets of 11 entities between June and October last year that it said were involved in North Korea's WMD proliferation. In a separate action, the US Treasury in September designated Macao-based Banco Delta Asia (BDA) as a primary money-laundering concern abetting North Korea's illicit financial activities, including counterfeiting of American currency and drug trafficking. 'One thing we do believe, at the very least, is that entities that are openly engaged in North Korea's missile and WMD programmes, the entities that we have already designated under our executive order of the US, those are entities that should be treated (the same) by others, at the very least,' Levey told Yonhap. "Not only that, those entities, to the extent that there are assets being held in other countries, those assets should be frozen," he said. The UN resolution is binding on all member states, so any country with such assets should freeze them, he said.  The undersecretary said the US was discussing with its allies how to properly interpret the Security Council resolution. Some argue that any and all money flowing into North Korea can be misused to bolster its missiles and WMD and therefore even routine business transactions should be severed with North Korea.  Levey said in theory the argument is right. "Money is fungible so one would have to be careful to make sure that even the best proceeds of routine trade transactions could benefit the WMD or missile programs," he said. But he added there was "a long way to go" to reach that conclusion. 'What I am concentrating on the short run is to make sure that those entities are cut off,' he said."

   This was left unclear, intentionally, in the Security Council's resolution. Developing...

July 24, 2006

  In Romania, more than 3,000 suspect deals in terms of money laundering this year are currently being investigated by the Romanian National Office for Preventing and Combating Money Laundering (ONPCSB), among which a few tens are suspected of having financed terrorist missions, said ONPCSB chairperson Adriana Popa...

 And:" The president of the southern Russian republic of Dagestan, Mukhu Aliyev, has called for more active efforts to fight money laundering, the shadow economy and economic crime in the republic. In his address to a regional conference, Aliyev said that the scale of the shadow sector of the economy in Dagestan is over 50 per cent, whereas the average for Russia is 20-25 per cent." 

July 17, 2006

  Echoes from across the sea: Jean-Cyril Spinetta, chairman and managing director of the Franco-Dutch airline group Air France-KLM, has been summoned for July 18 in connection with an inquiry into alleged concealed operations and money-laundering relating to Pretory, the former air transport security company, which was formerly a subcontractor for Air France. A lawyer representing Mr. Spinetta has assured that he has never had any contacts with responsible parties at Pretory and had no knowledge of the internal functioning of the company under investigation.  Following the terrorist attacks on September 11, 2001, Pretory provided security staff on Air France flights to the US. Suspicion has now arisen of favoritism in relations between shareholders in Pretory and Joel Cathala, former security director at Air France...

July 10, 2006

  In wildly under-reported news, officials in the southern Russian republic of Kabarda-Balkaria have published a list of 24 people they say are wanted for involvement in the 13 October 2005 rebel attack on the capital Nalchik. The Russian news agency Regnum complains that "the republic's Prosecutor's Office in May 2006 rejected the request of the directorate of the Federal Security Service to initiate criminal proceedings into money laundering." We'll see...

July 3, 2006

  The FATF's backing-down to Nigeria, removing it from the List of Non-Cooperative Countries and Territories, is questionable...

June 26, 2006

  The outgoing Treasury Secretary John Snow said on June 23: "I am particularly proud of our Terrorist Finance Tracking Program which, based on intelligence leads, carefully targets financial transactions of suspected foreign terrorists."  That is, combing all of Swift. And what law applies? Developing...

June 19, 2006

  After Inner City Press on June 15 asked the UN's Kofi Annan about the "anti-terrorism" initiatives of members of the Shanghai Cooperation Organization (see ICP's 6/19 Global Inner Cities Report), this is from a published interview of Vyacheslav Kazimov of the SCO:

Question: Could you please give us some specific examples of how the Regional Counter-Terrorism Structure deals with threats and challenges of our time? 
Vyacheslav Kazimov: They were listed at the meeting of the Council of the Regional Counter-Terrorism Structure in Tashkent this March. Secret services of members of the Shanghai Organization of Cooperation prevented over 260 terrorist acts from happening. 
Successful prevention of undesirable consequences of raids like the audacious attack on Nalchik in Russia or on the Fergana region of Uzbekistan close to the borders with Kyrgyzstan and Tajikistan this May, demonstrated efficiency and competence of secret services of members of the Shanghai Organization of Cooperation in localization of emergencies to contain the effect they may otherwise have on the situation in the region in general. 
I'd like to point out here that despite the measures the Kyrgyz authorities take, extremist Hizb-Ut-Tahrir and terrorist Islamic Movement of Uzbekistan are becoming ever more aggressive and active in this country and particularly in its southern part. 
This assumption is confirmed by the May 12 incident, when some gunmen attacked Tajik border guards and Kyrgyz customs officials. They were exterminated in the special operation that followed but investigation established that the criminals had planned a series of terrorist acts. That was their way of commemorating the first anniversary of the events in Andijan. 
It confirms by the way, that the events in Andijan were inspired and orchestrated by international terrorist organizations. 
Thirty-four organizations operating on the territory of the Shanghai Organization of Cooperation are recognized as terrorist, separatist, and extremist. Their names are on the Roster of terrorist, separatist, and extremist organizations outlawed on the territories of members of the Shanghai Organization of Cooperation. 
Approached by the Prosecutor General's Office, the Russian Supreme Court outlawed 15 organizations as terrorist and extremist. Twelve organizations were thus outlawed in Kazakhstan, 26 in Uzbekistan, 10 in Tajikistan, 4 in Kyrgyzstan, and 4 in China. Some of them are recognized as a danger to security of several members of the Shanghai Organization of Cooperation at once. For example, the Islamic Movement of Turkestan and East Turkestan Liberation Organization are banned in three countries of the Shanghai Organization of Cooperation, Al-Qaeda and Taliban in four, and Islamic Movement of East Turkestan, Islamic Movement of Uzbekistan, and Hizb-Ut-Tahrir al-Islami in five. The same goes for some other terrorist, separatist, and extremist structures. 


June 12, 2006

   Russia's Central Bank announced on June 7 it had revoked the operating licences of two more banks for "breaches of banking legislation." Moscow Region-based http://www.mosprombank.ru  Mosprombank and Moscow's http://www.cbr.ru  European Clearing Bank were stripped of their licenses and put under temporary administration for failing to comply with federal banking laws and Central Bank regulations, and for violations of the law on money laundering and financing of terrorism, the Central Bank claimed...

June 5, 2006

  The Council of the European Union imposed financial restrictive measures against several Belarusian officials, according to a May 18 statement reported by MoneyLaundering.com. They include freezing the funds and economic resources of people involved in or associated with the violations of “international electoral standards” during the March 19 vote. That includes President Alekandr Lukashenko. The measures also specify that no money shall be made available to the listed bureaucrats of the Belarus government, including Minister of Education Aleksandr Radkov, Minister of Justice Viktor Golovanov, Prosecutor General Petr Miklashevich, and others. Meanwhile the U.S. says it will not impose such sanctions, other than against Belarusian Info-Bank for its asserted links to laundering for the Saddan Hussein regime...

May 29, 2006

  In the U.S. Federal Reserve's Santander-Sovereign rubber stamp last week, the Fed recites that ICP "expressed concern about Santander’s ability to share information for purposes of complying with applicable U.S. anti-money laundering laws." The reference here is to the fact that Santander refused to disclose, even to its own US affiliates, the owner of accounts into which money was wired (as described in Senate's Riggs report, the owner was the dictator of Equatorial Guinea). So how can the Fed go on to "note[] that Santander has committed to make available to the Board information on the operations of Santander and any of its affiliates that the Board deems necessary to determine and enforce compliance with applicable laws"?  Does that mean that the Fed endorses the type of no-name offshore wiring as is described in the Senate's Riggs report? We'll see...

May 22, 2006

A deafening no-comment -- following the Wall Street Journal's May 11 article on the continuing investigation into the billions looted from Nigeria by ex-dictator Sani Abacha, which named as a conduit for Abacha's Transnational Bank's nostro accounts Citigroup and only one other institution (Deutsche Bank), nothing said by Citigroup...

May 15, 2006

  Regarding money laundering in Japan: "Banker off hook in loan shark money-laundering," blared The Japan Times on March 23. The Yomiuri Shimbun chimed in with "Court ruling could make Japan a money-laundering haven", questioning the Tokyo District Court ruling that experts say undermines claims that Japan is making progress on due diligence compliance.  The case behind the headlines involved Susumu Kajiyama - the "loan-shark king" of the Yamaguchi-gumi underworld group - hiding $659.47 million raised from loaning money at illegally high interest rates.  The funds were transferred to accounts opened at Credit Suisse in May 2003, in transactions completed by Atsushi Doden, an employee of the Hong Kong branch. A report on the transfer led to Kajiyama being sentenced to 61/2 years in prison in November. The judge ruled on March 22 that "reasonable doubt" existed that Doden knew the money was profits from criminal activities and that testimony from another gangster about a conspiracy with Doden was not trustworthy.  Observers are quoted in the SCMN that while "suspicious transaction reports" are being filed, but that those identified by Japanese watchdog Financial Intelligence Unit as requiring further investigation by the National Police Agency cannot all be examined adequately. In 2005, there were 98,935 STRs filed by financial institutions in Japan, of which 66,812 were referred to the police for investigation.  In 2003, the number of STRs stood at 43,768 and, in 1998, just 13 such reports showed up on the authorities' radar. The FIU still employs only about 20 staff, including financial intelligence analysts examining suspicious transactions.  Japan's anti-money laundering regime is covered by The Law Concerning Confirmation of Client Identity of Fiscal Institutions, The Organized Crime Punishment Law and The Foreign Exchange and Foreign Trade Law. These laws have remained substantially unchanged over the past two years, despite the scandals, including the one involving Citigroup.  Good place to launder....

May 8, 2006

  Unfortunate, for some -- Fortune of May 15 reports on "a multibillion-dollar money-laundering operation at Lebanon's Bank al-Madina that allowed terrorist organizations, peddlers of West African 'blood diamonds, Saddam Hussein, and Russian gangsters to hide income and convert hot money into legitimate bank accounts around the world," and links it to the assassination of Hariri. The article notes that "' "Fraud, corruption, and money laundering could have been motives for individuals to participate in the operation that ended with the assassination of Mr. Hariri," Mehlis wrote last December in his second report, referring specifically to the collapse of al-Madina. Mehlis, who would not be interviewed" -- we'll see.

May 1, 2006

   Here's a variation on the revolving door -- the repeat settlement. Bank of New York, which the Federal Reserve hit with a $38 million money laundering fine in 2000 (for having moved $7 billion in hot Russian money), has now settled again, without even paying a fine. The Fed and the New York Banking Department have slapped Bank of New York on its BONY wrist for  new deficiencies in the bank's money laundering controls, giving it 60 days to comply with yet another order. And if it doesn't?  Well, it can just settle again. This will be raised, and reviewed, in connection with JPMorgan Chase's applications to acquire 338 (presumably money laundering) branches from BONY...

  Report from the field: in Brussels last week, a Citibank branch refused to exchange currency into Euros except for Citigroup customers; a Citi credit card was not enough to qualify, highly ironic in light of CEO Charles Prince's statements at Citi's annual shareholders' meeting, that the company has unified its customer bases instead of viewing each product or business line separately. Perhaps the message hasn't crossed the cold Atlantic? When asked, a Citigroup rep called this part of Citi's anti-money laundering policies. Apparently a different policy is applied to such Citi customers as Omar Bongo of Gabon... 

April 24, 2006

  Last week, the representative of the UN department tasked with the fight against drugs and crime, Mary Helen Carlson, stressed the importance of implementing the Sharm al-Shaykh declaration and recommendations which called for creating an international mechanism to fight terror and organized crime.  She added that the outcome of this workshop would be presented to the 4th session of the conference of the Francophone countries' justice ministers to be held in Ouagadougou this year. ...

  Also last week, Pakistani Minister for Interior Aftab Ahmad Khan Sherpao on Wednesday categorically said Pakistan was an autonomous country that's why Islamabad would not share sensitive National Database and Registration Authority (Nadra) data with any country including US. At a press conference he said that Pakistan is not and will not share any sensitive information with anyone. He also said America is satisfied with the law making done by Pakistan government to curb money laundering.  Really?

 In the U.S., the Federal Reserve has let AmSouth off the hook, releasing it from anti-money laundering scrutiny. We'll see how that works...

April 17, 2006

  Japan's Financial Services Agency (FSA) in March ordered Korea Exchange Bank to temporarily suspend any foreign exchange and remittance transactions with new corporate customers at its Japan branches. An on-site inspection of the bank’s Tokyo branch in December and reports from other Japan branches revealed poor monitoring and internal controls at the bank. The Tokyo branch “repeatedly and continually accepted illegal remittances of large sums of money brought in by a remittance agent who was arrested by investigators,” according to the FSA’s administrative action. The agency ordered the bank to suspend “any transactions with remittance agents who receive remittance requests made by foreign residents in Japan” and to implement a program to prevent illegal remittances from flowing through its branches.  Courtesy MoneyLaundering.com

Spanish justice officials accused Pakistan’s former Prime Minister Benazir Bhutto and two of her aides of money laundering for transferring millions of dollars to a Spanish bank between 2000 and 2004. Spanish authorities allege that Bhutto, who served as head of state twice, used four bank accounts belonging to a corporation based in the Spanish province of Valencia to stash huge sums of money deposited from other accounts in foreign banks. The accounts allegedly were used to hide illegal commissions. A judge froze the four bank accounts, seized two companies linked to Bhutto, and a residence in Marbella – so far, the only Spanish property linked to the former Pakastani leader...

April 10, 2006

    The Central Bank of Russia announced on April 5 it had revoked the banking operations license of the Krasnoyarsk Social Commercial Bank. The CBR press office said the Krasnoyarsk-based commercial bank had failed to comply with the federal laws on banking, CBR regulations and have committed violations of the law on money laundering and terrorism financing.  The Central Bank said it had also applied numerous supervision measures against the bank. From April 5, the Central Bank of Russia has placed the Krasnoyarsk commercial bank under temporary administration until the appointment of a receiver or a liquidator.

  But what of the banks -- including Citibank -- in Abkhazia? We'll see.

April 3, 2006

  Balkans report: In Tirana on March 31, Albania's director-general of money laundering prevention, Adriatik Islamaj, stated during the annual analysis of this institution that the "money-laundering prevention and the fight against financing of terrorism and financial crime in Albania
are now based on a full legal framework and strongly backed by the general political will of the government". Islamaj said that the so far reports on dubious economic activity show that around 63 bank accounts are frozen. According to Islamaj, 61 bank accounts worth 2.4m euros used for financing terrorism and two accounts for money laundering worth 1.5m euros have been frozen.

  Meanwhile in Russia The Central Bank of Russia said Thursday it was revoking licenses from two credit institutions from March 30 due to breaches of banking legislation. The CBR is withdrawing the licenses from the commercial bank Archekas and the non-banking credit institution National Settlement and Credit  Society, the bank's press office said. According to the press office, both credit institutions have failed to  comply with the federal laws on banking, CBR regulations and have committed numerous violations of the law on money laundering and  terrorism financing.

March 27, 2006

   United States anti-money laundering, or at least FinCEN, has devolved into a revolving door. Two months after Bill Fox cashed out to Bank of America, now FinCEN's William D. Langford jumps to JP Morgan Chase. “I have an absolutely incredible opportunity with an incredible institution – it’s that simple,” Langford told Money Laundering Alert in a telephone interview. Again - if the Treasury Department's OCC has adopted anti-revolving door safeguards in the wake of the Riggs Bank scandal, why hasn't FinCEN?

  Meanwhile in Brazil, Credit Suisse Group director Peter Schaffner was arrested on March 24 on suspicion of money laundering; six other CS executives were placed under investigation. "Strong indications were obtained that the suspects were involved in an illegal manner, providing the overseas remittance of large sums of suspicious origin, belonging to Brazilians and foreigners residing in the country,'' a police statement said. Credit Suisse spokesman David Walker confirmed that one of the company's employees was in the custody of Brazilian authorities. Police said Schaffner was being held at the headquarters of Sao Paulo's federal police. 'We haven't been officially notified about any charges against Credit Suisse or any of our representatives,' Walker said. Developing...

March 20, 2006

            Last week, after repeatedly contacting Georgia's mission to the United Nations, Inner City Press / Fair Finance Watch finally obtained a copy of the National Bank of Georgia's letter to FATF, asking for action on what it calls the "illegitimate banking system in Abkhazia [which] provides broad possibilities for legalizing the income generated as a result of the above-noted crimes... smuggling (including arms), illegal circulation of drugs, kidnapping, etc.". The attachment to the letter lists, among the institutions which provide services to the unlicensed bank in Abkhazia, "Citibank (Moscow, Russian Federation)."  Meanwhile, Citigroup has gotten itself appointed to advise on the privatization of Greece's fourth-largest lender, Emporiki Bank

  At Money Laundering Alert's conference in Florida last week, Jeffrey Ross, a senior adviser to the Treasury's Terrorist Financing and Financial Crimes division, admitted that the United States is still uncertain about how much money former Iraqi leader Saddam Hussein left hidden in bank accounts and other financial institutions around the globe before his ouster nearly three years ago. Ross bragged that money from about 41 countries and 2,100 different accounts, has already been returned to Saddam's homeland and put under control of the Development Fund for Iraq (as InnerCityPress.com has reported with respect to the DFI, oil is still not metered in Iraq). Ross acknowledged to Reuters that U.S. officials involved in the search for Saddam's fortune had more recently shifted their focus to sources of funding for the insurgency in Iraq... Click here for Inner City Press’ two reports last week from the United Nations, on refugees in Nepal, and lack of oil metering in Iraq.

March 13, 2006

  The U.S. Federal Reserve, despite its talk about anti-money laundering, is even more committed to doling out approvals to any proposed merger or acquisition. In the face of public reports of Bank Hapoalim's involvement in ongoing money laundering investigations, the Fed last week gave Hapoalim an approval.  The Fed's order noted the comments of ICP Fair Finance Watch that

"expressed concern about the proposal based on news reports of investigations by Israeli authorities into allegations of money laundering at Bank Hapoalim. As a matter of practice and
policy, the Board generally has not tied consideration of a proposal to the scheduling or completion of an investigation if, as in this case, the applicant or notificant and reviewed reports of examination from the appropriate federal and state supervisors of the U.S. operations of Bank Hapoalim that assessed its managerial resources. Based on all the facts of record, the Board has concluded that considerations relating to the financial and \managerial resources of Notificants are consistent with approval."

   So the Fed's policy is to ignore active investigations? And to ignore reports of its sister agency, the State Department? The Fed's Hapoalim order says that ICP/FFW

"expressed concern about Israel's anti-money laundering policies and procedures [but] in June
2002, the FATF recognized that Israel had addressed the deficiencies identified in its 2000 report. FinCEN withdrew its advisory in July 2002, noting that Israel has in place a counter-money laundering system that generally meets international standards." FinCEN Advisory Withdrawal Issue 17A."

  But the U.S. State Department's more recent 2006 report, also released last week, states that in Israel, "there is a continuing need for more effective bank supervision and proactive investigations of money laundering associated with criminal activity, especially on the part of organized crime figures and syndicates." Oh but don't let that get in the way of a merger...

March 6, 2006

 Back at'cha: last week The national bank of Abkhazia has called "absurd" the statement by the president of the National Bank of Georgia, Roman Gotsiridze, accusing Russian commercial banks of laundering money in Abkhazia. "Not a single Russian bank or any other foreign bank operates in Abkhazia and it is easy to check that," the chairman of the national bank of Abkhazia, Illarion Argun, said in response to Gotsiridze's comments. According to Argun, "Gotsiridze's statement that Russian banks are operating in Abkhazia is a political provocation. Most likely there are problems in Georgia, which is being flooded by banks from other countries. That is why for many years international terrorists felt privileged and lacked nothing in the Pankisi Gorge. The president of the Georgian national bank is trying to cover up the financial means of terrorists by making stupid statements," Argun said, as reported by the Abkhaz news agency Apsnypress.

  Meanwhile Japan's Financial Services Agency said March 3 it will punish Korea Exchange Bank's Japanese branches for accepting remittances from illegal banks. The agency ordered KEB's branches in Japan to suspend foreign exchange and remittance transactions with new customers from March 10 to June 9.

     And who owns KEB? The hedge fund Loan Star owns 50%, purchased from the South Korean government for 1.08 trillion won, or about 4,000 won a share. The stock price has more than tripled since then…

February 27, 2006

Manhattan District Attorney Robert Morgenthau has said that Bank of America is close to settling the investigation into the laundering of money from South America.  BofA moved about $2 billion through New York branches from clients in South America, Mr. Morgenthau said. Most of the transfers were made for a Uruguayan company that operates near the borders of Paraguay, Argentina, and Brazil…

            There’s been an update, on what Inner City Press reported some weeks ago from the United Nations: last week The National Bank of Georgia has sent an official request to the FATF urging that Russian banks cease relations with banks in Abkhazia. National Bank President Roman Gotsiridze said that about 50 Russian banks were illegally cooperating with the Abkhaz side. He was quoted: “The National Bank has asked the FATF to examine illegal
activities of Russian commercial banks in Abkhazia…It is not ruled out that there may be even more serious violations, for example financing of terrorism, going on in this uncontrolled area. Banks operating in Abkhazia are illegal and unlicensed banking establishments. The Russian legislation itself prohibits any economic relations with unlicensed organizations.”

            Georgia’s permanent representative to the UN had promised to get more information and evidence to Inner City Press; we’ll see. In another hot spot we’ve reported on, Kosovo, an anti-money laundering agreement was signed last week between Albania and Kosovo. ATA from Tirana reported that “Adriatik Islamaj, head of the money laundering prevention department in the Finance Ministry, and his counterpart in Kosov[o], Kevin Stephesen [as published], signed on Tuesday, 21 February in Tirana a memorandum of understanding on the exchange of mutual information on the prevention of money laundering as well as on fight against terrorism. The document was signed in the presence of Deputy Finance Minister Florian Mima. According to Islamaj, the signing of this memorandum of understanding aims at the increase of cooperation in order to facilitate the investigation on people suspected of the penal act of money laundering and terrorism sponsorship, as well as any other criminal activity.” Developing…

February 20, 2006

  Following up on Inner City Press’ report on Georgia’s yet-to-be-substantied allegation of terror-related money laundering in Abkhazia, from Russia we have this:

Russian Deputy Interior Minister Andrey Novikov has said militants in the North Caucasus are increasingly adopting the tactics of Iraqi insurgents to target federal forces and said his ministry is investigating how dirty money is finding its way to militant groups from the Russian Caucasus to the Northern Ireland. In comments reported by the ITAR-TASS news agency on 15 February, he said:, “Their [rebel] tactics are simple: an anonymous warning is made to the police about an imminent or perpetrated crime and an ambush is prepared at the place specified. When a rapid response team arrives, it is destroyed by fire or bomb blasts."
The Gazeta version of his comments specifically referred to the use of "tactics tested by Iraqi terrorists" in Makhachkala, the capital of the Russian republic of Dagestan. Novikov said the Interior Ministry in 2005 succeeded in detecting a "highly conspiratorial" militant network across the Russian Caucasus with established channels of financing. He said the death of militant Rasul Makasharipov in Dagestan on 6 July made it possible to detect a commercial firm which had opened accounts with the Russian bank Lesprombank to route money to buy arms and bomb components. He also said that the Russian Interior Ministry is investigating "an international criminal group suspected of financing the Irish Republican Army" together with unspecified UK law-enforcement agencies. He gave that example as part of Russia's efforts to combat money laundering. Some 7,500 crimes related to money laundering were detected in Russia in 2005, he said.

  FinCEN has a new director: Robert W. Werner, who comes over from the U.S. Treasury's Office of Foreign Asset Control (OFAC). Until next report, for or with more information, contact us

February 13, 2006

In Russia, Victor Melnikov, Deputy Chair of the Central Bank, disclosed last week that FATF plans to conduct a large-scale check of the Russian banking system in April of 2007. Melnikov bragged that in 2005, the Central Bank checked 875 crediting organizations. Whereas in 2004, the Central Bank issued 71 prohibitions for conduction of certain operations by banks, in 2005 it issued 165 such prohibitions and the number of fines grew from 105 in 2004, to 253 in 2005. In 2004, licenses of only two crediting organizations were revoked for breaches of money laundering laws and licenses of 14 banks already revoked in 2005.

Meanwhile, Raiffeisen International last week announced plans to buy for $550 million Russia's Impexbank and its 190 branches and 350 consumer finance outlets. The deal would make Raiffeisen the largest foreign bank and the seventh-largest bank overall in Russia…

February 6, 2006 -- Abkhazia: Cleansing and (Money) Laundering, Says Georgia, Even Terror’s Haven, By Inner City Press’ U.N. Correspondent

   The situation in Abkhazia should be internationalized, said Georgia’s ambassador to the United Nations, Revaz Adamia, on February 1. Briefing reporters at the UN Headquarters, Mr. Adamia characterized the plight of ethnic Georgians in Abkhazia as one of ethnic cleansing and even genocide. He cited a figure of 10,000 dead (as well as 100 Russian soldiers killed). His prepared remarks referred to “de facto annexation” and that “acquisition of property in the conflict zones, including property of refugees and IDPs, by the Russian entities is underway at full steam.”

            As Inner City Press reported in December, the President of Georgia's National Bank Roman Gotsiridze has accused Russian banks in Abkhazia of money laundering and of financing terrorism. At the Feb. 1 UN briefing, Mr. Adamia responded to questioning by reiterating the allegation, and specifying that the perpetrator of particular terror attacks in Turkey is living in Abkhazia, “he has a shelter there.” Mr. Adamia promised to provide Inner City Press with further information and evidence; watch this space.

* * *

  Amid the news stories about the U.S. Financial Crimes Enforcement Network’s William J. Fox cashing out with a job at Bank of America, there’s not been questioning of how or if this is different from the Office of the Comptroller of the  Currency’s examiner of Riggs Bank going to work for the bank. The OCC – Riggs move resulted in anti-revolving door provisions applicable to bank regulators. But why shouldn’t they cover FinCEN officials? In an interview on January 30 with MoneyLaundering.com, Fox said that “an attractive job offer from Bank of America… contributed to his decision to leave government service for the private sector.” This means that while Fox was head of FinCEN, charged with enforcing money laundering laws at BofA and elsewhere, BofA made him “an attractive offer.”  ICP Fair Finance Watch editorial position: something is wrong here and should be acted on.

January 30, 2006

  The Federal Reserve has written to Bank Hapoalim’s outside counsel, asking “In light of the money laundering investigation of Bank Hapoalim and certain of its employees by Israeli authorities, discuss any measures that the bank has taken to strengthen controls that are designed to prevent the bank from being used for purposes of money laundering or other illicit activities. The response should describe the extent to which these policies and procedures are (i) subject to independent external audit and (ii) examination by the home country supervisor… please send a copy of your response to the commenter.”  We’ll see…

January 23, 2006

  Back in November 2005, a report called Slovenia's anti-money laundering rules ineffective due to poor implementation. The report by the Council of Europe highlighted the need for greater supervision in implementing the measures by non-financial institutions especially to improve currently inactive policing and slow prosecution. The report was published by the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures. Slovenia will draw up a progress report in June 2006 on its work to reduce inefficiencies in policing and prosecution highlighted by Moneyval. And we’ll be watching, having last week asked questions to the Slovene president

January 17, 2006

  Last week’s U.S. "Money Laundering Threat Assessment” contains, among other things, a breakdown (without context) of where the most suspicious-activity reports have originated in the last two years. In filings by depository institutions (banks), the top five cities were New York, Los Angeles, Wilmington, Del., Phoenix, and Houston. In suspicious-activity reports on mortgage fraud the leaders were Ann Arbor, Mich., San Francisco, and Seattle. This last, it’s been pointed out, is mostly Washington Mutual… At the release press conference, there was dark talk about North Korea, Banco Delta Asia and otherwise…

  Contrary to Hapoalim’s stonewall response to Fair Finance Watch’s comment to the U.S. Federal Reserve, this is from AP last week: “Israel's ambassador to Britain, Zvi Hefetz, was questioned Friday for a second time as part of an ongoing investigation into what may be the country's biggest money-laundering scandal, police officials said. Hefetz was questioned regarding a number of cases in which he bought shares for large sums of money. The case relates to fraud charges at Israel's largest commercial bank, Bank Hapoalim.”

  Last week HSBC confirmed that it is “reviewing its strategic options with regard to its 21.16% interest in Laiki Bank of Cyprus which may in due course lead to a reduction in or disposal of its shareholding.” As discussed in the U.S. Senate’s report on Riggs Bank’s money laundering for Equatorial Guinea, HSBC refused to disclose even to its own U.S. affiliates who owned the HSBC accounts into which it wired money, citing as support the laws in Luxembourg and… Cyprus.  So would this second defense or excuse hold up, if the stake in Laiki is sold?

January 9, 2006

            Royal Bank of Scotland, which is moving to dismiss litigation against it for allegedly providing financial services to terrorist organizations, has something of a history of doing business with groups designated as terrorists.  In the wake of the 9/11/01 attacks, it emerged that RBS’ Citizens Bank unit had transferred money for Al-Barakaat, which even RBS later acknowledged to the Federal Reserve “appears to have provided funds to Al-Qaeda.” RBS’ defense was that its wire transfers had been to the United Arab Emirates which “was not at the time of the wire (or today) in the high-risk for anti-money laundering category.”

            It also emerged that up to and after 9/11/01, Royal Bank of Scotland’s NatWest unit was a correspondent bank for Banke Millie Afghan Kabul, a nationalized company of the Islamic State of Afghanistan. Banke Millie was among seven corporations blacklisted by the United Nations in April 2000 as part of a sanctions regime against the Taliban. RBS’ NatWest, however, continued to be listed as a correspondent for Banke Millie long after the UN designation. While RBS’ chairman Sir Fred Goodwin characterized the issue, then raised by Inner City Press, as “nonsense,” even the Federal Reserve grilled RBS about it. A Federal Reserve memo obtained by Inner City Press reflects that

“Reserve Bank and Board staff called Greg Lyons, counsel for Citizens, to ask him to provide the following information in writing to the Reserve Bank: (1) an explanation of RBS's relationship with Afghan organizations, (2) a description of RBS's due diligence process regarding banks for which RBS offers correspondent services, and (3) a list of RBS's correspondent banks. Mr. Lyons agreed to provide a written response to our request. Staff also requested that a copy of the written response be provided to Inner City Press.”

  RBS withheld its list of correspondent banks. RBS was subsequently hit with the highest fine issued by the UK Financial Services Authority, for lack of anti-money laundering controls. The FSA's December 17, 2002, press release stated that its

“investigation revealed weaknesses in RBS's anti-money laundering controls across its retail network. The investigation found that RBS failed either to obtain sufficient 'know your customer' ("KYC") documentation adequately to establish customer identity, or to retain such documentation, in an unacceptable number of new accounts opened across its retail network.”

      Despite this history, RBS spokesman Mike Keohane has stated that that the issues raised against RBS have “no merit,” and RBS is arguing that it cannot be sued in the United States, despite its ownership of Citizens Bank in the Northeast, Charter One Bank in the Midwest, and RBS Greenwich Capital Markets, which does business nation- (and world-) wide, including with high-cost mortgage lenders.  The current case is 05-CV- 4622, before Judge Charles Sifton of in the U.S. District Court for the Eastern District of New York in Brooklyn, brought by plaintiffs including Tzvi Weiss, regarding RBS NatWest Account Number 140-00-08537933, for Interpal.  RBS has told Judge Sifton it will file a motion on January 26 seeking dismissal of the case, in which the plaintiffs are seeking treble damages.

   A separate case is pending in New Jersey against Credit Agricole’s Credit Lyonnais unit, which claims that it closed the account at issue in September 2003. RBS, on the other hand, will not confirm or deny with whom it currently banks – just as it would not disclose after 9/11/01 its correspondent banking relationship, even in Afghanistan.  Similarly, after the fall of Saddam Hussein’s regime in Iraq, U.S. currency transferred to Iraq in violation of the sanctions and rules of the U.S. Office of Foreign Asset Control was traced to a Royal Bank of Scotland vault in London. When the issue was raised to the U.S. Federal Reserve, the Fed deferred to vaguely-defined (and not yet disclosed) “confidential compliance examinations.” Seeing the now-ubiquitous RBS “less talk, more action” advertisements around New York City, including in the corridors of LaGuardia Airport, one wag suggested a modification: “RBS means less standards, more profits.” 

January 3, 2006

  At a conference of the Chinese National Audit Office in Beijing between Christmas and New Years in China, it was announced that the “illegal abuse of 290 billion yuan during the first 11months of 2005” has been uncovered, leading to promises by the Audit Office to investigate Bank of China, Bank of Communications and China Merchants Bank. European and US-based banks have been buying up everything not nailed down in China. Beyond Citigroup and Shanghai Pudong and Guangdong Development Banks, Royal Bank of Scotland for example announced in August that it would invest in Bank of China as the leading investor in a deal that saw RBS and its partners take a 10 percent stake in the Chinese bank.  Under the deal, RBS’ Sir Fred (“the Shred”) Goodwin is slated take a seat on the board Bank of China, now under double-investigation (including for allegedly money laundering for North Korea). Developing…

For ICP’s money laundering-relevant comments to the Federal Reserve and Office of Thrift Supervision on Banco Santander’s attempt to acquire stakes in Sovereign Bancorp and Independence Community Bank Corp, see ICP’s Bank Beat report, which will continue following this story.

December 26, 2005

  Behind ABN Amro’s $80 million money laundering fine announced last week: evidence that ABN Amro's branch in Dubai falsified various payments processed at branches in the United States to erase and obscure the names of  Bank Melli Iran ("such that any reference to Bank Melli Iran was removed”) and the Arab Bank for Investment and Foreign Trade, part-owned by the Libyan government, whose letters of credit were "reissued" by the Dubai branch in a manner that "obscured the [Arab Bank] origin of the letters,” according to FINCEN. The Chicago branch of ABN Amro cleared U.S.-dollar checks for ARBIFT that had been submitted by the Dubai branch, "which had arranged for [ARBIFT] to not endorse or stamp the checks."  ABN Amro also last week lost millions of consumers’ personal information….

  Regarding Bank Hapoalim, its outside counsel Pillbury Winthrop Shaw Pittman stated among other things, in a December 22 letter, that ICP/Fair Finance Watch “discuss[es] the investigation of certain people allegedly involved in money laundering activities in Israel. The Bank… is assisting Israeli official in an ongoing investigation of a number of individuals in Israel [and has] provided the Board with the information that the Board has deemed relevant t the acquisition of a nonbanking company in the United States.”  Implying that the Federal Reserve, contrary to law, doesn’t look into (and have a right to disclosure of) active money laundering investigations involving applicant banks? We’ll see. 

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. We’ll see…

December 12, 2005

            Inner City Press / Fair Finance Watch has filed comments with the Federal Reserve on Bank Hapoalim:

            On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, “ICP”), this is a timely comment opposing, requesting evidentiary hearings on, and an extension of the comment period on the application by Bank Hapoalim B.M. (and Arison Holdings (1998) Ltd. and Israel Salt Industries Ltd.) to acquire Investec USA and to engage in financial & investment advisory activities (b)(6); agency transactional services for customer investments (b)(7) & and investment transactions as principal (b)(8) of Regulation Y.

            Hapoalim is currently embroiled in a money laundering scandal. See, e.g., earlier this month, Israel Business Arena of December 5, 2005, “FRENCH CLIENTS TO TESTIFY IN HAPOALIM MONEY LAUNDERING AFFAIR,” by Noam Sharvit and Hadas Magen:

“The Tel Aviv District Court has approved an agreement between the state and French businessman Sami Sweid under which NIS 11 million in his bank account at the Bank Hapoalim's Hayarkon branch, and in the accounts of three of his associates, will be foreclosed. The Israeli and French police are cooperating in the money laundering investigation… The Frenchmen pled guilty to money laundering, and the state foreclosed 27% of the money confiscated for a foreclosure fund. Under the agreement, the Frenchmen will testify against employees at Bank Hapoalim's Hayarkon branch. Indictments will be filed against these employees… The foreclosed amount is second foreclosuree in the case. In August, a similar agreement was signed with March Investment owner Dennis Katziv (Danny Katz), the son of a senior Russian government official. Under that agreement, the state released over NIS 200 million confiscated in bank accounts of March Investment, and NIS 35 million was foreclosed.”

   As set forth below, the money laundering scandal at Hapoalim has reached into a number of countries. See, e.g., Jerusalem Post of November 15, 2005, “Ambassador to UK questioned about money laundering,” by Yaakov Katz:

Ambassador to Great Britain Zvi Hefetz was questioned under warning last Friday by investigators from the police's International and Serious Crimes Unit regarding suspicions that he was involved in a massive Bank Hapoalim money laundering scheme… In March police froze $ 372 million deposited in Bank Hapoalim's branch 535 on Rehov Hayarkon in Tel Aviv. Police suspected that the money which belonged to 200 of the bank's international clients was obtained illegally and had been knowingly laundered by bank employees.
Police decided to question Hefetz due to his close ties with Russian businessman and Ma'ariv newspaper shareholder Vladimir Gusinsky who had been named as a suspect in the case. Police suspect that Hefetz who served as Gusinsky's representative in Israel before taking up the diplomatic post in the UK was aware of - and even possibly behind - suspicious money transfers made into the Russian businessman's accounts at the branch. Police said they were confident indictments would be filed against some of the bank account owners and possibly even against Gusinsky.
’The investigation is at a very advanced stage one officer said. We are confident indictments will be filed but that is ultimately up to the prosecution.’ In March following a year-long investigation police detained 22 employees from the branch suspected of crafting and implementing two methods used by local and foreign businessmen to launder illegally-obtained funds.”


The FRB has previously noted 87 Fed. Res. Bull. 327, n.11, that “in a report dated June 22, 2000, the Financial Action Task Force, an intergovernmental body that develops and promotes policies to combat money laundering, identified Israel as having certain deficiencies in its anti-money laundering policies and procedures. In connection with this action, the U.S. Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN") issued an advisory concerning potential problems that could arise in dealing with banks in Israel in light of the lack of adequate anti-money laundering policies.”

  The currently-unfolding Hapoalim money laundering scandal calls into question whatever factors the FRB reached for to purportedly rebut the above-recited.

            On CRA, while Hapoalim has sold off Signature Bank, Hapoalim’s New York branch is still, by all accounts, subject to CRA (in which is has a tattered history). The FRB has previously noted 87 Fed. Res. Bull. 327, n.9, that “at its previous CRA examination, as of June 30, 1997, the New York Branch received a rating of ‘needs to improve.’”  … Hence, though the instant applications are under Section 4 of the BHC Act, ICP is raising these CRA issues as managerial issues, as well, along with the clearly relevant money laundering investigation, on which the FRB should hold public evidentiary hearings. On the current record, Hapoalim’s applications should not be approved.

December 5, 2005

  The GAO report on deficiencies in stopping money laundering for terrorism, as reported in the NY Times (which bragged in its article of having been “provided” an “advance copy”)

“More than four years after the Sept. 11 attacks, '’the U.S. government
lacks an integrated strategy'’ to train foreign countries and provide them with technical assistance to shore up their financial and law enforcement systems against terrorist financing… The government has identified 26 'priority' countries that it considered particularly vulnerable to exploitation by terrorist financiers, who may take advantage of lax financial controls and loosely regulated or nonexistent laws to launder money in support of terrorist attacks, officials said. But officials at the State and Treasury Departments cannot even agree on who is supposed to be in charge of the effort to shore up defenses in vulnerable countries, the accountability office report concluded.”

   How about identifying “priority” banks? As shown below on this page, these include big names, and not just money transmittal placed, “hawala” or otherwise…

November 28, 2005

  In Chile, Pinochet was charged yesterday with tax fraud, forgery and other crimes related to the millions stashed in secret bank accounts under false names. The indictment claims he evaded some $2 million in taxes between 1980 and 2004. Pinochet’s wife and youngest son are on bail after they were arrested in August and charged as accomplices in tax evasion and using false passports to move the money among the bank accounts. And in Washington DC, the PNC signs cover-up the old Riggs branch locations…

  In other cover-up news, the Central Bank Governor of the United Arab Emirates Sultan Bin Nasser Al Suwaidi last week intoned that "effective cooperation and communication between banks, other financial institutions, the banking supervisory authority, the law enforcement agencies and prosecutors should be enhanced,” at the conference on Investigating and Prosecuting Advanced Financial Crimes." Each state should ratify the relevant international conventions, enact appropriate anti-money laundering and terrorist financing laws and devise systems for implementation of legislation," he said. Meanwhile, HSBC (which refused to tell even its affiliated banks who owned the accounts that showed up in Senate’s Riggs investigation) is moving to open up in the Dubai International Financial Center. Let’s see what, of HSBC’s non-disclosures, the Dubai Financial Services Authority says. HSBC’s commitment to secrecy certainly posed no problem in getting a license last week in Saudi Arabia. The Saudi Arabian capital market authority gave its rubber stamp to HSBC and its 40%-owned subsidiary  Saudi British Bank (SABB) to establish an investment bank, HSBC Saudi Arabia Limited, in “the Kingdom.” HSBC CEO Stephen Green bragged, "We are optimistic about the long-term prospects for growth in the Saudi Arabian economy and look forward to providing investment banking and asset management expertise and products to the local market."  And other, more confidential, services as well…

November 21, 2005

   Deutsche Bank again: A French judge reportedly wants to scrutinize bank accounts of Osama bin Laden's brother for possible money-laundering. According to a report in Le Journal du Dimanche, French Judge Renaud van Ruymbeke apparently made the demand to Berne public prosecutor Claude Nicati in Switzerland. Van Ruymbeke heads a money-laundering inquiry targeting the financial operations of Yeslam bin Laden, brother of al-Qaida's head. Yeslam bin Laden has been living in Switzerland since 1973 and has Swiss citizenship. “At issue is a suspicious financial transfer of $300 million to Pakistan via the Deutsche Bank in Geneva.”  Ah, Deutsche Bank...


Has Nauru turned the corner? The FATF says yes, and now the minister who chairs Nauru’s National Committee on Countering the Financing of Terrorism, Dr Kieren Keke, said the country had finally won back the confidence of the international financial community. Dr Keke said Nauru had “shut down all its offshore banks, deregistered companies that failed to comply with new disclosure requirements and implemented an offshore business registry that meets IMF and Financial Action Task Force standards. He said sanctions placed on Nauru under the United States Patriot Act have also been lifted.”  Great...

November 14, 2005

  Money laundering in Fiji? Yes, according to Fijian Justice CEO Sakiusa Rabuka, who last week told the Fiji Times that since 2003 more than 1500 suspected cases of money laundering in Fiji had been identified. "When I talk about money laundering I mean financial transactions that are being treated suspiciously in Fiji. Since 2003 there have been more than 1500 cases," Rabuka  said. "This is a serious concern because even though there are legislations in place, Fiji lacks resources and I mean financial, technical and expertise to counter the problem."

November 7, 2005

Last week 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.”

  Here’s a suggestion by ICP/Fair Finance Watch -- as is the case now with bank mergers, impose a duty on regulators (in this case, the state regulators in the NAIC) to consider anti-money laundering policies and track record on any merger application, on NAIC Form A or otherwise...

October 31, 2005

            Last week’s Volcker report on the UN’s Oil for Food program devotes an entire chapter to BNP Paribas (Chapter Four: The Escrow Bank and Conflicting Interests), detailing at least $10 million of surcharge payments made through accounts at BNP, including scam oil sales to ACTEC of Russia and Bulf Oil of Romania. Where and when will BNP suffer the consequence? Developing...

October 24, 2005

            Last week Inner City Press / Fair Finance Watch filed timely comments opposing Toronto Dominion / Banknorth’s applications to acquire Hudson United, a bank recent subject to a money laundering cease-and-desist order. The order was taken off by the FDIC, just in time for TD Banknorth to apply to buy Hudson United. A little too convenient, we think - we have requested all related documents from the Federal Reserve, under the Freedom of Information Act (citing a recent ICP win, ICP v. FRB, 380 F. Supp. 2d 211).

            As Cathay and UCBH Holdings duke it out in a bidding war for Great Eastern, Inner City Press / Community on the Move has filed timely comments opposing Cathay’s application to the Federal Reserve:             Until last month, Cathay has been subject to a Memorandum of Understanding regarding breakdowns in its anti-money laundering systems.  While, conveniently, the MOU was ended simultaneous with the announcement of Cathay’s proposed acquisition in New York, there are issues which should be closely considered in this proceeding, including in connection with the evidentiary hearing ICP is requesting. .

October 17, 2005

            This week’s rogue is UBS. 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.” Good at stonewalling...

            Note at press time: the Fed has fined Deutsche Bank for lax anti-money laundering procedures - click here to view -- and note that it’s the same DB subsidiary, Deutsche Bank Trust Company, which foreclosures on predatory mortgage loans, as reported in ICP/FFW’s Deutsche Bank Watch...

October 10, 2005

            ICP/Fair Finance Watch has filed comments with the Central Bank of Iraq Governor Dr. Sinan Al-Shibibi on HSBC’s proposal to acquire a 70% stake in Dar Es Salaam Investment Bank there. The proposal was commented on publicly by HSBC last week: “’We are very close to concluding an agreement,’ David Hodgkinson, the chief executive officer of HSBC Bank Middle East, told a news conference.. Hodgkinson later told Reuters that HSBC was looking to buy 70%, not just the 51% previously mentioned... the Iraqi central bank said it has received a request to approve HSBC's purchase of a 51% stake from the Khudairy family.” Beyond predatory lending, HSBC’s lack of anti-money laundering standards seem particularly relevant. We’ll see.

            Our book review this week concerns money laundering. Nick Kochan is a British business journalist; his book The Washing Machine (Texere Thomson, 2005) walks through recent scandals from Bank of New York through Casablanca to Citigroup. Of this last, Kochan writes: “One Citibank private bank official in Africa stated that he does ‘not have problems with the large deposits held in New York by [Gabonese] President Bongo, providing information concerning them is kept completely confidential.’” Citigroup’s regulators do not comes off much better. An examiner from the Office of the Comptroller of the Currency noted: “Based on our review of the information in all related files... we conclude that this relationship and related transactions do more meet the level of suspicion expected for filing a Suspicious Transaction Report because... the transactions conducted through Citibank NA are the sort of transactions that the customer has historically been making and are normal for the Head of State of an African country.”   Cultural relativism, anyone? The book’s worth reading.

October 3, 2005

            Finally, an answer from HSBC, and a telling one. More than a month ago, ICP/Fair Finance Watch filed comments opposing HSBC’s application to acquire another high-cost subprime lender, Metris, as reported by the UK’s Observer newspaper. Last week HSBC responded. Under the heading “International Operations and Ethical Business Practices,” HSBC spouts generalities that dodge the issues raised in ICP’s comment. HSBC writes that “HSBC Group members are expected to follow all relevant local, international and industry standards in addition to our internal standards.” But in the only example given, HSBC used local (Luxembourg) “standards” to refuse to provide information about its wiring of money related to Riggs Bank / Equatorial Guinea’s dictator. HSBC writes:

“ICP references an investigation into certain wire transfers made through Riggs National Bank... HBUS did receive from Riggs a request under section 314(b) of the USA Patriot Act, which authorizes financial institutions in the United States to exchange account information that may be related to money-laundering offenses or terrorist financing. Such information-sharing authority is in stark contrast to federal and state privacy protections provided in the United States that generally prohibit banks from publicly releasing account-level information, except under limited circumstances. Upon receiving the request for Riggs, HBUS confirmed that the account in question had been opened by an HSBC Group affiliate in Luxembourg, and that HBUS had forwarded the funds to a United States correspondent account in the  United States for its Luxembourg affiliate. HBUS also informed Riggs, pursuant to the 314(b) request, that HBUS had sent funds for another mentioned company to an HSBC Group affiliate in Cyprus. Like the United States and many other sovereign countries where HSBC Group companies operate, both Luxembourg and Cyprus maintain privacy laws that prohibit the sharing of account information with other companies, even between companies related by ownership. In this case, HSBC affiliates in Luxembourg and Cyprus -- and are neither branches nor subsidiaries of a US institution (i.e., they are not branches or subsidiaries of HBUS but share a common, foreign parent), operate under laws which forbid such sharing of customer information. Thus, if those institutions had provided information to HBUS, to any other US bank, or directly to the US Government, they would have been in violation of the laws of Luxembourg and Cyprus respectively and could have been subject to criminal and/or civil sanctions in their host countries. Section 314(b) [of] the USA Patriot Act does not override these local laws applicable to banks operating in Luxembourg and Cyprus.”

           A final sentence: “The MLAT process was not used in the case involving the Riggs accounts noted by ICP.”

September 26, 2005

 Banco Delta Asia has hired the U.S.-based law firm Heller Ehrman to challenge the Treasury Department’s designation of BDA as a primary money laundering concern.” BDA says its business relationship with North Korean banks and trading companies, which began in the 1970s, had been "confined to the importation of commodities and consumer goods", while BDA collected payments on behalf of its customers. The payments, BDA said, "have been mostly remittances from other major international banks and financial institutions whom BDA believes would have carried out the same level of due diligence on their customers"... Like the due diligence performed by those “major international banks” on, for example, the accounts of the human rights abuser Pinochet?

September 19, 2005

 Guess which banks have been correspondents for Macau’s Banco Delta Asia, named last week as a money launderer for North Korea, and a primary money-laundering concern? HSBC and Wachovia.  According to The Standard, Banco Delta Asia “has a correspondent account with HSBC Bank USA in New York. The Web site of U.S. bank Wachovia also lists a correspondent relationship with Banco Delta Asia.”

September 12, 2005


The mega-banks of the West, salivating to enter the Chinese market, are now studying a bad omen. Royal Bank of Scotland was in full denial mode last week after reports that its target the Bank of China is under investigation for laundering money from North Korea's counterfeiting, drugs and weapons deals. RBS last month proposed to acquire a 5% stake in Bank of China, “in spite of concerns over human rights and corporate governance policies in the Far East giant,” at the Scottish press put it. The Herald quoted an RBS spokesman that “it certainly doesn't change our position there at all. It is yet to be understood what the scale of it is, and to establish the level of concern." The report emerged in the Asian Wall Street Journal, which said that US authorities were investigating three Chinese banks - Bank of China, as well as Banco Delta Asia and Seng Heng Bank, both of which are based in the former Portuguese enclave of Macau. The report claimed that the banks were under scrutiny for possible connections to North Korea's illegal fund-raising network, which many believe finances Pyongyang's nuclear program. RBS CEO Fred the Shred Goodwin is slated to take a seat on the board of China's second largest bank...

September 5, 2005

  North Fork Bancorp announced on August 31 that it must improve anti-money-laundering systems and procedures under a memorandum of understanding with the Federal Deposit Insurance Corp. and the New York State Banking Department.  North Fork said the memorandum may affect its "timing or ability … to engage in or obtain regulatory approval for certain expansionary activities." Which would those be? Buying another subprime lender like Greenpoint?

August 29, 2005

   Banco Santander, which bobbed and weaved and denied earlier in the inquiry into Pinochet’s finances, has now quietly returned some -- we emphasize “some” -- of its ill-gotten deposits to Chile.  Intrepid journalists at Money Laundering Alert have reported that “Banco Santander International had placed $1 million from an account linked to Pinochet in trust for the benefit of the government of Chile. The account was in the name of  Eastview Finance, a British Virgin Island offshore company established for the benefit of Pinochet by Oscar Aitken, a lawyer and confidante of the former strongman. Santander inherited two Eastview accounts from Coutts & Co. when it purchased  the Coutts Miami private banking portfolio in July 2003...

 Meanwhile, Pinochet’s wife, Lucia Hiriart, 82, and their youngest son, Marco Antonio, 47, were arrested and charged as accomplices in a tax-evasion case linked to an investigation into the former dictator's multi-million-dollar secret bank accounts. Although Lucia was granted bail, on health grounds, after two days in the Santiago military hospital, Marco Antonio remains incarcerated in Capuchinos, a jail for white-collar criminals. The charges against Pinochet's family come from a 13-month investigation by judge Sergio Munoz into over 100 foreign bank accounts and numerous off-shore shell companies held by the ex-general. Munoz's 27-page ruling, based on three interviews with Lucia, concluded that she at all times had knowledge of the movement of her husband's fortune and received direct benefits from the joint accounts... 

August 22, 2005

Again, who’s minding the store?  From the American Banker newspaper last week: “The Office of the Comptroller of the Currency plans to roll out a pilot program in the next few weeks that would require examiners to perform independent money-laundering risk assessments on banks. But industry officials are already concerned the plan could lead to more regulatory second-guessing... Under the program, examiners would have to spell out specific customer, service, product, and geographic money-laundering risks faced by each bank and then compare the data with the bank's internal assessment... ‘What we want to see is that there is deference given to the bank's internal assessment if it differs from that of the examiner,’ said John Byrne, director of the American Bankers Association's Center for Regulatory Compliance.”

   Wait a minute -- deference by regulators to their regulated? Like, PNC's Riggs?

August 15, 2005

   On August 13, ICP/Fair Finance Watch submitted a timely comment opposing BNP Paribas' application to the FDIC to acquire Commercial Federal. On issues relevent here, ICP noted that BNP's involvement in the now-widening Iraq Oil-for-Food scandal is not "blowing over" -- see, e.g., French Bank Admits Oil-for-food 'irregularities' But Fraud Link --

"The French bank BNP-Paribas on Thursday admitted that there had been some irregularities in payments it processed for the scandal-tainted UN oil-for-food program in Iraq but insisted it was not linked to any diversion of funds. The bank revealed the problems in a statement as top officials appeared before a US Congress hearing on the scandal. 'It appears from an extensive, ongoing review being conducted by the bank, that a small fraction of payments under the program were made to persons other than letter of credit beneficiaries orbanks making them direct loans,' the French bank said in a statement. 'However, based upon our review to date, the overwhelming number of payments were made to beneficiaries and their banks,' it added." (Liquid Africa, April 28, 2005)

  And see, BNP May Have Violated UN Oil-For-Food Rules, DOW JONES NEWSWIRES, April 28, 2005... Also, South Korea's financial regulator, the Financial Supervisory Commission, last month penalized the Seoul office "over inadequately advising state-run companies over the risks involved in derivatives trading. (Associated Press, July 22, 2005).  Indicative of BNP Paribas' lack of standards with regards to human rights, anti-money laundering and the environment, see, e.g., Africa Energy Intelligence of October 15, 2003: "Equatorial Guinea's government is set to shortly announce the results of an invitation to banks to bid for a contract to provide funding to pay for Malabo's share in Marathon's project to build a LNG plant on Elba Island. All of the banks responding to the call - including BNP-Paribas." For the record, the Equatorial Guinea accounts played a large role in the collapse and sale of Riggs Bank... We’ll see...

August 8, 2005

            Nauru claims it's close to being removed from the Financial Action Task Force's (FATF) black-list of Non Cooperative Countries and Territories.The chairman of Nauru's National Coordinating Committee on Anti-Money Laundering and Countering the Financing of Terrorism, Dr. Kieren Keke, said government has made steady and positive progress towards Nauru's removal from the FATF black-list.These include the lifting of financial counter measures and sanctions against Nauru by the FATF late last year, and the removal of sanctions by the United States of America against Nauru under the U.S. Patriot Act.Following the most recent FATF plenary in Singapore in early June, Dr. Keke advised the Nauru Parliament of a communication received from the Chairman of the Asia Pacific Review Group of the FATF, that an on-site visit for Nauru had been approved.

August 1, 2005

 German prosecutors’ investigation of money laundering for Russian privatizations have zeroed in on Commerzbank. Last week, Frankfurt authorities searched 10 locations in Germany while  their Swiss counterparts raided offices in Zurich and Zug, all looking for evidence that German bankers, among them five current or former employees of Commerzbank. Earlier in the month, Commerzbank Chief Executive Klaus-Dieter Mueller expressed interest in buying Germany’s second biggest mortgage lender BHW." We are interested in principle," Mueller was quoted by Reuters on the fringes of a conference in Frankfurt. Mueller called for an end to the "protection fence" that stops takeovers of German state-owned savings firms and state lenders. Mueller said that regulation of hedge funds, a subject of hot debate following the toppling of management at German stock exchange operator Deutsche Boerse, should not be left to banks. "Banks have all too often been enlisted by politicians to help," he said, citing money laundering supervision, where he said the costs of regulation had been left to banks themselves.

            Yeah -- while Commerzbank was laundering for Russian privateers...

July 25, 2005

Manic news of money laundering (as well as possible acquisitions by ABN Amro)  -- the Romanian “National Office for Prevention and Fighting Money Laundering received 336 notifications of suspect financial operations, totaling 246,484,375 euros, between January 1 and July 14. The main criminal operations generating dirty money include fraud, tax evasion, and organized crime, and fraudulent bankruptcy, use of company assets or credits contrary to company interests or for personal benefits. The office carried on investigations into 1,162 individuals and 246 legal entities suspected of money laundering. The persons under investigation are mainly Romanian citizens (52%), but also Chinese (16%) and Turkish (7%).... ‘Through the US Embassy to Bucharest we have received this year from the FBI and CIA as many as 11 transactions suspected of financing terrorist deeds. So far we have concluded investigations in nine of these cases, without being able to confirm suspicions, but jointly with American experts we are carrying on inquiries in the other two cases,’ Dragomir explained, giving no further details.” Sixteen percent Chinese?

July 18, 2005

  More on the irony noted last week, fact being more pro-corporate than fiction: a week after the July 7 bombings in London, the UK FSA announced that it is loosening anti-money laundering rules. The banks had asked for it, in the poll reported on last week and otherwise. But how could the FSA give in, at this time?  Then again, it’s the same FSA which let Citigroup off the hook on the Doctor Evil trade, and which for now denies access to any and all records under the Freedom of Information Act 2000...

July 11, 2005

            What timing -- last month, the Corporation of London and the Institute of Chartered Accountants in England and Wales released a survey in which bankers complained about the burden of anti-money laundering compliance in the United Kingdon.   The study, entitled “The Anti-Money Laundering Requirements: Costs, Benefits, and Perception,” and reported on July 4 in the publication Money Laundering Alert, reported that “among UK bankers, 43 percent said they felt AML requirements... were too severe in comparison to the perceived risks.”   And now?

July 5, 2005

            From the June 30 American Banker: “Some observers argued that any formal enforcement action would have prevented Wells from making acquisitions, such as the one it completed last week for First Community Capital Corp. of Houston. The $124 million deal was approved by the Federal Reserve Board, which noted that Wells was implementing improvements to its anti-laundering program. When the OCC memo became public, Wells' chief counsel, Jim Strother, acknowledged the anti-laundering problems and said his company was working to correct them. He would not discuss Wells' relationship with the OCC.”

            Of course, the OCC is suing to shield Wells Fargo from a fair lending inquiry from the New York State Attorney General...

            A letter to ICP from the Fed, dated June 29, 2005: “your comments on the application [on] federal investigations of Riggs, Riggs Bank and their management, and the appropriateness of the Board’s consideration of the [PNC] application before completion of all investigations... In addition, you cited a press report stating that PNC Bank had provided ATM cards to Riggs Bank’s customers after the PNC/Riggs merger was approved but before it had been consummated.... PNC has confirmed, however, that the ATM cards could not be used by Riggs Bank’s customers until the day the merger was consummated.”

Maybe -- but it was before the consummation...

June 27, 2005

            While an OCC employee whistle-blew about the OCC letting Wells Fargo off the hook on Bank Secrecy Act laxity, the Fed’s order says “banking organizations operating in the United States are required to implement and operate effective anti-money laundering programs. In this case, the Board has considered the existing compliance risk-management systems and internal audit programs at Wells Fargo and the assessment of these systems and programs by the relevant federal and state supervisory agencies. The Board has also considered information provided by Wells Fargo on enhancements it has made and is currently making to its systems.”  Yeah, right...

            The OCC whistleblower’s June memo, as obtained and provided by Money Laundering Alert (thanks!), complains that the April meeting “opened with a senior official making this extraordinary statement: ‘As you all know, WSRC is an advisory body. The decisionmaker for mid-sized and community banks is Tim Long, and for large banks is Doug [Roeder -- see below]. Regarding Wells, as I understand it, I think this has already been discussed at senior levels and it’s my understanding that a decision may already have been made.”  Yeah -- a decision to let Wells Fargo off the hook, and to agree to replace the on-site OCC examiner at the bank....

            The plot continues to thicken around the 837 super high cost HOEPA loans Citigroup reported in 2004 (after claiming to have stopped such loans in January 2003). These are mortgage loans costing more than eight hundred basis points over comparable Treasury securities. ICP raised the issue to Citigroup (leading to a knee jerk denial by CFO Bob Willumstad, which he has yet to retract), then to the regulators. The Office of the Comptroller of the Currency wrote back saying that none of the HOEPA loans were by a national bank or its operating subsidiaries. But for a number of the loans, Citigroup reported the OCC as the “Agency ID.” A second letter to the OCC raised this, and by letter to ICP dated June 21, 2005, the OCC’s head of large bank supervision Douglas W. Roeder (see above) writes:

“In response to your May 23, 2005 letter, we have determined after discussions with Citibank, NA, that Citigroup’s originally submitted HMDA Loan Application Registers (LARS) did not accurately reflect the correct agency code in all cases. This error has been corrected and Citigroup should be sending you an updated LAR reflecting the correct agency code for each loan reported on the LAR.”

            ICP has yet to receive the corrected data from Citigroup (which as noted below has already corrected its data once, having under-reported its high cost / rate spread loans by over 80,000 loans).  Will Citigroup be providing corrected data to, for example, the New York Attorney General’s Office (whose investigation of Citigroup, The Clearing House’s lawsuit on behalf of Citigroup is seeking to block)?

conduct a two-week examination of AmSouth this month. The American Banker of June 23 reported that the note was issued “after a meeting with AmSouth's management,” and that the note says it "is likely a final resolution could be reached" and that the company could make an announcement when it releases its second-quarter results.

          Should AmSouth be telling stock analysts, in an exclusive setting, about upcoming Federal Reserve exams? What about the SEC’s Regulation FD?

June 20, 2005

            J.P. Morgan Chase announced last week that it sold its 5.3 percent stake in Gulf International Bank to the Saudi Arabian Monetary Agency. "SAMA, which already owned a 22.2 percent stake in GIB before the transaction, acquired J.P. Morgan's shares for an undisclosed amount of cash. As one of three global banks recently granted a license to open a Saudi Arabian branch, we decided to sell our stake in Gulf International Bank to eliminate the potential for any conflicts of interest between our business and that of GIB," JPMC said-in-a-statement. On conflicts, JPM Chase now follows Citi, tryin to settle for its Enron involvement for $2.2 billion...

June 13, 2005

Yet more on PNC-Riggs: we have received a copy of PNC’s June 9, 2005, letter to the Federal Reserve, in Q & A form:

Fed Q: Please discuss whether Riggs Bank N.A. (“Riggs Bank”) ATM cards which expired between April 12, 2005 and May 12, 2005 were replaced. If not, how were the holders of these cards provided access to their Riggs Bank accounts?

PNC’s Answer: “For all Riggs Bank ATM cards which expired in April 2005, Riggs Bank mailed replacement Riggs ATM cards. Some of the affected customers did not receive these cards as a result of outdated or inaccurate mailing addresses in Riggs Bank’s customer database. These customers could continue to access their Riggs Bank accounts by visiting a Riggs Bank branch. All Riggs Bank ATM cards with expiration dates in May were not scheduled to expire until month-end. Because the closing of the PNC/Riggs merger occurred on May 13, it was not necessary for Riggs Bank to mail replacement ATM cards to these customers.” Hmm....  

June 6, 2005

            In a second response to Federal Reserve Board questions, dated June 2, PNC now admits that on the morning of May 13, before acquiring Riggs Bank, it “disabled” Riggs Bank ATM cards; it says that Riggs customers “were given the option to activate their PNC-branded cards at 8:00 a.m. on May 13th.”   But the deal wasn’t consummated until later. Can you say “gun jumping”?  More to the point, can the Federal Reserve? What will the Board do? We’ll see.   On June 3, a federal grand jury returned a 27-count indictment charging Simon Kareri  and his wife Ndeye Nene Fall Kareri, 40 with siphoning more than $1 million from Riggs accounts between 2000 and 2004 through an offshore shell company they set up in 2001. Kareri was the Riggs account manager for Equatorial Guinea and its ruling family as well as Benin...

            Meanwhile, Britain's offshore tax haven of Jersey has failed to plug a loophole under which bribery payments made in Africa remain legal. Despite a promise to a mission from the Organization for Economic Cooperation and Development (OECD) last year that the loophole would end early this year, it remains open. Jersey-registered companies will be able to pay overseas bribes with impunity. The promise has been broken because of administrative delays and the decision to redraft the law to conform with a UN convention against bribery. There will be further delays while the island holds elections this autumn, and the loophole will not be plugged until next year at the earliest. Until then, it remains open season...

May 31, 2005

   As PNC tries to sweep Riggs Bank under the rug, last week saw the arrest of former Riggs vice president Simon Kareri and his wife, Ndeye Nene Fall Kareri, on charges of conspiracy, bank fraud, wire fraud and money laundering. In complaints filed with the court, the government said the Kareris siphoned more than $1 million from Riggs Bank’s Equatorial Guinea accounts between 2000 and 2004, much of it using Jadini Holdings Ltd., an offshore shell company they set up in 2001 in the British Virgin Islands. Simon Kareri was the Riggs account manager for Equatorial Guinea and its dictator, as well as Benin. He and has wife are being held without bail, while those higher-up live it up off the profits of the merger. Meanwhile, in Chile on June 1 the Santiago Court of Appeals votes on whether to strip former dictator General Augusto Pinochet of immunity to allow his trial on charges of tax evasion; postponed from May 25...

            Retaliation? On Friday, May 20, Rahim Bariek, 46, a naturalized U.S. citizen from Afghanistan and resident of Herndon, Virginia, pleaded guilty in Alexandria to operating an unlicensed money transmittal business that wired $4.9 million to Iran, Pakistan, and areas in Afghanistan under the control of the Taliban between 2001 and 2003. On November 14, 2001, Bariek had testified before the U.S. Senate about how important it was for "hawaladars" like himself to abide by federal laws governing such businesses. Those who skirt the rules "give all hawala a bad name," he testified. A subsequent (consequential?) probe by Immigration and Customs Enforcement (ICE) concluded that Bariek was operating an illegal money transmittal firm in Virginia Question: was he investigated because he testified?

May 23, 2005

            The FDIC’s Inspector General, in a vague one-page audit report on the FDIC’s anti-money laundering performance, criticizes the agency:

Corporate governance at the financial institution and two former institutions was not sufficient to ensure that they met BSA requirements. The FDIC’s examinations identified significant BSA violations and deficiencies, but the examinations generally lacked sufficient follow-up on corrective measures promised but not implemented by institution management. Consequently, weak BSA compliance programs persisted for extended periods. In addition, the FDIC should have more thoroughly considered the impact of BSA compliance violation and deficiency histories in connection with the Corporation’s decision to qualify the potential acquirers of a failed institution.

            While the few other publications which have covered this vague announcement have not opined on the identity of the unnamed institution(s), we will: Hudson United, which bought the failed Connecticut Bank of Commerce. See, e.g, Bergen Record of June 27, 2004, “Hudson United Bank seeks to rebound from a money-laundering probe and lending protests” - “about $1.3 billion flowed through suspicious accounts at Hudson United's 90 Broad St. branch in 2002 and 2003 in transactions that should have raised red flags. Account holders at 90 Broad allegedly included offshore money remitters... the executive director of Inner City Press/Community on the Move, a consumer group in the Bronx, said he asked federal regulators several years ago to deny Hudson United's application to acquire a bank in the Hudson Valley, based on the bank's minority lending record.

‘They specialize in buying damaged goods; now they're kind of damaged goods themselves,’ [FFW] said.”  Yep...

            Finally, post-consummation, there’s been a response to the request for reconsideration ICP filed with the Federal Reserve on PNC - Riggs. FFW’s request included a quote from a May 6 Washington Post article, that

"Catherine Loper ...Her ATM card expired April 30. She received a new PNC Bank card in the mail this week, but it won't work until Riggs officially becomes PNC on May 13. When she called Riggs, the bank told her it couldn't issue her a new card because the merger is so close."

           FFW objected to the Fed's approval for many other reasons, some set forth below.

Too late, the Fed asked PNC about it; on May 20, ICP received from PNC the Fed’s questions and PNC’s responses:

Fed Question 1: Were any accounts of Riggs Bank National Association ("Riggs Bank") converted to accounts of PNC Bank, National Association ("PNC Bank") prior to consummation of PNC’s acquisition of Riggs?

PNC Answer: PNC consummated its acquisition of Riggs on May 13, 2005, at 5:01 p.m.

No Riggs Bank accounts were converted to PNC Bank accounts prior to May 14, 2005.

Fed Question 2. Was a Riggs Bank customer able to use a PNC Bank ATM card prior to 5:01p.m. on May 13, 2005 to access his or her Riggs Bank account or new PNC Bank account?

 PNC Answer 2: To provide the Riggs customers with uninterrupted ATM service during the transition, they were issued PNC Bank ATM cards several weeks prior to the scheduled closing. Riggs customers were given the option to begin activating their new PNC Bank ATM cards at 8:00 a.m. on Friday, May 13th. Once a new PNC Bank ATM card was activated, a Riggs customer could use the card to withdraw cash or make a deposit from his or her account at Riggs Bank. Following the conversion of the Riggs Bank accounts to PNC Bank accounts on May 14th, former Riggs customers could continue to use their PNC Bank ATM cards to access their new PNC Bank accounts.

            Taking the answer at face value, even before the deal closed, PNC gave out PNC ATM cards to Riggs customers and let / made them use the PNC cards...

            ICP has also received HSBC's response to (Riggs-related) issues FFW raised to the United Nations Global Compact, based on the (First) Levin Report's description of HSBC refusing to say who owned the accounts into which Riggs was wiring money, supposedly based on the laws of Luxemburg.

From: ivorgodfrey-davies [at] hsbc.com               

To:        [UNGC]

16/05/2005 10:12 AM   

Subject:  Memo:  Re: Re HSBC, Grupo Santander, Riggs/PNC and others                     

    Dear Ms Wynhoven

Thank you for your email message of 25 February about a communication received from... Fair Finance Watch. We appreciate your bringing [FFW]'s issues to our attention as it provides us with the opportunity to confirm for ourselves our compliance with the principles we have established for the HSBC organisation.  Please be assured that we will undertake the appropriate investigation of the matters raised in [FFW]'s communication.

HSBC has operated pursuant to the highest ethical standards throughout its history and has always attached the utmost importance to honesty, integrity and a strong sense of responsibility in all our dealings.  We respect fully the ten principles of the Global Compact and we look forward to participating in the future development of this initiative.

Yours sincerely

Ivor Godfrey-Davies

Head of Group Corporate Relations

HSBC Holdings plc

Registered Office: 8 Canada Square, London E14 5HQ, United Kingdom

Registered Number 617987


May 16, 2005

            Cavalier approach to money laundering: North Fork Bancorp. disclosed in its SEC filings last week that the FDIC and the New York State Banking Department found "certain supervisory issues" related to compliance with the Bank Secrecy Act and the USA Patriot Act in a recent examination. North Fork said the agencies have asked it to sign a memorandum of understanding within weeks in which it would promise to resolve those issues. "We made a business judgment that it would be too expensive and cumbersome to continue to bank money transfers, so we have exited that business," North Fork’s chairman said. "The memorandum relates to our failure to comply completely with the letter of the law under the Bank Secrecy Act. We have fixed those violations,” he said, bragging that he expects regulators to lift the agreement after an examination in September. We’ll see...

  ICP submitted to the Fed a request for reconsideration of the PNC-Riggs approval order, noting that PNC had already starting mailing its own bank cards to Riggs customers, even during the 15-day “waiting” period. No word back from the Fed....

May 9, 2005

Armenian TV last week bragged that only two criminal cases on charges of money laundering have been instituted in the country over the last 10 years and there have been no criminal proceedings on charges of financing terrorism, according to the chairman of the Central Bank of Armenia, Tigran Sarkisyan. He specified that the two criminal cases had been launched on charges of money laundering. The first one is the scandal around the Credit-Yerevan Bank connected to individual bills to the tune of 250m dollars, which could be cashed in different states. In the second case, he said, the crime was committed by an Armenian citizen and his bank account in an Armenian bank was frozen at the request of the USA.  Tigran Sarkisyan said, We received information from the USA. Appropriate US bodies informed us that they had revealed a suspicious deal and asked us to freeze an account in one of the Armenian banks, which was done. This is an Armenian citizen who was cooperating with foreign citizens to illegally transfer money from the USA to Armenian banks.

May 2, 2005

In the wake of the Federal Reserve’s rubber-stamp approval of PNC-Riggs (see Report below), FFW received by regular mail the 17-page approval of the Office of the Comptroller of the Currency. Here’s a paragraph of interest:

“The commenter raised concerns with Riggs Bank’s service as a correspondent baqnk with, among others, Bank of Sierra Leone, Sierra Leone Commercial Bank Ltd; Energobank of Bishkek, Kyrgyzstan; Banco de Cabo Verde; and Banco International SA... Riggs maintained correspondent relationships with each of these banks, except Banco de Cabo Verde; however, two of these four correspondent relationships closed two years ago, and the remaining two closed recently.”

          The vague reference to “recently” closed correspondent relationships is why FFW maintains that Riggs is a crime scene, that shouldn’t be sold off and swept under the carpet... We also wonder: since the FDIC by letter dated April 25 informs ICP that “the material you have forwarded to this office will allow the FDIC to perform a thorough review and in-depth analysis to address you concerns” on the FDIC piece of the PNC-Riggs proposal, how could the deal close on May 13?  Will the FDIC’s review be thorough and in-depth -- and accomodate the 15 day waiting period? We’ll see...

On April 28, BNP Paribas admitted that payments it approved under the U.N. oil-for-food program may have violated its own guidelines.  While recognizing some "avoidable errors," bank officials told a congressional panel that BNP had followed standard financial practices. In a report to the committee, the bank said its own review so far has identified 403 payments that were made to parties other than a contractor or the contractor's bank. Everett Schenk, chief executive of BNP Paribas-North America, claimed that the agreement was ambiguous about whether these transactions were permitted. But he said some of those payments shouldn't have been allowed under BNP's own procedures. He said in processing transactions "some mistakes were made." BNP still has not been able to explain 80 transactions, including three payments for a company called Al-Riyadh International Flowers were made instead to another called East Star Trading. The subcommittee has since learned that Al-Riyadh International Flowers is owned by Prince Bandar bin Mohammed, a member of the Saudi royal family, and that a 2003 Defense Contract Audit Agency review found it may have overcharged by more than $8 million for oil-for-food transactions.

          Ah, Monoco, land both of casinos and money laundering and now a new Prince, Albert. Monaco has a zero percent income tax policy for residents after five years, although French nationals do not qualify, in order to keep Paris happy about having an offshore centre right on its doorstep. Nevertheless, Monaco has been repeatedly and properly criticized for accommodating money laundering . In 2000, the French parliament issued a report detailing tax evasion and money laundering. Will it get cleaned up now? We’ll see.

April 26-27, 2005

   Late on the afternoon of April 26, the Federal Reserve Board issued a 19-page order approving PNC’s applications to acquire Riggs National Corporation.  ICP Fair Finance Watch, which submitted detailed comments to the Fed opposing PNC’s application, has now quickly reviewed the order, which confines to footnotes the issues raised by ICP and by Riggs’ and PNC’s records, including Riggs’ money laundering for the dictators of Equatorial Guinea and Chile, and PNC’s repeated compliance problems, first in connection with transactions with AIG, and now an IRS investigation.  

                ICP intends to request reconsideration and before May 10. While the Federal Reserve may want to sweep the Riggs Bank scandal, which its own inattention to compliance allowed, under the rug, this approval without conditions allows an already troubled bank, PNC, to acquire what is still a crime scene. Banks which launder money for human rights violators should not get off so easily. Riggs’ majority owners, responsible for these acts, stands to be rewarded to the tune of tens of millions of dollars. The question of Riggs’ role in the financial of the Nine-Eleven-Oh-One attacks remains resolved, as acknowledged in the Fed order’s footnote sixteen. That issue and the several other of the Fed’s footnotes must be unpacked; PNC should wait, or should walk away. 

            Riggs’ money laundering was not limited to Augusto Pinochet and Teodoro Obiang Nguema, who seized power in Equatorial Guinea in a military coup. According to U.S. Senate and public reports, Riggs performed similar services for personnel of the Saudi Arabian embassy, without filing the required Suspicious Activity Reports -- a matter unaddressed, yet prospectively covered-up, in the plea bargain and in the Federal Reserve’s Order. ICP will request reconsideration and a stay.

            Using the most recent Home Mortgage Disclosure Act data, from 2003, FFW first showed that in the Washington D.C. Metropolitan Statistical Area, Riggs Bank NA denies the conventional home purchase applications of African Americans 7.63 times more frequently than those of whites. Acquisition by PNC would scarcely improve matters. For example, in PNC’s headquarters MSA of Pittsburgh in 2003, PNC Bank NA denied the conventional home purchase applications of African Americans 4.62 times more frequently than those of whites.

            In a March 30 response to the FRB, FDIC OCC, PNC declined to respond to any of what ICP raised, including e.g., the Senate's March 16, 2005, Report <http://levin.senate.gov/newsroom/supporting/2005/pinochetreport.pdf>;  PNC claimed that it responded to those new issues in Mr. Jack Wixted's August 26, 2004, letter (perhaps by clairvoyance). PNC also stated that ICP's HMDA analysis was of 2003.  In that analysis, ICP has noted that "PNC's disparities to Latinos / Hispanics remain particularly outrageous."  The 2004 data, which ICP raised to the Fed, see footnote 28, bear this out.

            PNC Bank, N.A., in 2004 denied 42.02% of applications from Hispanics (denying 619 of 1474 applications); it denied 18.33% of applications from whites (406 of 2210 applications) -- a higher-than-(2003)- aggregate denial rate disparity of 2.29.   ICP is still analyzing PNC's 2004 LARS -- PNC Bank, N.A. reported 81,536 records; PNC Bank DE reported 4048 records -- but can already say this regarding Riggs:

            Riggs in 2004 denied 13.24% of applications from African Americans (denying 36 of 272 applications); by contrast Riggs denied only 1.76% of applications from whites (denying a mere 17 of 968 application) -- a MUCH higher-than-(2003)- aggregate denial rate disparity of 7.52 (Riggs denial rate disparity between Hispanics and whites was a troubling 4.81).

            Of these disparities, the Fed says only that the data is "preliminary," that that it doesn't yet have the aggregate. But this is the data the two banks filed on March 1, and based on previous years it is highly unlikely that the aggregate in 2004 had a denial rate disparities of eight to one, like Riggs. The Fed should not be so dismissive of the new 2004 data. Nor should the Fed have cited as authority and precedent for this PNC-Riggs approval to own recent ill-advised March 2005 approval for Citigroup - First American Bank, despite massive and growing compliance break-downs at Citigroup (including violation of its commitment to have stopped making super high cost HOEPA loans, see ICP’s CitiWatch Report for more).

            Here is yet another a indication that PNC's managerial resources militated and militate against allowing it to acquire a bank as deeply troubled as Riggs (ICP submitted this; it’s “addressed” by the Fed only in footnotes) --

"PNC Discloses IRS Audits Over Equipment Leasing,” American Banker    Friday, March 18, 2005

PNC Financial Services Group Inc. said it may have to adjust its tax treatment for certain leveraged leases. The Pittsburgh company disclosed in its annual filing with the Securities and Exchange Commission that the Internal Revenue Service, after auditing PNC's tax returns for 1998 through 2000, proposed that the company reverse tax deductions that it took on 12 crossborder lease transactions it signed in the late 1990s.It also reported that the IRS would audit its 2001-2003 federal tax returns."

            As reported by the Associated Press of July 17, 2004, PNC "has also had regulatory problems of its own. In June 2003, a PNC subsidiary agreed to pay $90 million in restitution and $25 million in fines to settle allegations of securities violations. The subsidiary was accused of conspiracy to violate federal securities laws by transferring $762 million in troubled loans and investments to off-balance-sheet entities." 

            FFW has also called for action on the two other banks were involved in Riggs dealings with Pinochet and Obiang: HSBC and Banco Santander Central Hispano.  These two banks’ refusal to identify the beneficial owners of the accounts in question are recounted and questioned in the Senate Permanent Subcommittee on Investigations Report, online at <www.senate.gov/~govt-aff/_files/071504miniorityreport_moneylaundering.pdf>.

            FFW initially raised these issues to the U.K. Financial Services Authority, as reported in the Glasgow Herald, Observer and Financial Times.  Now, ICP has raised the issue to the United Nations Global Compact, through which HSBC and Santander have ostensibly committed themselves to human rights, transparency and anti-corruption. ICP asks: How can HSBC and Santander say they are promoting human rights, when they moved money for Pinochet and Obiang, and refused to allow transparency, much less accountability? Impunity for human rights abusers and their enablers and financiers must end.

            The Senate Report also, at page 79, states that “beginning on November 22, 2002, media stories reported that a Riggs account associated with the Embassy of Saudi Arabia had allegedly sent funds that ended up benefiting two of the Saudi terrorists involved in the 9-11 attack on the United States.” The issue surrounding accounts of personnel of the Saudi Arabian embassy were not addressed in the proposed plea, nor by the Fed’s Order.

            Riggs Bank remains a crime scene. It should not be swept under the rug, let off the hook, or sold to PNC. We will be requesting reconsideration by May 10, 2005.

April 25, 2005

            On April 21, the U.S. Treasury Department designated two Latvian banks, Multibanka and VEF Bank as money-laundering entities under Section 311 of the USA Patriot Act. As to action so far on HSBC and Citigroup, nothing. Only Japan seems to have the independence to act against Citigroup, which like HSBC refused to disclose who owned the accounts into which Riggs Bank’s Equatorial Guinea and Pinochet wires went.

            Also last week the Federal Reserve faxed to Inner City Press a series of terse memoranda about PNC’s applications to acquire scandal-plagued Riggs Bank. A sample memo, dated April 21, 2005, from Mike Carroll to “Files,” ran a total of two sentences:

“Over the past months since PNC filed its applications to merge with Riggs, my Reserve Bank colleagues and I have had discussions with PNC representatives regarding PNC’s confidential plans for integrating Riggs’s operations into PNC’s. On some occasions, such discussions have touched peripherally on the confidential planned structure of BSA/AML programs at Riggs post-consummation.”

            Mr. Carroll, thou dost protest too much. Or, better late than never, we supposed, to begin paying attention to the Federal Reserve’s own rules against ex parte communications. Under those rules, the Fed is supposed to invite the participation of, or at least provide real time meaningful notice of, discussions with the submitted of a substantively protested application. But here, at the eleventh hour, a staffer writes two sentences covering an undetermined number of meetings of “the past months,” and characterizes everything as confidential.

            On April 19, Fed lawyer Anne Zorc faxed ICP three other memoranda, two of them from November 2004. Why these weren’t provided at the time was not explained. In fact, Ms. Zorc’s message invited Inner City Press to call (if it didn’t receive the fax), but left the Fed’s general number, 202-452-3000. Apparently they don’t want a real call-back. That would be ex parte and impermissible, right? [Update of April 26: Ms. Zorc called again on April 26, to deliver news of the Board's approval (see Report above), and quite politely provided her direct number. While she stated that she always leaves the 3000 general number, one wag wonders if that would be the case for messages left for PNC's outside counsel at Wachtell Lipton, or for ex-Fedsman Jack Wixted within PNC. Ms. Zorc's own March 9, 2005, memo to files describes a conference call with lawyers from Wachtell and Sullivan & Cromwell. Our issue is not with Ms. Zorc personally (as was conveyed, and will apparently be conveyed to others at the Fed) -- it is with the seemingly routine variance from the Fed's own rules against ex parte contacts, proving cursory summaries months late, just prior to approval when they cannot be commented on.  The Fed's April 26 footnote stating that no inappropriate contact took place is both too vague and besides this point: why were the cursory summaries provided so late? We'll see]

            If the past is any guide, the purpose of this faxing (and of PNC counsel Richard Kim’s late night email on April 22) is to dot the i’s and cross the t’s prior to the Board voting on PNC’s application, to allow a May 13, 2005 closing of the ill-fated deal.

April 18, 2005

On April 15, the Swiss government announced that Aba Abacha, a son of late Nigerian dictator Sani Abacha, has been extradited to Switzerland by Germany to answer money laundering charges. The Justice Ministry in Bern said Abacha was handed over at the border town of Loerrach on April 14 and taken to Geneva. Abacha was arrested in Neuss, Germany on December 9, 2004 under an international warrant. Switzerland filed for his extradition on January 9 this year. He was being sought on a number of allegations including money laundering, fraud and embezzlement.

April 11, 2005

  Last week from the Federal Reserve, a heavily redacted copy of Amended Disclosure Schedule, a heavily redacted copy of Riggs Bank’s Amended Disclosure Schedule (to PNC) arrived. The redactions were and are outrageous: on page 7, even the names of Riggs’ subsidiaries are redacted. On pages 22 through 24, a discussion of the “collateral consequence” of Riggs’ guilty plea to felony charges is withheld. On page 22, before the redaction begins, it is stated that “[t]he Plea will expose Riggs and PNC and their respective affiliates to a number of collateral legal consequences, both mandatory and discretionary.”   Then, one and a half pages are redacted. It is imperative that this presentation to the FRB of “mandatory and discretionary... collateral consequences” of a guilty plea to money laundering / Bank Secrecy Act felony charges be released -- so says ICP/FFW’s most recently filing with the Federal Reserve. Developing.

April 4, 2005

   On March 29, U.S. District Judge Ricardo Urbina accepted the plea agreement between the Justice Department and Riggs; he ordered Riggs to pay the $16 million penalty immediately. "There is no way of measuring the amount of harm and atrocities and human rights violations perpetrated by Pinochet and Equatorial Guinea as a result of the enabling criminal activity by Riggs Bank," Urbina said. But then how do you know that $16 million is enough? Particularly after the Senate’s Second Riggs-Pinochet report released in mid-March (after the DOJ-Riggs plea agreement), and in light of Riggs total impunity for harms it aided and abetted in Equatorial Guinea?

            PNC’s lawyers from Wachtell Lipton last week wrote to the Federal Reserve, providing a requested update on “Riggs’ material litigation.”   These include cases overseen by Judge Garzon in Spain, the Allison Vadhan / 9-11 case, and a RICO case about Riggs’ “allegedly deficient anti-money laundering program.” Allegedly?

   Inner City Press has now reviewed the 2004 lending of controversy-plagued Riggs Bank, N.A., and has now commented to the three regulatory agencies considering PNC’s take-over proposal that Riggs in 2004 denied the applications of African Americans 7.52 times more frequently than those of whites (while denying the applications of Hispanics 4.81 times more frequently than whites).  Beyond its money-laundering for Augusto Pinochet and the dictator of Equatorial Guinea, this striking under-service to communities of color in and around the District of Columbia militates for the public hearings Fair Finance Watch has requested on PNC-Riggs.

March 28, 2005

            Lost in the muddled news last week from Bishkek was the question of who did Akayev’s banking, and where the money (as well as Akayev) took off to. Click here for Fair Finance Watch’s beginning report on the Kyrgyz banking system. In Central Asia, it’s anything goes: last week a Japanese banking expert spoke blithely in Uzbekistan, despite the human rights issues (including the boiling alive of political opponents).

            Pending forthcoming ICP filings, the Riggs story of the week was T. O’Hara’s 2000 word analysis of the second Levin report, in the Wash Post of March 21.  It describes Riggs delegations to Chile in 1996, 1997, 2000 and 2002, long after Pinochet was under indictment for torture.  Riggs’ Tim Coughlin “thanked Pinochet for a book, ‘The Crucial Day,’ a sympathetic account of the Pinochet-led military coup in September 1973 that featured extensive interviews with Pinochet. ‘I am just finishing my reading of “The Crucial Day.” The factual objectivity with which you tell the story of Chile in the early 1970s is both fascinating and instructive. History provides for fair and proper judgment only when the true facts are known.’”

            We counter-suggest Marc Cooper’s “Pinochet and Me,” and the films “Il Pleut Sur Santiago” and “Missing.” The latter gave rise a the libel-dismissing decision in Davis v. Costa-Gavras, 580 F.Supp.1082 (S.D.N.Y. 1984)...

March 21, 2005

  The Senate’s report last week on Pinochet’s funds identifies accounts at Citigroup, Bank of America, Banco de Chile-United States, Ocean Bank, PineBank, Banco Atlantico (now Banco de Sabadell), Espirito Santo Bank in Miami (which has a Credit Agricole connection), and Coutts & Co. (USA) International while it was owned by the Royal Bank of Scotland (it’s now owned by Santander). 

  Regarding Citigroup, the Senate states that its “investigation has determined that Citigroup had a substantial, years long relationship with Augusto Pinochet and his family"... Only in "response to Subcommittee requests, Citigroup has identified 63 U.S. accounts and certificates of deposit that were opened for Mr. Pinochet and his family in New York and Miami at various points in time from 1981 to 2004... It was not until July 2004, two years later, that Citigroup first alerted the OCC to its years-long relationship with the Pinochet family.”  The report at page 82 deadpans that Citigroup “declined to provide any information in response to Riggs’ Section 314(b) requests. When the Subcommittee asked why, Citigroup pointed out that, at the time the requests were made, Riggs was under civil and criminal investigations raising questions about the bank’s management and operations."   That's ironic -- because under that standard, no one should answer Citigroup's questions either... The report refers (too) obliquely, at footnote 132, to HSBC’s and Santander’s refusal to identify who owned the accounts into which Riggs Bank wired money. Also, casting Riggs’ restitution and pleas to date in a different light, subcommittee investigators have shown that the “relationship between Riggs Bank and Augusto Pinochet was more extensive than previously disclosed, encompassing 28 accounts instead of nine, spanning 25 years instead of eight, including secret accounts opened under misleading names, and involving more personal, high-level contact between Riggs officials and Pinochet than previously described” (that’s from the subcommittee’s own press release).  Chilean judge Sergio Munoz continues his probe into Pinochet's secret accounts abroad, including at Riggs. So should Riggs’ guilty plea on the cheap (and PNC’s sweep-it-under-the-rugs takeover bid) be accepted?

March 14, 2005

  From the Cyprus News Agency in Nicosia last week: “Government spokesman Kipros Khrisostomidhis has noted... the casino operating in the Turkish-occupied north, the banking system and the financial institutions are ‘actual bodies where money-laundering can be promoted’...  The US report said ... that although casinos, Internet gaming sites, and bearer shares are not permitted in the government-controlled area of Cyprus, the areas under Turkish occupation present a different picture, with 22 essentially unregulated, and primarily Turkish-mainland owned, casinos being the primary vehicles through which money laundering occurs.” 

          And which is the global bank which operates in North Cyprus?  None other than HSBC...  In impunity news, Riggs Bank’s Robert L. Allbritton, weeks after grudgingly tossing $1 million to the many victims of Augusto Pinochet (whose money Riggs laundered), cashed in stock options for a profit of $5.8 million. There’s still been no restitution for Riggs Bank’s much larger dealings for Equatorial Guinea’s Obiang (including the reported pilfering of at least $35 million).  Riggs, following Allbritton’s resignation, rushed to appoint Tony Terracciano, previously of First Fidelity / First Union, so someone can sign the SEC filings under Sarbanes-Oxley on March 15...

March 7, 2005

            The U.S. State Department 2004 Human Rights Report issued last week admits that the regime in Equatorial Guinea of Teodoro Obiang Nguema Mbasogo “severely restricted freedom of speech and of the press. The Government continued to restrict the rights of assembly and association and limit freedom of movement. Corruption remained a problem. There were no effective domestic human rights nongovernmental organizations... By law, arrests do not require warrants... The lack of a published penal code allows for frequent abuses by security forces.”

            The report does not mention Riggs Bank or the Senate’s 2004 investigation, which shows much more extensive engagement by Riggs with Obiang ($700 million) than Pinochet. But PNC is intent not justice but sweeping the squeaky wheels of the past under the rug. Witness, for example, last week’s announcement of a proposed settlement of class action litigation, $1.1 million to the lawyers $2.7 million to shareholders. This ratio, of fee to supposed justice-making, is out of kilter. Also dubious is the “finding,” as part of Riggs guilty plea, that the 1998 Pinochet funds freeze order "was never domesticated, served on Riggs Bank, or otherwise made legally operative in the United States." That’s not even consistent with the Senate report. The lack of accountability for the Equatorial Guinea outrage, however, is most glaring...

February 28, 2005

            An outrage on which we must comment: on the same day it was announced that Riggs will pay $9 million to a fund for Pinochet’s thousands of victims, it was also disclosed that the managers of Riggs, including the Allbrittons, stand to get golden parachutes well over $9 million (up to $15.4 million, it’s reported). The Allbritons, of course, stand to get over $250 million on the sale. Comparing these numbers shows the place of human rights in today’s field of banking, at least at PNC: an afterthought.  And what of the much larger sums Riggs helped loot from Equatorial Guinea? These are described in the Senate report and Riggs’ plea. What of Obiang’s victims? This shows the place of Africa to Riggs and PNC: less than an afterthought. ICP/Fair Finance Watch will be notching up its opposition.

February 21, 2005

   The Riggs Bank and Pinochet matters continue to develop.  Below is a portion of a comment ICP has filed with the Federal Reserve Board, citing the Washington Post’s February 17 reporting on the use of Riggs Bank’s jet (including for the spouse of the Fed’s chairman, requiring recusal) and the Pinochet tax evasion inquiry:

Dear Secretary Johnson, and Governors of the FRB:

            On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, “ICP”), and in connection with the applications of PNC Financial Services Group, Inc., PNC Bancorp, Inc. and their affiliates to acquire Riggs National Corporation and Riggs Bank National Association, this is a supplemental comment in extraordinary circumstances, including a formal request that Chairman Greenspan recuse himself from the PNC - Riggs proceeding. Riggs has pleaded guilty, requiring a restarting of the comment period. PNC is changing the structure it proposed, seeking to artfully dodge the effects of the guilty plea: also requiring a restarting of the comment period. And now, the Washington Post of February 17, 2005, has reported on the use of Riggs’ jet to fly the Chairman’s spouse around:

“Andrea Mitchell was invited to join Allbritton and his wife on a flight from New York to Washington in December 2002. Mitchell said Barbara B. Allbritton approached her ‘at the last minute’ in the airport in New York while Mitchell was waiting for the Delta shuttle to Washington. ‘Barbara said, “We're flying back to D.C., would you like to go with us?”’ recalled Mitchell, whose husband, Alan Greenspan, is chairman of the Federal Reserve, which regulates Riggs's holding company. She said she knows the Allbrittons socially. ‘I thought it was their personal airplane. Only later when this whole thing came up did I learn that it was a corporate aircraft. I'm usually very careful about those things.’ She described the Allbrittons' offer as ‘sociable and neighborly.’”  


            The Allbrittons now stand to make over $250 million if the Chairman’s FRB approves PNC’s application to acquire Riggs. Recusal is required, and a hearing should be held.Here for the record is an update on the Pinochet inquiries:

Groupo de Diarios America / NoticiasFinancieras (Feb. 18, 2005)

Former military leader Pinochet faces charges of tax fraud

Political woes are mounting at a fierce rate for former military leader Augusto Pinochet, after the national tax agency announced that's broadening its investigation into charges of tax fraud by the retired general, combing more than 20 years of financial statements. The International Tax Service has said it was investigating whether Pinochet secretly kept multimillion-dollar accounts at a bank in Washington from 1998 to 2002.

The broader investigation reported by would extend back to 1980, when Pinochet officially assumed the role as president. Judicial authorities are looking into the source of Pinochet's wealth after a U.S. Senate committee reported that he held up to $8 million in undisclosed accounts at Riggs Bank. El Mercurio reported the broadening inquiry suggested investigators were looking into whether Pinochet's funds came from government coffers. Pinochet also faces ongoing court battles in several lawsuits arising from human rights violations blamed on his military regime, which began after a 1970 coup that ousted former President Salvador Allende and continued until 1990. An official Chilean report says 3,197 people were killed for political reasons under his rule.

 Note that the Riggs Bank jet story had traveled, by the weekend, all the way to New Zealand -- "Former Prime Minister Jim Bolger is on a list of famous high-flyers given free trips on an American bank's private jet, which should have been used only for corporate travel. Mr. Bolger was featured on the front page of yesterday's Washington Post in the company of former United States Presidents and news personalities who had accepted flights from the controversial former head of Riggs Bank, Joe Allbritton. The Post said many of the flights offered by the banker were private trips for his friends despite bank policy that only employees and directors use the plane for personal reasons. The flights are under investigation by the Department of Justice. Last month, Riggs admitted the offence of failing to prevent money-laundering by former Chile dictator General Augusto Pinochet."

Until next report, for or with more information, contact us.

February 14, 2005

            Immediately following Riggs Bank’s and PNC’s revival of their merger deal on February 10, ICP/Fair Finance Watch wrote to the Federal Reserve, demanding a re-starting of the comment period, in light of the PNC-acknowledged Material (Adverse) Effect, and public hearings. It now appears that application will have to be made to the Office of the Comptroller of the Currency as well. Among the most cynical parts of this process is the following statement, in the banks’ Feb. 10 press release:

“Under the restated terms of the merger agreement... Riggs National Corporation will merge into The PNC Financial Services Group, Inc. and PNC Bank N.A. will acquire the assets of Riggs Bank N.A. This change in structure was effected to mitigate the potential business impact of Riggs Bank's plea agreement with the Department of Justice.”

  The Pittsburgh Post-Gazette of Feb. 11 noted that the “language of the agreement was changed so that PNC will not inherit Riggs' guilty plea for violating the Bank Secrecy Act. A judge still has to approve the plea agreement. A sentencing hearing is scheduled for March 29.”

            The judge, Richard Urbina, is also in charge of the case(s) against Riggs Bank’s Simon Kaleri. Reporting on those cases, the Legal Times of Dec. 27, 2004, noted that "Kareri, former senior vice president of the Riggs' International Banking Group, was fired by the bank in January 2004 after an internal investigation alleged that he stole hundreds of thousands of dollars... Kareri had been a senior manager of Riggs' Embassy Banking Division since January 1994 and was responsible for managing various embassy accounts as well as the personal accounts of foreign government officials and their families. Those accounts included the African nations of Equatorial Guinea, Benin, Mozambique, and Togo."   So those would have been the accounts of 38-year Togolese strongman Gnassingbe Eyadema, and quite possibly also of his just-installed son, Faure Gnassingbe.  (On February 5, immediately after the death of  Gnassingbe Eyadema, the Togolese army passed power to Faure Gnassingbe. As protests mount, here’s the in-process Togo Report of the ICP Fair Finance Watch, and here’s BBC’s web page of Africa News. The Senate Subcommittee’s July 2004 report, at least in its 114-page version, doesn’t follow up on the Riggs / Kaleri connection to Togo (or Benin or Mozambique).  But these should be followed up on, as well...

Update of February 10, 2005: On the morning of Thursday, February 10, Riggs announced its deal with PNC is back on, at the reduced price of $654 million.  Monday’s squabble reflected both a lack of class (belying Riggs new statement that is has developed a great working relationship with PNC over the past six months), and the banks’ contempt for the unresolved issues at Riggs.  How can the enabling through money laundering of human rights abuses be assigned a dollar figure, and the unresolved issues be swept under the rug?   Based on the banks’ press release about Joe L. Albritton voting 24.6% of shares, that he stands to be paid over $160 million for having enabled human rights abuses. 

            ICP on Feb. 10 filed a request with the Federal Reserve to re-start the public comment period and hold public hearings on PNC’s application. ICP’s filing with the Fed emphasizes that on Feb. 7, PNC issued a press release directly denying Riggs’ claim that no “Material Adverse Effect under our merger agreement has occurred, based on the facts to which Riggs itself has fully conceded.” See www.prnewswire.com/gh/cnoc/comp/701257.html. Now that the proposed acquisition proposal has been revived, PNC can’t have it both ways. Once PNC acknowledged that a Material Adverse Effect has occurred, it became clear that the public comment period must be re-started, for a minimum of a full thirty days (and more, to allow the needed public hearings). The specifics of ICP’s ongoing (and now ramped-up) campaign are below in this Report; see also, Feb. 10 CBS-Market Watch of Feb 7, “Riggs sues PNC after talks to save merger fall through,” by David Weidner and Feb. 10. ICP/FFW’s position is that impunity for human rights abusers and their enablers and financiers must end; Riggs is the banking industry’s poster child (also though there are others, see, e.g. ICP’s Feb. 7 reporting on Deutsche Bank and Turkmenistan).

Update of February 7, 2005: On the morning of February 7, Riggs announced its deal with PNC is off, and sued PNC for damages. Riggs’ court complaint against PNC supports the skepticism about Riggs plea bargain, expressed by Judge Richard Urbina on January 27 that the $16 million   fine might be no more than a business expense. Paragraph 71 of Riggs’ February 7 complaint states that “[n]either the DoJ plea agreement nor the settlements with the Federal Reserve, OCC and FinCEN materially affected Riggs’s business, financial condition or results of operations” - i.e., the fine was and is little more than a business expense.  ICP will be raising this, and opposing Riggs’ sale to any other bank, until oppose the sale of Riggs Bank, whether to M&T, Sovereign, National City or whomever, until the money laundering and human rights issues at Riggs are fully plumbed and acted on.

6 p.m. post script: after 5 p.m. on February 7, PNC issued an arch press release, expressing amazement at Riggs’ lawsuit and Riggs’ claim that no “Material Adverse Effect under our merger agreement has occurred, based on the facts to which Riggs itself has fully conceded.” ICP’s view is that they can’t have it both ways. Riggs told Judge Urbina that the $16 million fine it plea bargained to was serious, no mere business expense. Then Riggs sues and claims that the fine and plea bargain wouldn’t materially affect it. Meanwhile, PNC has fought ICP’s requests that the Fed restart the comment period on the PNC-Riggs application (now apparently moot), but now claims that the changes are material (and apparently asked to drop the price by 33%). Riggs remaining alone and actionable is good for human rights -- but PNC’s motives are not principle, just a chance to chisel down the price for the money laundering bank.  Developing...

February 6, 2005

            Following the announcement of its flawed plea bargain on January 27, Riggs Bank said that it and PNC would make an announcement about their stalled merger “on or about” February 4.  That day passed with no announcement. Earlier in the week, the Federal Reserve and OCC announced cease-and-desist orders with Banco de Chile, for holding and concealing accounts for Augusto Pinochet.  Also reported to have been holding Pinochet accounts are Royal Bank of Scotland’s (and now Santander's) Coutts & Co. Int'l USA unit, and Espirito Santo, regarding which an application by Credit Agricole, on which ICP / Fair Finance Watch commented to the Federal Reserve back in 2003, is still pending...   (The Coutts and Espirito Santo connections were reported among other places in the newspaper Clarin). Chilean Judge Sergio Muñoz, investigating Pinochet’s finances, is seeking records and additional information from the governments of the United States, Switzerland, Luxembourg, United Kingdom, Bahamas, Germany, Panama, Spain and Gibraltar. “Unexplained Pinochet wire transfers through several banks in the United States and elsewhere have been identified by Muñoz at Banco Atlántico in New York, Gibraltar and Zurich; Citibank; Bank of Bahamas; Sun Bank; Swiss Bank Corp.; Bank of America; American Express; Lehman Brothers; and Barclays Bank... Muñoz named four other offshore companies that Pinochet used, all incorporated in Tortola, British Virgin Islands: G.L.P. Ltd., Tasker Investment Ltd, Abanda Ltd., Belview Internacional Inc., Belview S.A. and Eastview Finance S.A.” Also reportedly in the mix is the British insurance company Standard Life. Developing... In other "PEP" news, on ICP’s new Human Rights beat: Deutsche Bank, which forecloses on Ameriquest’s (and other predators’) loans, is also the prime banker for the mad dictator of Turkmenistan, who has renamed the months, and built a golden statue of himself, which rotates to follow the sun across the sky. Click here for ICP/ Fair Finance Watch’s report on DB and Turkmenbashi.

January 31, 2005

            Riggs Bank’s proposed plea bargain announced January 27, and its proposed acquisition by PNC Financial Services Group, to be discussed on February 4, are both being opposed by the Fair Finance Watch / Human Rights Enforcement project (FFW). In three filings today, FFW has emphasized that Riggs’ money laundering was not limited to Augusto Pinochet and Teodoro Obiang Nguema. According to the Senate Permanent Subcommittee on Investigations Report (here in PDF), Riggs performed similar services for personnel of the Saudi Arabian embassy, without filing the required Suspicious Activity Reports -- a matter unaddressed, yet prospectively covered-up, in the plea proposed last week. Riggs is still a "crime scene" - see, e.g., Riggs Slapped Again: Washington Bank Fined $16 Million with 5-year Probation, CBS MarketWatch, January 27, 2005. The probation would expire if Riggs is sold to an unaffiliated company (i.e., PNC).

            Riggs has now admitted helping Augusto Pinochet, even while he was under house arrest, to access presumptively pilfered funds without filing any Suspicious Activity Reports. Of Pinochet’s human rights abuses, judicial notice should be taken. (Procedurally, note that BBC on the evening of January 28, 2005, reported that earlier that day, Pinochet’s “attorneys presented a writ of amparo requesting that Judge Sergio Munoz be declared unfit to continue investigating the Riggs Bank case, the same strategy they attempted with Judge Juan Guzman and the Operation Condor case. Though Munoz himself will rule on the writ, he is prevented from further investigation until he does so.”) 

            Of Teodoro Obiang Nguema, note as regards press freedom that he threatened journalists in Equatorial Guinea when media carried news of the Senate report on the Riggs scandal.  See, <http://news.bbc.co.uk/1/hi/world/africa/3911855.stm>.  As regards freedom of conscience, Obiang had previously jailed political opponents for “insulting” him on the Internet. See, <http://news.bbc.co.uk/1/hi/world/africa/2164050.stm>. From another recent report on “the context of Equatorial Guinea... Tropical Gangsters by Robert Klitgaard, an economist who worked in Malabo during the late 1980s. The book ends with Klitgaard protesting the torture of a local colleague who was taken to the presidential compound above Malabo’s harbor, blindfolded, and had his hands tied behind his back. He was then hung by his ankles -- as Klitgaard writes, ‘like a marlin at the weight scale’ -- and lowered into a barrel of soapy water and kept there until he choked. He was pulled out, questioned, and submerged again. This went on for several hours. Later, electric shocks were administered to his genitals.”

            Riggs actively helped human rights outlaws to conceal blood money. The $16 million fine is disturbingly small. Stock analysts have characterized it as a “light penalty” (see, e.g., Pittsburgh Tribune of January 27, 2005). ICP’s comments urge: consider (and inquire into) what fees and income Riggs made from handling Teodoro Obiang Nguema’s (or Equatorial Guinea’s) $700 million. Troublingly, the few safeguards commitment to in the plea agreement would become ineffective if Riggs is sold to an unaffiliated party (i.e., PNC). ICP has already made part of the record before the Federal Reserve Board PNC’s previous (and recent) managerial problems. The potential expiration of safeguards and probation(s), in this light, seems particularly ill-conceived.  There’s also the matter of PNC’s demonstrable lending disparities, documented in ICP’s previously comments, combined with Riggs Bank’s -- in the Washington D.C. Metropolitan Statistical Area, Riggs Bank NA denies the conventional home purchase applications of African Americans 7.63 times more frequently than those of whites.  Acquisition by PNC would scarcely improve matters. For example, in PNC’s headquarters MSA of Pittsburgh in 2003, PNC Bank NA denied the conventional home purchase applications of African Americans 4.62 times more frequently than those of whites.

            From the Statement of Offense to which Riggs agreed “is a true and accurate description of Riggs Bank’s conduct in this matter” --

From in or about 1996 to in or about 2004, Riggs Bank maintained numerous accounts for EG. Over the course of this period, Riggs Bank opened over 30 accounts for the EG government, numerous EG senior government officials, and their family members. Riggs Bank opened multiple personal accounts for the EG president and his relatives and assisted in establishing offshore shell corporations for the EG president and his sons (collectively, the “EG Accounts”). By 2003, the EG accounts had become Riggs Bank’s largest single relationship with balances and outstanding loans that totaled nearly $700 million.... In September 1999, Riggs Bank assisted the EG President Obiang in the establishment of Otong S.A., an offshore shell corporation, incorporated in the Bahamas, and held a money market account for the corporation. Otong was a Private Investment Company... Over the course of the history of the EG Accounts, the following transactions took place through an account in the name of Otong S.A (the “Otong Account”):
a. April 20, 2000: $1 million deposit of U.S. currency;
b. March 8, 2001: $1.5 million deposit of U.S. currency;
c. April 20, 2001: $1 million deposit of U.S. currency;
d. September 5, 2001: $2 million deposit of U.S. currency;
e. September 17, 2001: $3 million deposit of U.S. currency; and
f. April 12, 2002: $3 million deposit of U.S. currency.
21. Riggs Bank failed to determine the background and possible purpose of these
transactions, and failed to file a SAR until after the OCC and Congressional investigators
brought the transactions to the bank’s attention. These transactions were suspicious because of the cash nature of the deposits, because of the lack of understanding as to the source or destination of the money, and because the transactions were not the sort in which the particular customer would normally be expected to engage.
22. Additionally, Riggs Bank filed inaccurate CTRs on these cash deposits. The
CTRs listed the Otong account as an exporter of timber, rather than a PIC controlled by the EG president. Certain Riggs Bank employee(s) knew this representation to be inaccurate.
23. From June 2000 to December 2003, 16 separate wire transfers, totaling
approximately $26.4 million, were sent from an EG oil account at Riggs Bank, which held oil royalty payments to the government of EG, to an account in the name of Kalunga Company, S.A. at Banco Santander in Madrid, Spain.

            ICP has previously asked the Federal Reserve (and the U.K. FSA and others) to take action on the Santander (and Spain/BBVA) and HSBC issues.  See, e.g., “Request for Halt to Santander Takeover,” by Karl West, The (Glasgow) Herald, September 23, 2004, www.theherald.co.uk/business/24582.html; “New York Protest at SCH Plans,” by Jane Croft, Financial Times, September 23, 2004; “FSA Urged to Block Abbey Bid over Laundering Report,” by Conal Walsh, The Observer, September 26, 2004, http://observer.guardian.co.uk/business/story/0,,1312662,00.html, and, in Spanish, “Piden a las autoridades británicas que paren la OPA sobre Abbey hasta que no se aclare el papel del Santander en un caso de blanqueo de dinero,” <www.elconfidencial.com/buscador/mostrar.asp?seccion=enexclusiva&id=4386>.

            ICP has now raised these issues to the United Nations Global Compact (see this week’s Human Rights Report for more). It would be unwise and contrary to the public interest to “close out” the Riggs matter prior to additional inquiry and disclosure concerning not only HSBC’s and Santander’s roles, but also the Saudi accounts.  The Senate Report states at page 79 that “beginning on November 22, 2002, media stories reported that a Riggs account associated with the Embassy of Saudi Arabia had allegedly sent funds that ended up benefiting two of the Saudi terrorists involved in the 9-11 attack on the United States.” Note that the issue surrounding accounts of personnel of the Saudi Arabian embassy were not addressed in the proposed plea. “Riggs Bank remains a crime scene,” says FFW. “It should not be swept under the rug, let off the hook, or sold to PNC The perceived and reported interest of the FRS in ‘closing off’ the Riggs scandal cannot be allowed to exclude and preclude public review. The Federal Reserve must, as a matter of law and administrative procedure, re-open its comment period on PNC’s application to acquire Riggs, a bank that has now pleaded guilty to a set of facts that raise troubling human rights, anti-terrorism and even safety-and-soundness issues. Developing. For or with more information, contact us.

January 24, 2005

            In the Philippines, the the insurance industry regulator is finally revising its examination procedures to reflect its earlier circular requiring all insurance companies to report all transactions suspected to be the basis for money laundering. This was in response to Republic Act 9160 passed in Congress after the FATF threat to impose sanctions on the country if it failed to enact proper legislative measures. Now the Bangko Sentral ng Pilipinas is predicting the country will be taken off the FATF blacklist next money. We’ll see..

   The inquiry into the Pinochet accounts has spread to accounts at Banco de Chile's New York and Miami branches. Banco de Chile said Jan. 21 in a statement to Chile's Securities and Insurance Superintendency that the Federal Reserve Bank in Atlanta is looking into accounts at its Miami branch while the Office of the Comptroller of the Currency is handling the New York investigation. We’ll see...

January 18, 2005

Nigeria, it has emerged, plans to issue $500 million of Treasury bills to cover its 2004 fiscal deficit while it waits for Switzerland to return funds looted by its former dictator Sani Abacha.   In a letter to the Senate earlier this month, President Olusegun Obasanjo said that the government planned to issue 90-day Treasury bills to help finance the 2004 budget deficit in lieu of the $500 million. "The funds are now expected to be released around the end of January 2005 ... This amount was already programmed into the 2004 budget as a financing item. Our plan is to redeem the bills with the recovered funds once we receive them," he said. Nigerian authorities calculate that Abacha embezzled between $2 and $5 billion from the state coffers.  And where did it go?  By most accounts, to the following:

Credit Suisse and two of its subsidiaries, Bank Leu and Bank Hoffman; Credit Agricole Indosuez; Union Bancaire Privie; MM Warburg; Deutsche Morgan Grenfell in Jersey. In London, branches of ANZ Banking, Banque Nationale de Paris, Barclays, Citibank, Bank of Boston, HSBC, NatWest (part of Royal Bank of Scotland) and Standard Bank of South Africa were among those that held funds looted by Abacha. In New York, Bankers Trust (now Deutsche Bank) and Merrill Lynch in New York; Goldman Sachs in Zurich, UBS in Geneva. Quite a rogues’ gallery...

  Smaller scale, on January 13 the US Office of the Comptroller of the Currency released a cease-and-desist order with Eagle National Bank of Miami (on which ICP/Fair Finance Watch previously commented to the regulators). The OCC has now belatedly required Eagle to improve its anti-laundering compliance.  Within 60 days Eagle must conduct a review to identify all accounts held by "senior foreign political figures" or any of their close associates or immediate family members.  Sound (Riggs-like and) familiar?

January 10, 2005

  The key line from the WashPost of January 5: “Riggs officials think that without a settlement by the end of this month, PNC will probably pull out of the deal, sources said.” Then, from the Pittsburgh Post-Gazette of January 6: “PNC spokesman Brian Goerke and Riggs spokesman Mark Hendrix declined comment on a Washington Post report yesterday that Riggs was close to resolving its issues with the Justice Department, which is conducting a criminal probe of the bank.... Analysts had not heard of a pending Riggs settlement. But one said revelations that the bank had significant ties with the CIA increases the chances of such a settlement. The Wall Street Journal disclosed the relationship last week, citing U.S. officials and people familiar with the bank's operation.’ That changes the whole picture dramatically,’ said Dick Bove of Hoefer & Arnett. ‘If the government was in fact the reason this bank was doing a lot of the things it did, then the government is on the hook.’ The purported link between Riggs and the CIA sent Riggs shares up 7 percent on Friday.”

   Let’s get this straight: the stocks goes up on news of the CIA link?  Because it makes a bank-regulatory cover-up more likely? But the regulators, including the Federal Reserve Board to which Inner City Press/Fair Finance Watch has commented, should note: the judicial process against Pinochet in Chile is moving forward (click here for ICP’s update on this), so a cover-up in El Norte may be for naught, even, embarrassing.  (And somewhat embarrassing errata for the Post-Gazette: Dick Bove is at Punk Ziegel, not Hoefer & Arnett...) Meanwhile, EPW muses: “The CIA connection, meanwhile could infinitely complicated the prosecution of the bank over last summer's scandal, because if bank employees allege they were acting on orders from the CIA, prosecutors would have an almost impossible time proving that was untrue. That angle is complicated by the fact that the notorious Bank of Credit and Commerce Inter-national (BCCI), which was deeply enmeshed in the criminal and terrorist underworld when it was closed down in the late 1980s, was kept open by the CIA long after BCCI's real character was known, because the agency wanted to monitor and follow the money flow.  Similar allegations from Riggs employees would only plug into those memories, not to mention the inclination of many Washingtonians to believe the CIA has unseen fingers in many pies, doing all sorts of things that may not stand the light of day... There's a CIA connection to the Chilean matter, as well: Pinochet's liaison with the agency, Manuel Contreras, who is head of Chile's Secret Police, had accounts at Riggs, according to a recent report in The Wall Street Journal. (Riggs Bank, 202/835-5162; Central Intelligence Agency, 703/482-0623)”

   ICP last week received a FOIA response from the CIA: “We reviewed the material and determined it is properly classified and must be denied in its entirety on the basis of FOIA exemptions (b)(1) and (b)(3)... You have a right to appeal this decision by addressing your appeal to the Agency Release Panel within 45 days.”  Will do.

January 3, 2005

   In the Bank of America investigation, as described in the Wall Street Journal last week, the Manhattan district attorney says that BofA has transferred hundreds of millions of dollars for a money transmitter in Uruguay called Lespan SA and its affiliates. The prosecutor and federal officials say they suspect the money has come from Colombian drug trafficking and other criminal activity. The investigation could get much broader and sweep in other major banks as well. A related local prosecution earlier this year - in which Mr. Morgenthau's office obtained the conviction of a New York money transmitter operating without a license - yielded data about wire transfers involving Lespan by Bank of America, J.P. Morgan Chase, Citigroup and Wachovia. The DA’s staff is now reviewing transactions related to all four banks. According to the Journal, these four banks, among others, moved hundreds of millions of dollars between New York and Uruguay, Paraguay and Brazil at the behest of obscure firms in the British Virgin Islands. Much of the money appears to have come from the Tri-Border Area between Argentina, Brazil and Paraguay. Investigators are looking at whether the big banks made an effort to determine how small firms in Uruguay and Paraguay could possibly have taken in so much cash from legitimate commerce. The investigators are also examining whether the banks inquired into the ownership of the British Virgin Islands companies.

            As to Citigroup -- on which we’re focusing -- you can bet they didn’t check it out. How else to explain Citigroup’s ongoing and increasingly tenuous denials to Bloomberg News?  Developing...

Meanwhile, the Bosnian central bank and the entities' banking agencies have not yet received instructions from the B-H Bosnia-Hercegovina Council of Ministers to block the bank accounts of war crimes indictees including Radovan Karadzic, Ratko Mladic and 19 other persons
accused of war crimes (see below, for list).  "We know that the Council of Ministers decided about 20 days ago to freeze the assets and block the accounts of persons indicted of war crimes.  However, we have not received any official document instructing us to block these accounts. We cannot act on information obtained from the media," Ibrahim Polimac, spokesman for the B-H Federation's Banking Agency, told Bosnian Serb newspaper Nezavisne novine.

  Finally, for this Report, two Riggs updates: federal prosecutors are now seeking the seizure of accounts and property owned by former Riggs executive Simon Kareri. Government lawyers have filed a civil forfeiture action for property and $1 million in cash against Kareri, who as a Riggs senior vice president managed a number of embassy accounts, including that of Equatorial Guinea, which at one point had upwards of $750 million in Riggs National Bank... In Chile, Oscar Aitken, the financial adviser of former Chilean dictator Augusto Pinochet resigned after nearly two years of service, Pinochet's son Marco Antonio said on December 29. Aitken decided to step down two weeks ago because he feared  legal action could be opened against him, Marco Antonio Pinochet   added.  As well it should be...

December 27, 2004

On Riggs, beyond the Pinochet developments, focus now re-shifts to accounts established by Equatorial Guinea’s Obiang regime at Riggs Bank. Obiang also held more than $16 million in an offshore account that the bank helped him establish in the Bahamas. In one internal Riggs memo obtained by the Senate, the Obiang family's private banker raised the daily limit on the first lady's debit card to $10,000. "The $2,500 limit is insufficient for her needs," the Riggs banker wrote. The OCC’s $25 million fine is starting to look more and more insufficient...

December 20, 2004

HSBC’s fast-and-loose practices, even beyond HFC’s predatory lending, begin to come home to roost: an account at an HSBC subsidiary [the Saudi- British Bank] will be charged with being used to collect and pass funds to organizations which then used the money to help suicide bombers and their families. Yes, it’s the Account 98 scandal.

In positive human rights -- and anti-money laundering -- news, Augusto Pinochet was last week finally charged with kidnapping and murder dating back to his 17-year rule. The charges relate to nine disappearances and one death in the 1970s as part of Operation Condor, an intelligence-sharing network among South American dictators who helped each other to hunt down dissidents. "The decision [to prosecute], when I studied all the statements and elements of the case, was not difficult," said Judge Juan Guzman.  Pinochet's lawyers quickly announced that they would lodge an appeal before the Santiago court of appeals and, if necessary, take the case to the Chilean supreme court, which ruled three years ago that Gen Pinochet was mentally and physically unfit to stand trial. In that case, he had also been indicted by Judge Guzman. The judge sought yesterday to cut off that line of defense, citing statements by Gen Pinochet in a television interview in November 2003. "Gen Pinochet has declared himself mentally fit to be the subject of trial," he said. So let’s get it on -- including as relates to Riggs Bank and its money laundering...

December 13, 2004

            ICP (and its Fair Finance Watch project) have filed comments with the U.S. Federal Reserve challenging to the application by Banco Bilbao Vizcaya Argentaria (BBVA) to acquire Laredo National Bancshares, its banks and its nationwide subprime lender, Homeowners Loan Corp., for over $800 million dollars. ICP's timely comments among other things address managerial issues at BBVA including off-shore banking and political contributions scandals --

 “The case of Spain's Banco Bilbao Vizcaya Argentaria embroiled in Latin American charges of questionable cash transfers, money-laundering and secret political campaign contributions illustrates how the highway to democracy and global commerce is still pocked with holes, some of them deep. BBVA, with US$276 billion in assets, is under investigation for allegations linked to multibillion-dollar bank privatizations in Mexico, Venezuela, Colombia and Peru. It denies wrongdoing but admits one mistake. ‘We acted without transparency,’ BBVA President Francisco Gonzalez declared in late June... [D]uring its acquisition of privatized Banco Continental de Peru, then-Banco Bilbao Vizcaya is alleged to have shelled out millions of dollars in loans and other payments to former Peruvian President Alberto Fujimori and his videophile security chief Montesinos. The accusations, which BBVA says are baseless, range from claims that $112 million in bribes were paid to Fujimori to questions over the sale of Fujimori's $670,000 house. In Colombia, BBVA is fending off money-laundering charges in connection with its successful bid to control Banco Ganadero. BBVA-Ganadero executives vehemently deny the charges. Officials in Mexico, meanwhile, are looking into whether money laundering played a role in BBVA's takeover of financial group Mercantil Probursa and if offshore funds were inappropriately used to buy shares in Bancomer... BBVA had $227 million in a secret account in the British isle of Jersey.” (Latin Trade, October, 2002).

  And see World Markets Analysis of January 30, 2004:

“The Swiss public prosecutor investigating the case against Paraguay's ex-President Luis Gonzalez Macchi (1999-2003) arrived in the Paraguayan capital, Asuncion, yesterday to share information with local authorities. Thomas Wiser is progressing the case after Swiss authorities froze two secret bank accounts of the former leader, who is wanted in his home country for alleged skimming off state funds. Paraguayan District Attorney Oscar Latorre made the decision to open an inquiry after Swiss authorities began their own investigation into Macchi's private accounts held with Spanish bank BBVA in the Swiss city of Geneva.”

   More of the ICP's comments are here.  We'll have more on the ever-unfolding Riggs (and PNC) scandal, as it develops.

December 6, 2004

   In terms of lack of standards (and dissembling), after Citigroup’s denials, Bloomberg News of Nov. 30 nailed it down: “Yasser Arafat controlled a company that Palestinian Authority documents show held a $ 6.8 million account at Citigroup Inc., Palestinian legislators Hanan Ashrawi and Azmi Shuaibi have confirmed. The company, Palestine Commercial Services Co. (PCSC), held the account until it was transferred to the Palestine Investment Fund, according to the fund's 2003 annual report. The fund was created in 2002 to consolidate the PA's assets and bring them under the control of its Finance Ministry.  Palestine Commercial Services ‘was a company that was founded by Arafat,’ Ashrawi, 58, a former member of Arafat's cabinet, said in a telephone interview from Ramallah. ‘He had the authority.’ Disclosure of an account linked to Arafat is an embarrassment for Citigroup.. Charles Prince and Michael Schlein, a senior vice president who oversees public relations and ethics programs, called Bloomberg last week to demand a previous story about the account be retracted. They refused to be interviewed by a Bloomberg reporter. ‘Citigroup does not have any accounts for Yasser Arafat - and we never have,’ company spokeswoman Shannon Bell said in a statement issued November 19. After Bloomberg submitted a list of written questions about the account, Bell said Friday the New York-based company would make no further comment. Citigroup's global policies require it to know the identity of its clients and the source of their funds, according to anti-money laundering rules the bank submitted to the US Senate Governmental Affairs Committee's subcommittee on investigations in 1999. The company, which also signed the Wolfsberg Principles on money laundering, in September shut its private banking business in Japan after regulators said it hadn't properly screened clients. Palestinian and Israeli officials agree Arafat controlled PCSC, the company that held the Citigroup account.”  But Citigroup denied this...

            Beyond its subprime consumer finance buy in Brazil last week, HSBC is hoping to set up in both Iraq and Libya, according to CEO Stephen Green. He said the bank was currently negotiating with authorities and banks in both countries to build a presence there. HSBC is also setting up a new investment bank in Saudi Arabia in a joint venture with the Saudi British Bank, in which HSBC already owns a 40 per cent stake. (Article 98 accounts -- heard of them?) HSBC is licensed to operate in Iraq and sources told the FT it will be operational by the first quarter of 2005.  It’s not impossible -- HSBC operates in the contested part of Cyprus, while gunning now for the ex-Riggs embassy business in Washington... PNC’s now-troubled proposed acquisitions of Riggs was supposed to be for $24.25 per Riggs share. Riggs' stock recently dipped below $20...For or with more information, contact us.

November 29, 2004

Scandal-echo sell-off: ING Group proposed last week to sell the activities of Baring Asset Management nearly a decade after it purchased the remains of the bankrupt British bank Barings, brought down by the Nick Leeson trading scandal in 1995.  Northern Trust would purchase Baring Asset Management's Financial Services Group, for about $480 million. MassMutual Financial Group would buy the investment management activities of Baring Asset Management, with $32 billion in assets under management, and the rights to the Barings name. ICP wonders: how would MassMutual propose to use the name? Note that the business being sold operates from offices in London, Guernsey, Dublin, the Isle of Man and Jersey -- and that’s NOT New Jersey...

  From AP of Nov. 24: “A judge investigating Gen. Augusto Pinochet's multi-million dollar bank accounts in the U.S. has ordered the assets of the former dictator frozen, a newspaper reported Wednesday. The Santiago Court of Appeals press office told The Associated Press it couldn't confirm or deny the report by the Santiago daily El Mercurio because the investigation is ongoing. The paper said the order was issued last Friday by judge Sergio Munoz to guarantee payments Pinochet may be ordered to make if found guilty of illegal financial procedures. The frozen assets include real estate in Santiago and other cities, according to the report. Munoz was appointed to investigate the source of Pinochet's money after a U.S. Senate committee reported that he maintained secret accounts at the Riggs Bank (RIGS) in Washington worth up to $8 million through the mid 1990s. The Internal Tax Service sued Pinochet for tax fraud and is seeking payment of $3.4 million in back taxes and interest. In addition, the State Defense Council, the nation's top attorney's office, asked Munoz to investigate whether Pinochet could be charged with money laundering. Pinochet associates and representatives have repeatedly insisted that the money is legitimate, the result of savings, donations and good investments. Pablo Rodriguez, Pinochet's chief defense lawyer, told reporters this week that ‘Pinochet has not stolen a single peso from anybody, much less from the Chilean State.’ Some accounts were held under aliases, the lawyer acknowledged, but he said that isn't illegal. Interior Minister Jose Miguel Insulza, however, said that using a false name to open a bank account abroad may not be illegal, ‘but it is indeed suspicious.’”

And here’s some foreshadowing, for close readers: “the Spanish central bank discovered that BBVA had maintained secret accounts in tax havens for 13 years. Spanish judge Baltasar Garzon renowned for his attempts to extradite Chilean dictator Augusto Pinochet to Spain for alleged human rights abuses - has said he will investigate the case to establish if any criminal activity can be linked to BBVA and its management.  Spanish and Latin American press have reported that BBVA used the secret accounts to bribe politicians in several Latin American countries in order to protect its financial interests.”  More to follow...

November 22, 2004

While Riggs explains delays in its proposed sale to PNC in terms of systems conversion, the Chilean newspaper El Mercurio on Nov. 16 reported that “Augusto Pinochet has assets of doubtful origin worth 13 million US dollars in offshore bank accounts, primarily in the US-based Riggs Bank. The assets include three million dollars to the name of Pinochet's wife Lucia Hiriart, according to the report of Chilean police's Money Laundering Investigative Brigade (Brilac).  The report was required by Judge Sergio Munoz, who was assigned to look into possible corruption of Pinochet. Brilac gave the figure after months of studies of materials from Riggs Bank... Brilac's figure is close to that presented by Pinochet's personal financial advisor Oscar Aitken, who claimed Pinochet's assets could amount to 15 million dollars.”  Developing..

The Federal Reserve Bank of New York, responding on November 18 to detailed anti-money laundering submission made to the Federal Reserve Board on September 29, states only that “your letter will be held for a period of 90 days... as a comment on any application filed by HSBC Bank or any of its affiliates that requires consideration of the matters raised in your letter under the relevant statutory factors.”

  This is akin to a police department saying, thank you for the information, we’ll keep it on file for three months in case the subject happens to apply for a gun permit...

November 15, 2004

In its SEC filing last week, Riggs disclosed that the Pinochet investigation case in Spain has been expanded to explicitly accuse Joe L. Allbritton, former chairman and chief executive of Riggs, as well as his son, Robert, who replaced his father at chairman and chief executive in 2001.  Also named are Riggs board member Steven B. Pfeiffer, managing partner with Fulbright & Jaworski and one of the architects of Riggs's international business, and Carol Thompson, a former account manager at Riggs who handled Pinochet's accounts.  And now S&P is questioning the PNC-Riggs proposal:

"I think mergers or acquisitions at the best of times are very difficult to pull off," said James O'Brien, an equity analyst with Standard & Poor's. "When you're talking about a situation like this ... the cockroach theory starts to take hold." Merging banks, he explained, requires a tremendous amount of management time, and dealing with a regulatory investigation can prove a distraction, not just in the integration process but also in the daily operations. He said scrapping the deal "could be a possibility." Yep...

November 8, 2004

From CBS MarketWatch of November 1:  “PNC Financial Services may not have the stomach to acquire scandal-tarred Riggs National, a research analyst said Monday... Riggs, which built its name in part by serving the capital's embassy community, was accused in September of helping former Chilean dictator Augusto Pinochet hide money. That came days after survivors of those killed in the Sept. 11, 2001 attacks sued the bank for allegedly aiding terrorists. Earlier this year, Riggs was shamed in a money-laundering scandal involving Saudi Arabian diplomats and ordered to pay $25 million in fines. Meanwhile, community group Inner City Press/Fair Finance Watch has opposed the deal, saying PNC is acquiring a ‘crime scene.’”
    Also regarding Riggs, this month’s American Lawyer magazine profiles, Steven Pfeiffer, who in January 2003 was elected chairman of the law firm of Fulbright & Jaworski.  At that time, the law firm's press release noted his position on the board of Riggs National Corporation, the parent company of Riggs Bank. “Last summer, the Senate issued a report on the Riggs/Pinochet connection, which noted the role Pfeiffer played in the payments. One eager reader was Baltasar Garzon, Spain's crusading magistrate-judge, who has pursued Pinochet for years. In September, Garzon issued a criminal complaint against Pfeiffer and others for money laundering. Garzon asked the U.S. Department of Justice to freeze Pfeiffer's assets until he posts a bond and answers questions about the payments. [By mid-October Justice had not responded to the request.] In addition, the U.S. attorney's office in Washington, D.C., has opened a criminal inquiry into the Riggs matter”...

November 1, 2004

The Federal Reserve has finally started asking PNC questions about its proposal to acquire [toxic] Riggs -- but PNC is trying to keep its answers confidential.  ICP is preparing an appeal, under the Freedom of Information Act... Meanwhile, the Fed’s revolving door continues spinning. Ex-Fed legal staff Satish Kini, now at the law firm of Goodwin Procter, opined in last Friday’s American Banker that “This trend has been borne out in my own practice. I have seen that issues that a year or two ago would have commanded less regulatory attention or resulted in a minor comment from an examiner now gets much more scrutiny and, sometimes unfairly, a referral to the agencies' enforcement lawyers. From the agencies' perspective, this trend is perhaps understandable. The federal bank regulators were roundly accused on Capitol Hill of lax reaction to anti-laundering issues at Riggs Bank. As a consequence, those agencies seem to be taking a much tougher line.”  The upshot of the article?  “Gimme a call... I know these guys, and can delicately call them “somewhat unfair,” though “understandable”....  The Treasury Department has its own revolving door: David Aufhauser, now the general counsel of UBS Warburg and a former Treasury Department general counsel in the Bush II administration, spoke on a panel at a money laundering conference on October 26, claiming that "AmSouth is to me a case that should be studied, because it was a Justice Department hijacking of a regulatory issue.”  Hijacking, eh?

October 25, 2004

  In an October 20 earnings conference call with stock analysts, PNC's Jim Rohr further back-tracked on his bank's commitment or ability to acquire scandal-plagued Riggs. Rohr, acknowledging that he knew the analysts "have a lot of questions about Riggs," said PNC was "obviously monitoring events there very closely. New items have been announced since the date of our agreement. We have to see how those play out." Beyond Pinochet and Equatorial Guinea, the US Justice Department has launched a criminal probe, and Riggs has been named in lawsuits seeking damages for its alleged ties to 9/11 terrorist funding. In a conference call last month, Rohr said he was prepared to scuttle the deal if the mounting troubles made the acquisition too risky. "We simply have to wait and watch developments," Rohr said on October 20.

 For the proposition that deals can die, consider that last week, Farm Credit Services of America terminated its agreement to sell itself to Rabobank Group, and the proposed Carver - Independence deal fell apart...

October 18, 2004

Regarding the $650 million found by U.S. military forces in Baghdad in hideaways of Iraqi dictator Saddam Hussein. Investigators quickly learned through serial numbers that some of the freshly minted $100 bills came from UBS. Authorities later discovered phony records and a cover-up scheme by UBS officials in its main Zurich office, concealing up to $5 billion that was sent from UBS to Iran, Libya, Cuba and the former Yugoslavia from 1996 to 2003, when all those nations were under U.S. sanctions. At least eight shipments of U.S. cash had been sent by UBS through Iran and into Iraq. “While we will never know the full extent of the damage, we do know that our national security and economic interests were significantly compromised by these despicable acts," Senator Richard Shelby said -- not noting that his predecessor as chairman of the Senate banking committee, Phil Gramm, is ensconced at UBS...

October 11, 2004

Thou dost protest too much: on October 8, HSBC claimed that it is beginning an internal investigation after a CIA report claimed Saddam Hussein had passed money through the bank's branch in Jordan to avoid United Nations trade sanctions. HSBC said that “the allegations, in this week's CIA report into the Ba'athist regime, had been a surprise. It said it was undertaking a hasty review of its Middle Eastern operations. The CIA report claimed that during Saddam's reign Iraqi agents used an HSBC account in Amman as a home for money which funded their operations. In a statement, the bank said: ‘Throughout the period of the Iraqi sanctions we were acutely conscious of allegations that they were being breached and, consequently, of the need for great vigilance.’” But that just makes the violation worse, and more telling.  Why is HSBC being helped -- even, allowed -- to get the embassy banking business that was Riggs’ until the scandal blew?  Developing...

October 4, 2004

   ICP has now raised the Banco Santander and HSBC money laundering issues in the Senate’s Riggs report to regulators in London, Brussels, Vienna Virginia (FinCEN), the Federal Reserve, OCC -- and now on HSBC to FDIC, in a October 2, 2004 comment (click here to view).

 Meanwhile - you and us? Turns out that Osama bin Laden had use of an account at UBS even after he was designated a financier of international terrorism. The revelation was made in a French courtroom last week during an investigation into one of the al-Qaeda chief's half-brothers. Yeslam Binladin, a Swiss citizen who since 2001 has been under investigation by Renaud Van Ruymbeke, a French judge, for suspected links to money-laundering, told the court that bin Laden had access to a UBS account between 1990 and 1997. He said that two of his brothers had created an account at UBS to redistribute family funds, which are thought to have come from the bin Laden family's construction empire in Saudi Arabia. He said that Osama bin Laden was one of the main beneficiaries. A spokesman for UBS in New York confirmed last week that Osama bin Laden was a beneficiary of the account but was never a customer of the bank. It is understood that the account was opened in 1990 with several million dollars....

September 27, 2004

            Following ICP’s filings last week, with FinCEN, the UK FSA, Banco de España, the EU and FATF, Santander’s spin, to the Glasgow Herald, was that “it was bound by the laws which govern it.”  How about the requirements in most jurisdictions that it (and HSBC) not wire money into accounts the beneficial owners of which are not known?  If Santander’s and HSBC’s subsidiaries in Luxemburg and Cyprus won’t tell even their own affiliates who owns the account, how can either bank claim to have a centralized compliance function, or to comply with most country’s, including the US’s, laws?  The Glasgow Herald article reported:

A leading US-based human rights group has written to Britain's financial regulator urging it to halt Santander's £8bn acquisition of Abbey National until it fully investigates its part in the alleged "violation" of US money laundering laws.
Inner City Press and its Fair Finance Watch, based in New York, has drawn the Financial Services Authority's attention to the US Senate's recent report on Riggs Bank's alleged money laundering for former Chilean dictator Augusto Pinochet, and the dictator of Equatorial Guinea. Earlier this year, Senate investigators said Riggs Bank helped Pinochet hide millions of dollars in assets from international prosecutors while he was under house arrest in the UK. Pages 55 and 56 of the report state that Riggs asked two banks – HSBC and Santander – for the identities of the beneficial owners of accounts belonging to Apexside and another company. Following the request, Santander's New York office responded that the account had been opened by its parent bank in Madrid, but that it could not disclose the account's beneficial owners because of Spanish statutes which prevent disclosure of bank information, even in cases of suspected money laundering. Santander was even prevented from disclosing the information to its US subsidiary under the terms of the law. The Senate report added: "This bar on disclosure across international lines, even within the same financial institution, presents a significant obstacle to US anti-money laundering efforts."
A spokesman for Santander last night said that it was bound by the laws which govern it. He denied the Riggs report was critical of Santander, noting the criticism was against the bar on disclosure across international lines.  Nonetheless, in its letter to the FSA, Fair Finance Watch said: "This proposed acquisition (of Abbey) should not be permitted, at least not until the troubling issues raised herein are fully addressed, responded to, and acted on."

   A subsequent article, in the Observer of September 26, reports that "a Santander spokesman defended the bank's position yesterday, saying that the Senate investigation had criticised Spain's bank ing laws rather than Santander itself. 'We have to conform strictly with the laws applicable in each country,' he said. The spokesman added that although the bank had been unable to disclose information about the suspect account to the Americans, 'the Bank of Spain, our regulatory body, was fully aware of the nature of the account.'"  But Santander has operations under the purview of the U.S. Federal Reserve, including Banco Santander Puerto Rico (its New York acquisition, BCH-NY, had a rare "Needs to Improve" rating under the Community Reinvestment Act), as well as banks in Morocco, Colombia, and elsewhere. So we'll see... Click here for developments last week in the Pinochet cases.

September 23, 2004

            Inner City Press / Fair Finance Watch have mid-week filed comments about the lack of anti-money laundering (and thus, quite possibly, anti-terrorist financing) safeguards at the two offshore banks listed in the U.S. Senates report on Riggs: HSBC and Banco Santander.  Today’s Glasgow Herald covers ICP’s comments as to Santander (which has a pending proposed acquisition, of Abbey National).  Others who should be covering HSBC, the world’s second largest bank by market capitalization, have yet to cover the HSBC side.  But it will all be pursued. Below is a summary of the comments ICP filed this week with the UK FSA, U.S. FinCEN, FAFT, EU and Banco de España, etc.  For or with more information, contact us.

            On behalf of Inner City Press / Fair Finance Watch and its members and affiliates (collectively, "ICP"), this is a formal comment and request for action regarding Banco Santander, its seeming violation of anti-money laundering laws of the United States and other jurisdictions, and its proposed acquisition of Abbey National.  This proposed acquisition should not be permitted, at least not until the troubling issues raised herein (and in the public record, see www.senate.gov/~govt-aff/_files/071504miniorityreport_moneylaundering.pdf) are fully addressed, responded to, and acted on.

            From the recent public record:  a portion of the U.S. Senate's Permanent Subcommittee on Investigation's Report on Riggs Bank which has not been sufficiently reported and acted on is at pp. 55-56 of the Report and states as follows:

"On February 10, 2004, in an attempt to gather additional information, Riggs sent letters to several banks sponsoring accounts to which questionable wire transfers had been sent from the E.G. oil account. These letters requested information about the accounts under Section 314(b) of the Patriot Act, which allows financial institutions to share client and transaction information to guard against money laundering and terrorist financing. The Riggs letter to Banco Santander, for example, requested information about the identity of the owners or authorized signatories for accounts belonging to Apexside and another company. [FN 197: Letter from Riggs Bank to Banco Santander (2/10/04).] ...

"The New York office of Banco Santander responded with information that the Kalunga account had been opened by its parent bank in Madrid, Spain, but that its parent bank could not disclose the account's beneficial owners due to Spanish statutes barring disclosure of bank information, even in a case of suspected money laundering. In discussions with the Subcommittee, Banco Santander indicated that its parent bank had interpreted Spanish law to mean that it was barred from disclosing this account information not only to any third party, but also to its own subsidiary banks located outside of Spain.

"The position taken by Banco Santander... USA means, in essence, that banks in the United States attempting to do due diligence on large wire transfers to protect against money laundering are unable to find out from their own foreign affiliates key account information. This bar on disclosure across international lines, even within the same financial institution, presents a significant obstacle to U.S. anti-money laundering efforts."


   The final sentence quoted above is an understatement.  ICP asks: how can Banco Santander be said to be complying with U.S. anti-money laundering laws, if it refuses to disclose any information about the beneficial owners of accounts, to a U.S.-based insured financial institution like Riggs, or even to its own U.S. affiliates? Your agency must answer (and act on) this question.

[The Senate report names one other bank, HSBC -- ICP is pursuing that with the U.S. FinCEN, in connection with its public notice in the Federal Register of August 24, 2004, regarding First Merchant Bank OSH Ltd, and the "Turkish Republic of Northern Cyprus" -- where HSBC maintains banking operations, see, e.g., the London Daily Telegraph of January 7, 2002, "HSBC stirs up Cypriot controversy" --

"HSBC acquired three bank branches in the Turkish Republic of Northern Cyprus, which is a disputed territory recognised only by Turkey, by purchasing the Turkish bank, Demirbank, for $350m ( pounds 210m) last year. Demirbank had been Turkey's ninth-largest bank in terms of assets before it was taken into state receivership during the financial turmoil of December 2000. Its three Cypriot branches were rebranded with the HSBC logo over the New Year."

            To put HSBC's swashbuckling in perspective, Xinhua News Agency of January 4, 2002, reported that the only other (or last) international bank doing business in north Cyprus left in the early 1980s, and that

"The Cypriot government on Friday expressed concerns over the fact that Britain's Hongkong and Shanghai Banking Corporation (HSBC) has became the first foreign bank operating in the Turkish Cypriots-controlled northern Cyprus. Speaking at a daily briefing, government spokesman Michalis Papapetrou said that the Cypriot government would investigate the whole issue and act accordingly.  He said, however, that the operations of branches in northern Cyprus, under HSBC logo, did not result in direct or indirect recognition of the Turkish Cypriot regime in northern Cyprus. Certain representations will be made, he added. According to the Cyprus News Agency, Britain's HSBC in London confirmed on Friday that it had purchased Turkish Demirbank, which operates three branches in northern Cyprus... In southern Cyprus, HSBC has an offshore banking presence and a 22 percent stake in Laiki Bank, the second largest onshore financial group in Cyprus."

           In fact, other relevant and troubling issues are raised by HSBC's operations in Cyprus and (see infra) in Greece.  Regarding Laiki Bank in Cyprus, in which HSBC has a presumptively controlling 22% stake, the Financial Times of July 25, 2002, in the article entitled "Defiant Cyprus bank that helped fund two wars MILOSEVIC CONNECTION SCALE OF ISLAND'S UN SANCTIONS-BUSTING RAISES CONCERNS OVER COMMITMENT TO FIGHT MONEY LAUNDERING," reported:

"The gleaming steel-and-glass headquarters of Popular (Laiki) Bank of Cyprus makes a striking contrast with the discreet office blocks occupied by most Greek Cypriot companies. But even more suggestive of the group's ambitions is a metal sculpture in the courtyard pointing aggressively towards the sky.  When the international community shunned Yugoslavia as a pariah state for much of the 1990s, Cyprus seized its chance to do business with Belgrade, and Popular Bank became former Yugoslav President Slobodan Milosevic's main financial link with the outside world.

"According to a report by Morten Torkildsen, an investigator at the United Nations war crimes prosecutor's office, Popular Bank, the island's second largest bank, allowed a group of Yugoslav-controlled front companies to operate in defiance of UN sanctions.   These companies supplied Mr Milosevic's government with fuel, raw materials, spare parts and weapons to pursue wars in Bosnia in 1992-1996 and in Kosovo in 1998-1999.

"Mladjan Dinkic, the Yugoslav central bank governor, said during a visit to Cyprus last year that as much as Dollars 4bn (Euros 3.9bn, Pounds 2.5bn) in foreign currency might have been transferred to Cyprus between 1992 and 1994. The funds were mainly deposited in Popular Bank and its Greek subsidiary, European Popular Bank, he said... Popular Bank played an important role in a drive by the Cyprus government to reduce dependence on tourism, its main source of revenue, by boosting the offshore banking industry. The bank, which is listed on the small Nicosia stock exchange, also expanded outside Cyprus, to Greece and London. Its biggest single shareholder is HSBC, the UK-based financial group, with a 22 per cent stake."

     Regarding this Milosevic / Cyprus (Laiki Bank) connection, Mr. Winer has testified to the Senate that "And the next thing that the United States and the United Kingdom found out, Cyprus was being used by Slobodan Milosevic to move his money. So they went back to the Cypriotes. The Cypriotes said, 'Well, we have a great system. It's the best system in the world. We don't have any of that money.' But then after that, Milosevic's money was no longer in Cyprus, and that tends to be the pattern."   But beyond actions that may need to be taken with respect to HSBC, and to First Merchant Bank OSH Ltd's correspondent banks, including JP Morgan Chase, BNP Paribas. Doha Bank, Mizuho, Riyad Bank, and UBS - which ICP is hereby requesting -- this is most pressingly a call for inquiry into Santander's practices, prior to any consummation of its expansion attempt via Abbey National.

Very Truly Yours,

Matthew Lee, Esq.

Executive Director

  This will be updated. For or with more information, contact us.

September 20, 2004

   Riggs Bank is being sued on behalf of the victims of the Sept. 11 attacks and their families for assertedly allowing Saudi officials to use accounts at the bank to funnel money to at least two of the terrorists involved.   Last week the U.S. Federal Reserve belatedly (and apparently begrudgingly) gave Inner City Press documents ICP requested back on August 11.  These documents, even as partially whited-out by the Fed, show the inordinate and inappropriate access that PNC had -- and has -- to the Fed, including via ex-Chicago Fed official Jack Wixted, now at PNC.  At 4:07 p.m. on July 15, 2004, Stephen H. Jenkins of the Fed staff e-mailed other staffers: “Jack Wixted just called Bud to inform us that they were the successful bidder for Riggs.”  Less than two hours later, Mr. Jenkins e-mailed Jon Greenlee, assistant director of regional banking organization supervision at the Fed in Washington: “Jack Wixted told Mike Carroll that they might make a press release as early as tomorrow.”

            Two months later, PNC wrote to the Fed, cc-ing the above-referenced Mike Carroll at the Cleveland Fed and purporting to respond to ICP’s comments by stating that “J. Wixted, Jr.... previously responded to those issues.  Accordingly, PNC believes that no response to the September 9 letter is warranted.”  But all that Wixted said on money laundering was that he was sure that the Federal Reserve would look into it.  Now PNC’s chairman is claiming that the Fed will help PNC get the deal done.  The whole thing’s improper, and particularly inappropriate given the terrorist-financing issues swirling around Riggs. Perils of revolving doors... For or with more information, contact us.

September 13, 2004

     On September 9, the U.S. Treasury Department accused a Saudi charity of helping to finance terrorist activities. The order covers Al-Haramain Islamic Foundation's locations in Ashland, Oregon, and Springfield, Missouri; it’s the second shoe dropping. In February, the government had ordered banks to freeze the assets and property at those locations pending further investigation. The department said a federal investigation "shows direct links between the U.S. branch and Osama bin Laden," the al-Qaida leader. Further details were not provided. Typical...

   Meanwhile Riggs and PNC are policing the press, keeping things quiet, hoping it blows over.  For example, following a report of ICP’s challenge in the National Mortgage News, the NMN ran a demanded correction on September 6:

In the Aug. 30 issue of NMN regarding the Inner City Press/Fair Finance Watch challenge to the proposed acquisition of Riggs National Corp. by PNC Financial Services Group, Riggs was incorrectly described as having been charged with accounting fraud. The company has never been charged with this or any other violation. We regret the error.

This seemed too craven; ICP wrote in:

   Your Sept. 6 retraction, in the face of PNC's complaints, of your August 30 mis-report that Riggs Bank was "not long ago was charged with accounting fraud" should have said more -- it was PNC that was charged with accounting fraud, and paid $115 million to settle the charges.   On Sept. 6, you stated, "Riggs was incorrectly described as having been charged with accounting fraud. The company has never been charged with this or any other violation."  That too is incorrect. Riggs has been charged with money laundering, and the investigation remains ongoing, by the U.S. Attorney in the District of Columbia, and in the U.S. Senate, including on the question of whether Riggs' greed assisted in money laundering for terrorism.  See http://govt-aff.senate.gov/_files/071504miniorityreport_moneylaundering.pdf
  We like it when publications are willing to correct themselves -- but you shouldn't give in so easily to large banks' complaints, without pointing out what the basis of the report was. 

  So far there has been no response [later it ran in the National Mortgage News].

September 6, 2004

  PNC's laughable response, to both the Federal Reserve and OCC, is that "with respect to the investigations that are currently underway at Riggs, these matters will surely be considered by the Federal Reserve in taking into consideration the statutory factors under the Bank Holding Company Act, including the financial and managerial resources of PNC and Riggs, in acting on this application."

  But the Fed and OCC have been asked to, and have agreed to, suspend their investigations into Riggs, pending the DOJ's ongoing investigation. The Fed and OCC would have a duty to reach conclusions about these matters before even considering an application to acquire Riggs. So why isn't PNC withdrawing or suspending its applications?

  And when will the regulators provide ICP the requested documents about their communications with PNC? The publication Bank Systems & Technology of September 1, 2004 quotes "Brian Goerke, a PNC spokesperson," that "We did a thorough review of Riggs and worked closely with regulators before making the acquisition." If PNC "worked closely with the regulators" before announcing the proposal and submitting its applications, where are the documents? Developing...

August 30, 2004

It's been confirmed: Kenneth Wainstein, the U.S. Attorney for the District of Columbia, asked the OCC in an Aug. 6 letter to stop work on the review and two other matters relating to Riggs due to the DOJ investigation. "We have agreed to this request and have suspended our work in these areas," Comptroller Hawke wrote in an Aug. 18 letter to Senate Banking Committee Chairman Richard Shelby. This raises an obvious question: how could the OCC and Federal Reserve even consider PNC's Riggs application, if they've suspended their own attempts to get to the bottom of the managerial and other factors which, by law, they'd have to consider on the acquisition proposal? The Pittsburgh Post-Gazette of August 25 reported, "PNC Financial Services Group said yesterday that it was 'premature to speculate' on whether the recent launch of a criminal probe of Riggs Bank by the Justice Department might impact its pending acquisition of Riggs. 'We will monitor the situation as it unfolds,' spokesman Brian Goerke said." So will we. In the interim, this question: if the Senate permanent subcommittee on investigations, and many others, question the OCC's examiner having gone over to Riggs, what exactly is the different with the Federal Reserve's Jack Wixted having gone to PNC, and now writing the bank's responses to the Fed? This will be answered in coming weeks.

   Beyond this still-unfolding Riggs scandal, the London Telegraph of August 26 reported, "Congressional committees investigating the allegations have subpoenaed records from several institutions, including French bank BNP Paribas. The bank managed billions of dollars that came from Iraqi oil revenue, though there is no official suggestion that it was involved in wrongdoing. A BNP Paribas spokesman said: 'It is understandable given the publicity surrounding the UN oil-for-food program, that US authorities would wish to understand details about the program. As is customary, BNP Paribas will fully co-operate with the authorities. We are not the target of any investigation.'" We'll see...

August 23, 2004: On Riggs-PNC, the plot has thickened. The Washington Post of August 21 reports on the widening criminal investigation of Riggs. CBS MarketWatch, which covered ICP's filing last week, now notes that "a lengthy probe could affect the company's pending acquisition by PNC." Another conflict has been identified, and raised: PNC awarded $50,000 to the Fed chairman's wife in April 2004. With all due respect, below is a summary of ICP's second comment, a petition for recusal. 

August 23, 2004

Board of Governors of the Federal Reserve System
Attn:  Secretary Johnson, Inspector General, Governors [and Chairman]
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Re: The Applications of PNC Financial Services Group, Inc. & PNC Bancorp, Inc., to acquire Riggs National Corporation & Riggs Bank NA National Association

Dear Secretary Johnson, and Governors of the FRB:

  On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), and in connection with the applications of PNC Financial Services Group, Inc., PNC Bancorp, Inc. and their affiliates to acquire Riggs National Corporation and Riggs Bank National Association, this is a second timely comment, including a formal request that Chairman Greenspan recuse himself from the PNC - Riggs proceeding. It should first be noted that since ICP's first comment, the Washington Post of August 21, 2004, has reported on the widening criminal investigation of Riggs. "The Post's Saturday story, citing a letter to federal bank regulators from the District of Columbia's U.S. attorney's office, said the investigation includes Joe Albritton, Riggs' largest shareholder, his wife, Barbara, and son, Robert, who is chairman of Riggs... A lengthy probe could affect the company's pending acquisition by PNC Financial Services (PNC) for $779 million. The deal was announced in mid-July. Riggs has already paid a $25 million civil penalty to the U.S. Comptroller of the Currency over allegations that its Riggs Bank laundered money for Saudi Arabian diplomats." CBS MarketWatch, August 21, 2004.

   This development further calls into question the wisdom of considering allowing the sale of Riggs at this time, until the investigations, including into terrorism-related money laundering, are completed. A sale to a bank with a troubled compliance record like PNC's, which also funds high-cost payday lenders including in the target bank's market, would be particularly unwise and harmful.

  Unless PNC's Riggs application is withdrawn or dismissed forthwith, ICP contends that chairman Greenspan should be recused from involvement in this proceeding. Those involved in decision-making on Bank Holding Company Act applications, particularly one of this import, need to be impartial, and to be seen to be impartial. In April 2004, PNC awarded chairman Greenspan's wife $50,000. At the time, industry publications questioned the propriety of the award, to the spouse of PNC's chief regulator. See, e.g., American Banker newspaper of March 24, 2004, Pg. 3, "Earth to PNC" -

"Corporate America's ethics have come under considerable scrutiny in recent years for obvious reasons, so it's no surprise PNC Financial Services Group Inc.'s decision to present a $50,000 prize to the spouse of its top regulator would raise eyebrows. PNC is promoting a black-tie awards ceremony, scheduled for April 24 in Wilmington, Del., at which it will present five high achievers with the 2004 Common Wealth Awards. The winners are the actor Christopher Reeve, the Chilean author Isabel Allende, actress Meryl Streep, scientist Stanley Prusiner and Andrea Mitchell -- the chief foreign affairs correspondent for NBC News and the wife of Federal Reserve Board Chairman Alan Greenspan. The awards are given by the trust of Ralph Hayes, who sat on the board of PNC predecessors from 1943 until 1965. PNC is the administrator of the Hayes trust....

Wendell Cochran, who teaches journalism ethics at American University, said that regardless of the merits, the appearance of impropriety in this case was too strong. Having a bank holding company give the wife of the Fed chairman a $50,000 prize does look to me to be wrong,' Prof. Cochran said. Ms. Mitchell said in an interview last week that she was accepting the award because it came from a philanthropic entity and that NBC News has a policy not to accept awards from private corporations. She also noted that she is donating her prize money to a charity at the University of Pennsylvania, where she is a trustee. 'It is my understanding that this award comes from a foundation and has nothing to do with the financial activities of PNC,' she said...Under most circumstances, spouses are not barred from accepting awards like this, according to Office of Government Ethics rules. A Fed spokesman would not discuss the matter."

   Whether or not PNC's granting a $50,000 prize to the spouse of its chief regulator, soon after being sanctioned for using special-purpose entities to move assets off its books, was or was not technically legal, a different, more stringent analysis is applicable to whether the spouse of the grantee should recuse himself from PNC's application to acquire the scandal-plagued Riggs National Corporation. The above-quoted ethics professor opined that "the appearance of impropriety in this case was too strong." AT this stage, ICP's reference is to the appearance of impartiality. At the April 24 event itself, Ms. Mitchell was responding to questions about the possible conflicts of interest raised by the $50,000 award. See, e.g., "Common Wealth Awards," Wilmington News-Journal of April 25, 2004, Pg. 12B,

"Mitchell, who is married to Federal Reserve Chairman Alan Greenspan, said she will give away the $50,000, as she does with any money she receives for speaking. Pointing out that the money comes from the Hayes trust, not the bank, Mitchell said it will go to programs in writing, English literature and music that she helps support at her alma mater, the University of Pennsylvania, where she was an English literature major. Mitchell is lead foreign-affairs correspondent for NBC News. Her employer also vetted the award and was satisfied it did not represent a conflict of interest, she said."


   Whether NBC found a conflict, as to its news coverage of PNC, is a different question than whether a $50,000 award from a regulated entity like PNC to the spouse of its chief regulator should lead to that regulator's recusal from decision-making on the entity's application, less than four months later, for approval to acquire a bank sanctioned for money laundering. The answer to that question, ICP contends, is yes: recusal is appropriate, even, required. While the FRB declined to comment to journalists regarding its conflict of interest standards back in March 2004 (see above), it is important that the response to this timely request from ICP be in writing, and explain the reasoning and authority for any decision not to recuse, as early as possible in this proceeding.

  It should be noted that the FRB has had and still has primary jurisdiction over at least one of the troubled Riggs subsidiaries: PNC's application at footnote 11 refers to "Riggs International Banking Corporation, which is regulated by the Board of Governors of the Federal Reserve System." The language is from Riggs May 13, 2004, consent order with the OCC, providing for a

"review, in a time period not to exceed one year from the effective date of this Order, of all Bank accounts in the Embassy and International Private Banking areas that are identified as high risk, and other high risk accounts identified by the Bank as appropriate for review, to ensure that Suspicious Activity Reports have been filed as appropriate between January 1, 2001, and April 30, 2004. This review shall include accounts at Bank subsidiaries (excluding Riggs International Banking Corporation, which is regulated by the Board of Governors of the Federal Reserve System), accounts covered by paragraph (c) of this Article, and an analysis of Currency Transaction Reports filed for each account."

   It is surprising, and contrary to the public interest ICP contends, that PNC has even submitted this application and started the running of the comment period before the above-referenced review has been completed, and appropriate action taken. This is even more true now, given the just-reported widening criminal investigation of Riggs. The PNC-Riggs application should be immediately (this week) withdrawn or dismissed; or chairman Greenspan should confirm recusal, hearings should be scheduled [FN: ICP again emphasizes for purpose of its hearing request that PNC funds and enables major nationwide payday lenders such as Check n’ Go a/k/a CNG Financial Corporation, including Check n’ Go of Washington D.C., Inc., see the UCC filings, including from the District of Columbia Department of Finance and Revenue, which ICP submitted into the record along with its August 16, 2004, initial Comment], the comment period should be extended and the application should be denied.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

    To be continued; developing... For or with more information, contact us.

* * *

August 16, 2004

   On August 16, 2004, Inner City Press / Fair Finance Watch (ICP) filed two 21-page challenges to applications by the PNC Financial Services Group to acquire the scandal-plagued Riggs National Corporation, with the FRB and OCC. ICP's comments include evidence that PNC funds payday lenders such as Check n’ Go of Washington DC, Inc. and elsewhere; ICP contrasts this with PNC’s peer SunTrust’s July 12, 2004 response to ICP’s comments, that SunTrust will no longer fund payday lenders. See, e.g., "SunTrust pledges to drop ties to payday & title lenders," www.investors.com/breakingnews.asp?journalid=22274151&brk=1 and here.

  ICP’s comments use recently-released 2003 mortgage lending data to demonstrate that PNC disproportionately excludes ("redlines") African American and Latino applicants from its lending. However, ICP’s comments first emphasize that the fast sell-off of Riggs may undermine the ongoing credible investigation that the Administration has promised -- particularly a sell-off to PNC, which beyond relining and funding payday lending was not long ago charged with accounting fraud, and subject to a deferred prosecution agreement with the U.S. Department of Justice.

  Riggs is essentially a crime scene -- itshouldn't be sold so quickly, least of all to an unqualified bank like PNC, which we have now proved funds high cost payday lenders like Check n' Go. Riggs trampled human rights abroad, while PNC supports predatory lending throughout the United States. This is a shotgun marriage made in hell, one that we are speaking up to oppose, showing why these two banks should not be joined together, neither now nor in the future. Here now a summary of ICP's comments:

August 16, 2004

Board of Governors of the Federal Reserve System
Attn:  Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551

Office of the Comptroller of the Currency

Attn: Comptroller John D. Hawke, Jr., et al.

250 E Street, SW, Washington, DC 20219

Re: Timely Comment in Opposition to, and Requesting an Evidentiary Hearing on, the Applications of PNC Financial Services Group, Inc. & PNC Bancorp, Inc., to acquire Riggs National Corporation & Riggs Bank NA National Association

Dear Mr. Chairman, Governors, Secretary Johnson, OCC, FRB:

   On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a timely comment opposing, and requesting an extension of the comment period and an evidentiary hearing on, the Applications of PNC Financial Services Group, Inc., PNC Bancorp, Inc. and their affiliates (on- and off-balance sheet, collectively "PNC") to acquire Riggs National Corporation, Riggs Bank National Association and their various on- and offshore affiliates (collectively, "Riggs").

  In this application, a bank that is essentially an international crime scene is proposed to be acquired by a regional bank with little to no international banking experience, with serious recent managerial problems, with worsening lending disparities and which, ICP emphasizes for purpose of its hearing request, funds and enables major nationwide payday lenders such as Check n’ Go a/k/a CNG Financial Corporation, including Check n’ Go of Washington D.C., Inc. (see annexed UCC filing from the District of Columbia Department of Finance and Revenue).

   Beyond PNC’s direct support for predatory lending, ICP has reviewed PNC's lending record based on just-released 2003 data and below sets forth troubling disparities therein. However, it should first be emphasized how inappropriate a buyer for troubled Riggs PNC is, as a bank holding company that so recently engaged in accounting fraud, and been subject to a deferred prosecution agreement with the U.S. Department of Justice. The Associated Press on July 17, 2004, "Riggs, a troubled bank for diplomats, sold," by Marcy Gordon, reported that PNC "has also had regulatory problems of its own. In June 2003, a PNC subsidiary agreed to pay $90 million in restitution and $25 million in fines to settle allegations of securities violations. The subsidiary was accused of conspiracy to violate federal securities laws by transferring $762 million in troubled loans and investments to off-balance-sheet entities."

  The Financial Times of July 17, 2004, reported that "the investigations are far from over. A grand jury is looking into the bank's dealings with Equatorial Guinea, which could lead to criminal charges, and the Senate committee on governmental affairs is conducting a separate investigation into more than 150 accounts associated with Saudi Arabia. Even that may not be the end of it. According to Senate investigators, some 85 per cent of Riggs' 15,000 embassy and international private banking accounts - the core of its overseas business - had significant problems with documentation."

  ICP’s recent research finds for example that Riggs served -- or serves -- as correspondent for, among others, Bank of Sierra Leone, Sierra Leone Commercial Bank Ltd, Energobank of Bishkek, Kyrgyzstan, Banco de Cabo Verde, Banco Internacional SA, and others. See attached, which includes a listing of account numbers.

  Many other questions remain emerging and outstanding -- questions that an acquisition by PNC would not help to answer. See, e.g., "Justice Dept. to Probe Former Examiner at Riggs," by Kathleen Day, Washington Post, July 29, 2004, reporting among other things that "Federal regulators also have said that Riggs failed to report hundreds of suspicious transactions in more than 150 accounts held by officials of Saudi Arabia." These outstanding questions have been linked, at the June 3 Senate Banking Committee and elsewhere, since, with questions about the effectiveness of regulatory efforts to crack down on terrorist financing. See, e.g. N.Y. Times of July 19, 2004, and Money Laundering Alert of August 2004, analyzed below.

   Question: how would selling off this crime scene to PNC, a bank already recently charged with accounting fraud and mis-reporting, help get to the bottom of the troubling issues raised? It wouldn’t help. But see, "Bush Promises Full Inquiry Into Bank Ties To Dictator," N.Y. Times, July 20, 2004, Pg. C9, quoting: ''It's important for the facts to be en la mesa, as we say -- on the table -- and so that we know what course of action may or may not be needed... The Riggs Bank is being fully investigated, and they'll be investigated in a very open way.''

  ICP notes that on August 11, 2004, it submitted a request, including under the Freedom of Information Act ("FOIA"), to the FRB for all records reflecting "communications between [FRS] personnel and representatives of the above-named companies or their affiliates since January 1, 2004, including on the lack of anti-money laundering controls and other managerial issues at Riggs - and at PNC."

   The American Banker newspaper of July 19, 2004, ran this quote: "'This is a clear strategic win for us,’ said James E. Rohr, PNC's chairman and chief executive officer. ‘We've had conversations with the regulators. They were very pleased with the announcement, and that's probably an understatement.’" ICP’s FOIA requests must be responded to, forthwith, and the comment period should be extended, and hearings held -- including on PNC’s funding of predatory payday lenders (see infra), and on PNC’s worsening lending disparities.

   Here are additional convenience and needs, CRA, fair lending and other grounds: based on PNC's lending record, including as reflected by 2003 Home Mortgage Disclosure Act ("HMDA") data only recently released and analyzed below, ICP opposes, and requests a hearing on, PNC's application.

  In 2003 in the Newark, New Jersey Metropolitan Statistical Area ("MSA"), for conventional home purchase loans, PNC Bank N.A. denied loan applications from Latinos 4.71 times more frequently than applications from whites. PNC’s disparity for African Americans was incalculable in 2003: PNC made no conventional home purchase loans to African Americans in 2003 in the MSA of Newark, NJ.

  PNC claims to make up for its lack of home purchase lending to people of color with its home improvement lending. But in the Newark MSA in 2003 for this type of loan, PNC Bank N.A. denied the applications of Latinos 3.16 times more frequently than whites, and denied African Americans 2.84 times more frequently than whites.

  In its home MSA of Pittsburgh, PNC Bank NA in 2003 denied the conventional home purchase applications of African Americans 4.62 times more frequently than those of whites. Again, PNC’s lack of home purchase lending to people of color was not made up for its home improvement lending: in the Pittsburgh MSA in 2003 for this type of loan, PNC Bank N.A. denied the applications of Latinos 2.11 times more frequently than whites, and denied African Americans 2.43 times more frequently than whites.

  PNC Bank N.A. has 100% denial rates for African Americans’ applications for home improvement loans in the Jersey City NJ and Newburg, New York MSAs in 2003. It was scarcely better in its home state of Pennsylvania. In the state capital, the Harrisburg MSA, PNC Bank N.A. for home improvement loans denied the applications of Latinos 3.28 times more frequently than whites, and denied the applications of African Americans 2.93 times more frequently than whites. In the Philadelphia MSA, for refinance loans, PNC Bank N.A. denied the applications of Latinos 2.45 times more frequently than whites, and denied the applications of African Americans 2.64 times more frequently than whites. In this Philadelphia MSA for home improvement loans, PNC Bank N.A. denied the applications of Latinos 2.72 times more frequently than whites, and denied the applications of African Americans 3.06 times more frequently than whites.

  PNC's other bank, PNC Bank Delaware, in 2003 in the Wilmington DE MSA for conventional home purchase loans denied 100% of the loan applications it received from Latinos. For refinance loans in this MSA, PNC Bank Delaware denied the applications of Latinos 2.93 times more frequently than whites, and denied the applications of African Americans 2.02 times more frequently than whites. For home improvement loans in this MSA, PNC Bank Delaware denied the applications of Latinos 2.73 times more frequently than whites, and denied the applications of African Americans 2.22 times more frequently than whites.

  Given these lending disparities, on this ground alone the public would be ill-served by allowing PNC to acquire Riggs and its branches. Also to be considered, including at the requested hearing, is the question of reductions in service, which occurred, including via branch closings, after PNC - United. The Washington Post of July 26, 2004, reported: "Brian Goerke, a spokesman for PNC, said the company will initially operate all 51 Riggs branches. Long-term decisions about historic structures such as the Corcoran branch... have not been made, he said." The American Banker newspaper of July 19, 2004, reported that "executives indicated that about 50% of Riggs' 1,400 employees would be cut." ICP formally requests hearings, evidentiary and public -- including specifically on PNC's funding of problematic payday lenders.

As documented by the Uniform Commercial Code filings annexed hereto, PNC funds and enables for example:

Check n’ Go of Washington D.C., Inc. (see annexed UCC filing from the District of Columbia Department of Finance and Revenue);

Check-N-Go of Illinois; Check n’ Go of Ohio; Check n’ Go of Washington (State); Check n’ Go of Wisconsin; "The 409 Group" care of Check n’ Go’s parent CNG Financial Corp. in Mason, Ohio, etc..

   Check n’ Go is not only one of the largest, but one of the most troubled and troubling of the payday lenders. See, e.g., Ashville Times of August 1, 2004, "Consumers file class action lawsuits;" "Two payday lenders agree to settlements; Forms were mailed mid-month to eligible Check Into Cash and Check 'N Go customers," by Chris O'Malley, The Indianapolis Star of February 28, 2002: "Customers of two payday lenders in Indiana would be forgiven $5.1 million in debt and receive millions of dollars in cash refunds under proposed settlements awaiting the approval of U.S. District Court in Indianapolis. Affected are about 75,000 customers who obtained loans at Check Into Cash offices in Indiana from 1995 until last Aug. 16 and 65,000 Check 'N Go Indiana Inc. customers from 1996 until last Sept. 1. The settlements, totaling $11 million, are the largest yet and follow a flurry of lawsuits in Indiana filed on behalf of payday customers. "

  See also, "Lawyers file suit against lender; Attorneys representing an Englewood man say Check 'N Go engages in a 'fraudulent scheme," Sarasota Herald-Tribune, September 02, 2000: "An Englewood man is taking on the payday loan industry in a federal lawsuit against Check 'N Go. Attorneys for Jerry Manchester have filed what they hope will become a class-action lawsuit against Check 'N Go, an Ohio-based company with 13 offices in Florida. The company engages in a 'fraudulent and deceptive scheme' by charging interest rates that can exceed 300 percent a year, the lawsuit claims... He accepted $ 100 and signed a personal check to the business for $ 114. Manchester was told that he could redeem the check within the two-week hold period by repaying the $ 100 plus the $ 14 fee. Instead, he repeatedly rolled over the debt every two weeks and accepted additional loans, according to the lawsuit, filed in July in U.S. District Court in Tampa. 'Defendants are making short-term loans to class members at usurious and unconscionable interest rates, often many times greater than is allowed under Florida law,' the lawsuit states... The lawsuit was filed against Check 'N Go of Florida Inc.; its parent company, CNG Financial Corp. of Mason, Ohio; and company founders/majority owners Jared A. Davis, A. David Davis, Stephen K. Curtis and Stephen J. Schaller."

   See also, the Consumer Financial Services Law Report of July 24, 2000:

In declining to dismiss a claim for statutory damages under the Truth in Lending Act, the U.S. District Court for the Northern District of Illinois equated the improper placement of a required disclosure with the failure to make the required disclosure. (Van Jackson, et al. v. Check 'N Go of Illinois Inc., et al., No. 99 C 7319 (N.D. Ill. 6/15/00).)
A group of Illinois debtors who took out "payday loans" from Check 'N Go of Illinois Inc. sued the lender under the TILA and moved the District Court to certify "the class of all Illinois debtors" who signed certain high-cost loan agreements. The debtors sued for statutory damages under the act and Regulation Z. They also brought several individual TILA claims, claims under Illinois' Consumer Fraud Act and a common law unconscionability claim.
Check 'N Go moved to dismiss the TILA claims and challenged the class certification. The court granted the motion for certification and denied the motion to dismiss.
Check 'N Go argued that the proposed class lacked the elements of commonality and typicality. Specifically, it argued that the complaint failed to establish any basis for the recovery of statutory damages under the TILA. Thus, according to Check 'N Go, the plaintiffs must make a showing of individual damages supported by proximate cause. The court noted, however, that this argument went to the merits of the claim for statutory damages and was, therefore, inappropriate for consideration on a motion for class certification.
As for Check 'N Go's assertion that a class action would be difficult to manage because of the alleged predominance of individual issues, Judge Elaine E. Bucklo stated, "I appreciate the defendants' concern about my caseload, but I would much rather handle this case as a class action than try hundreds of individual claims."
Turning to the motion to dismiss, the court explained that the TILA requires certain disclosures to be made in a certain form. The court further explained that all disclosures required by federal law must be grouped together and "conspicuously segregated" from other information. The debtors claimed Check 'N Go violated the TILA and Regulation Z because the security disclosure in their loan documents was not properly made or properly segregated.
The court noted that, although the loan agreements contained a "federal box" headed "Our Disclosures to You," the "federal box" did not identify the security for the loans. Instead, the statement identifying the debtors' check as the security for the loan was made outside and above the "box," in small print and at the end of a paragraph "written in repetitive and hard to read legalese."
Recognizing that its forms were technically in violation of the TILA, Check 'N Go argued that the problem was a "picky and inconsequential formal error" that did not warrant an award of statutory damages under Section 1640(a). In support of its argument, Check 'N Go claimed that its error was one relating to conspicuous segregation as opposed to failure to make a required disclosure. While failure to make a required disclosure is covered in Section 1640(a), failure to conspicuously segregate is not.
The court held, however, that because the security disclosure was outside the "federal box" and because "the statement could not have been less accessible to the average person if it had been written in Sanskrit," Check 'N Go simply failed to make the required disclosure. As stated by the court, "[I]t would frustrate the purpose of the disclosure law to read the statute to bar statutory damages when a required disclosure is hidden in the fine print at the end of an indigestible chunk of legalistic boilerplate."
Check 'N Go also attempted to dismiss the individual TILA claims of certain named debtors on the basis of an arbitration agreement. The court, however, noted that these arbitration clauses did not provide for mandatory arbitration. Rather, they were elective arbitration clauses. According to the unambiguous language of the contracts, "the choice of arbitration after a lawsuit has been filed is plainly up to the plaintiff in the lawsuit," the court said.

  It is significant, and must be made part of the record, that the FRB has refused to approve an application by Check n’ Go’s parent, CNG Financial Corp., and the putative Cincinnati BancGroup to buy Bank of Kenney and become a bank holding company. See, e.g., the American Banker newspaper of July 9, 2002, regarding the many protests, which included ICP’s. See also, Chicago Tribune of July 4, 2002, describing Check n’ Go as "an innovator in predatory lending." PNC has presumptively been on notice. What, if any, due diligence did PNC do before each of its many loans to various CNG / Check n’ Go subsidiaries?

For the record, PNC has presumptively been on notice of predatory lending issues surrounding Check n’ Go, including because Check n’ Go has been under fire in PNC’s headquarters city, Pittsburgh. See, e.g., Pittsburgh Post-Gazette of May 14, 2004, "Zoning for ‘Payday" Loan Shops Opposed" --

"Several community groups are fighting to keep payday loan outlets out of commercial districts on the North Side and in East Liberty, claiming the businesses will have a negative impact on redevelopment efforts and exploit people who can least afford to pay the loans back... The businesses are being proposed by Check 'n Go, an Ohio-based company that currently operates 25 outlets in Pennsylvania. Check 'n Go offers short-term loans, typically in the form of paycheck advances, to customers... [The] director of real estate development for East Liberty Development Inc., decried the ‘exploitative nature’ of the businesses, saying they... tarnish ‘people's financial behavior.’" (Emphasis added).

  This is in PNC's headquarters city, one that it claims to serve under the Community Reinvestment Act. See, e.g., Bergen Record of October 15, 2003, "Group seeks to block PNC deal for N.J. bank," reporting that "Brian Goerke, spokesman for PNC, declined to respond to specific allegations. He said the company is proud of an 'ongoing commitment to improving all the communities in which we do business.' The company 'will respond appropriately with any matters raised' during the acquisition approval process, he added."

   Well, funding and enabling payday lenders is hardly indicative of an "ongoing commitment to improving all the communities in which we do business." For the record, banks larger than PNC, such as SunTrust, have committed to the Board to not lend to payday lenders, in light of consumer harm and reputational harm. See, e.g., SunTrust's July 12, 2004, response to ICP's comments, annexed hereto. ICP formally requests hearings, evidentiary and public.

* * *

   Again, many very important questions about Riggs, money laundering, terror financing and human rights remain outstanding -- questions that an acquisition by PNC would not help to answer. See, e.g., the NY Times of July 19, 2004, reporting that

The F.B.I. briefed them on the Saudi funds in December 2002, and bank regulators told Riggs a month later that they would examine the accounts. What regulators expected to be a one-month examination lasted five months as regulators uncovered improprieties in some of 150 Saudi accounts at Riggs. Under law, banks are required to vet the background of their customers, report outsized movements of cash and alert regulators when any banking activities are suspicious. Regulators and members of Congress said Riggs frequently failed to carry out these duties, and the Saudi accounts were no exception.
Last week's Senate report said that the Saudi accounts were ''equally troubling'' as other accounts at Riggs that have come under scrutiny, but noted that a more thorough Congressional examination of the Saudi accounts was under way at the Senate Governmental Affairs Committee. Federal investigators and people close to Riggs said regulators had concluded that Riggs inadequately monitored the destinations and uses of large amounts of cash, often more than $1 million at a time, in the Saudi accounts. Many of these transactions involved Prince Bandar personally, these people said.
A member of Saudi Arabia's diplomatic corps said in a recent interview that the prince often made up large shortfalls in the embassy's budget out of his own pocket, which could account for some of the heavy cash movements through the Riggs accounts. Spokesmen for the Saudi embassy have said that the F.B.I. told the embassy that there were no concerns that its Riggs accounts involved money laundering or terrorist financing.
Problems with the Saudi accounts led regulators to issue a rare and public cease-and-desist order against Riggs early last year, requiring it to clean up its practices or face further penalties. But unexplained transactions continued to flow through the Saudi accounts late last year, and Prince Bandar refused to provide information about them to Riggs, according to people with direct knowledge of the discussions. Last March, the same month regulators told the bank it would receive a heavy fine, Riggs said it had closed all Saudi accounts. Minutes of a Riggs meeting on April 7 noted that Prince Bandar had recently requested ''$2 million in cash for traveling expenses,'' a request the bank denied.
''Prince Bandar then asked that Riggs wire $2 million to another bank, which was done,'' the minutes said

   See also, Money Laundering Alert of August 2004:

IN A POST-PATRIOT ACT WORLD, A CASE like Riggs wasn't supposed to happen. On July 15, the U.S. Senate Permanent Subcommittee on Investigations revealed a web of multi-hundred million dollar transactions that Riggs Bank had conducted over many years for dictators on two continents, including Augusto Pinochet of Chile and Teodoro Obiang Nguema of Equatorial Guinea. The accounts formed part of the embassy banking portfolio that was the bank's specialty product for decades. Over the years, Riggs attracted more than 100 foreign missions in the United States capital city as customers.
Those days are over. Under belated pressure from federal regulators and under the heat of sensational Senate hearings, Riggs is closing down its embassy banking division. That has left many embassies without a U.S. bank to place their sizeable accounts; banks often perceive that some embassy accounts serve as convenient covers to move money derived from corruption in the embassy's home country -- a view confirmed by last week's Senate hearings.... The USA Patriot Act, in provisions drafted by Senator Carl Levin (D-Mich.) who led the Riggs hearings, amended the Bank Secrecy Act and the money laundering criminal law to impose much tougher duties -- and penalties -- on financial institutions that deal with "senior foreign political figures, their immediate families and close associates."
...The Senate hearing seems to have made clear that Riggs went to great lengths to avoid compliance altogether. The bank hid the ownership of Pinochet's funds by creating offshore corporations and changed the names on his accounts to avoid revealing his link to the funds. It asked no questions, the Levin probe revealed, when millions of dollars in cash, plastic-wrapped in suitcases, were presented for deposit to the account of Obiang. The neglect -- or complicity -- of examiners at the Office of the Comptroller of the Currency is at the heart of the Senate probe...
After the Senate hearings President Bush announced there would be a full investigation of the suspect Pinochet accounts at Riggs Bank. Bush did not say who would investigate. But the Chilean government has filed formal charges against Pinochet and launched an investigation to determine the origin of Pinochet's fortune, which at Riggs, manifested itself in transactions of "$ 4 and $ 8 million at a time," according to documents disclosed by the Levin probe.

   Again, ICP’s recent research finds for example that Riggs served -- or serves -- as correspondent for, among others, Bank of Sierra Leone, Sierra Leone Commercial Bank Ltd, Energobank of Bishkek, Kyrgyzstan, Banco de Cabo Verde, Banco Internacional SA, and others. See attached, which includes a listing of account numbers.

   Outrageously, those who are responsible for these practices at Riggs stand to make windfall profits: "Robert L. Allbritton is slated to received $850,000. Riggs Bank President Lawrence I. Hebert, a longtime Allbritton family lieutenant, would receive $1 million... If the deal goes through, Riggs Bank executive vice president Henry D. Morneault will receive $651,000, and executive vice president Robert C. Roane will receive $621,000, according to merger papers filed by PNC with the Securities and Exchange Commission. Nine other executive officers will receive a total of $4 million." Washington Post, August 13, 2004.

  Ironically - or incomprehensibly -- the American Banker, reporting on August 13 on Riggs’ 11 SEC filing, noted that

Riggs National Corp., the embattled Washington banking company, did not sell to the highest bidder, according to a securities filing. Instead it chose PNC Financial Services Group over a bidder whose all-stock offer was valued about 4% higher than the winning $779 million cash and stock offer, PNC revealed Wednesday in a Securities and Exchange Commission filing. The filing detailed the sale agreement and the background to it. It said the board of the $6 billion-asset company chose PNC's offer because, among other things, it favored a buyer that had weathered regulatory issues of its own. It was also impressed by the speed of regulatory approval for PNC's latest acquisition... The filing also said that the other bidder had taken longer than PNC to close its recent acquisitions, and that regulatory approval of a deal with that bidder might have been more complex. Mr. Record said PNC's January purchase of United National Bancorp of Bridgewater, N.J., took less time than Sovereign's last four acquisitions. In addition, he noted, Sovereign is regulated by the Office of Thrift Supervision and would have needed its approval to buy Riggs.

   There seems to be a belief that despite PNC’s tattered compliance record, the FRB is an easy regulator for this transaction. See, e.g., Wall St. Journal of July 19, 2004, Pg. C3, "PNC'S ACQUISITION OF RIGGS BANK IS EXPECTED TO GET EASY APPROVAL," by ROBIN SIDEL and GLENN R SIMPSON. This may be based on PNC’s (and the FRB’s) previous behavior. While executives of, for example, Enron, WorldCom and Tyco have been indicted and/or have resigned, here PNC's CEO has bragged, in announcing this proposal, that "we have reviewed this transaction with our regulators." See, Fair Disclosure Wire of August 21, 2003, Transcript 082103az.713.

   The American Banker of August 22, 2003, reported that "James E. Rohr.... played down the regulators' role in the $638 million stock and cash deal, though he conceded that it discussed the transaction with the Fed first." As noted, Mr. Rohr has made the same boasts this time. This is inappropriate; ICP formally requesting hearings, evidentiary and public.

  More needs to be (and will be) said, but ICP will await the improperly withheld information, copies of the FRB's [and OCC's] correspondence with and about Riggs and PNC, and the banks' responses.

    For the reasons set forth above, the FRB should forthwith schedule the requested evidentiary hearings. On the current record, the agencies must deny this proposal.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

    To be continued; developing... For or with more information, contact us.

* * *

August 9, 2004

  In continuing Riggs fall-out, last week Judge Sergio Munoz questioned Augusto Pinochet's wife and children about the former dictator's secret bank account in the United States. The investigation conducted by Munoz is one of several opened in the wake of the disclosure by a U.S. Senate investigation that Pinochet kept accounts at Riggs Bank with deposits from $4 million to $8 million. Chile's National Tax Service and the state prosecutor's office are conducting separate probes. Munoz is seeking to determine the source of the money in Pinochet's accounts. Developing...For or with more information, contact us.

August 2, 2004

  From the slap-on-the-wrist department: on July 26, Federal and state bank regulators gently cited weaknesses in ABN Amro's compliance with anti-money laundering rules at its New York branch, which provides "significant" services to its correspondent banks, including non-U.S. banks, and also conducts a high volume of U.S. dollar clearing business, according to the agreement. "Examiners have identified compliance and risk management deficiencies at the New York branch in these operational areas," the agreement said -- all too vaguely. Within 20 days, ABN Amro and its New York branch must hire an independent firm to conduct a review of account and transaction activity from July 23, 2002, through April 30, 2004. This review will be done "to determine whether suspicious activity involving accounts or transactions at, by, or through the New York branch was properly identified and reported in accordance with then applicable suspicious activity reporting regulations," the agreement said. Let's see: an accused criminal is allowed to check his own behavior, and report to authorities whether it broke the law? ABN Amro confirmed -- happily, one imagines -- that it entered into the agreement with regulators to address what it characterized as "insufficient internal controls" in the anti-money-laundering program of its New York branch's U.S. dollar clearing business. "The bank regrets that its AML controls in its U.S. dollar clearing business fell short of these standards," the ABN Amro said-in-a-statement. And so it goes...

July 19, 2004

  From last week's Senate hearings: ExxonMobil, Amerada Hess and Marathon Oil contributed to a culture of corruption in Equatorial Guinea. The report cited millions of dollars of payments that the companies made to Brig. Gen. Teodoro Obiang Nguema Mbasogo and his cronies over the years to lease property and fund the education of the children of the ruling elite. Equatorial Guinea was Riggs Bank's largest client, with deposits reaching as much as $700 million, or more than 10% of the bank's assets... In the hearings, Simon P. Kareri, who managed Riggs's West African business until he was fired in January, declined to explain why he lugged a 60-pound suitcase stuffed with $3 million in plastic-wrapped cash to Riggs's Dupont Circle branch. Riggs' "consultant" Bruce McColm said, ''Equatorial Guinea was Riggs's most lucrative account and it was a gravy train and they were going to do business there regardless.'' So when Riggs runs onto the rocks, exposed for money laundering for dictators in Chile and Equatorial Guinea among others, who's brought in to buy it? Why, another managerially-troubled bank, PNC. Which was subject to Fed no-acquisition orders throughout 2003. Seems like a bad fit...

July 12, 2004

  The future of off-shore: last week PwC's Bruce Weatherill opined that "Only the top 10 [off-shore centers] will survive," and predicted that these survivors will be the Cayman Islands and Bermuda in the Caribbean, Switzerland and one other in Europe, and Hong Kong, Singapore and South Korea in Asia. And what of the others?

July 5, 2004

  In Detroit on June 29 U.S. District Judge Paul Borman upheld a decision to detain a former assistant bank vice president of Huntington National Bank, for the unauthorized wiring of $438,000 to banks in Lebanon and Jordan. Issam Abdul Hakim-Berjaoui has been charged with bank fraud, money laundering and embezzlement. So far, Huntington has escape (or evaded) scrutiny. Prosecutors are seeking, under treaty, bank records from Jordan; no such arrangement, however, exists between Lebanon and the United States...

June 28, 2004

  When Nauru a $160 million mortgage in 1998 for its real estate holdings in Australia, it turned to GE Capital. In January, Nauru's Government defaulted on the loan. And in April, General Electric's real-estate unit asked receivers to sell Nauru's Australian shopping center, office building and hotels. They are worth an estimated $200 million ( $317 million) - the most valuable asset for the island's 12,000 residents. The 21 square-kilometer island remains on the OECD's money-laundering blacklist after issuing 400 overseas banking licenses in the mid-1990s. Nauru's financial crisis could become a regional security issue, says Steve Vickers, president of International Risk, a Hong Kong-based consulting firm. "Failed states become used by terrorists and criminals," he says. "When countries are desperate, they will do desperate things. "The Russian Mafia laundered billions through Nauru in the 1990s, says Hughes, now a senior fellow at the Center for Independent Studies, a Sydney-based research group. Even PPB Group, the Sydney-based receiver appointed to sell the properties by General Electric, is proceeding "cautiously", says Steve Parbery, a partner. "Nauru has a history of engaging with agents of curious background and credibility," he says. The situation is complicated by a political crisis. Nauru's 18-member Parliament has been stalemated since March, when the Speaker defected to the Opposition. That gave pro and anti-Government forces nine votes each. Since then, no Budget bill has been passed. The island is unlikely to gain refinancing for Nauru's Australian properties. Asian Development Bank estimates show the properties are mortgaged to 83 per cent of their value. The interest rate agreed was 8.985 per cent over five years, with General Electric also receiving 20 per cent of the increased value of the properties - $12 million on top of the principal. An Asian Development Bank report in April described the properties as "relatively expensively mortgaged." Yep...

June 21, 2004

....ICP has submitted into the record before the Federal Reserve, on two BNP applications, these recent reports: "Iraqi-Born Billionaire Has Big Stake in Bank That Holds Baghdad's Oil-for-Food Funds," by Timothy L. O'Brien, New York Times, April 30, 2003, Pg. A12 --

One of the largest private shareholders in BNP Paribas, the French bank that holds more than $13 billion in Iraqi oil funds administered through the United Nation's oil-for-food program, is an Iraqi-born businessman who once helped to arm Iraq in the 1980's and brokered business deals with Saddam Hussein's government, according to public records and interviews. The involvement of the businessman, the British billionaire Nadhmi Auchi, raises questions about how carefully the United Nations has vetted the bank in its continuing role as repository of oil-for-food funds.... Although the United Nations pressed Iraq to allow banks other than BNP Paribas to be the primary repository for billions of dollars in oil revenue, Iraq successfully insisted that BNP Paribas remain the sole caretaker of the program's escrow account... Mr. Auchi, who declined to be interviewed for this article, holds his stake in BNP Paribas through a Luxembourg concern he controls called General Mediterranean Holdings. As recently as 2001, General Mediterranean Holdings described itself in an annual report as one of largest single shareholders in BNP Paribas.

ICP note: BNP's involvement raises questions, relevant to these proceedings, under the managerial and other factors of the BHC Act, about BNPP's "vetting" and other processes. See also, RCR Wireless News of April 26, 2004:

The $100 billion relief project-managed by the U.N. with the help of French banking giant BNP Paribas-apparently proved too tempting. The accusations are serious: grift, kickbacks, bribes and looting, allegedly benefiting everyone from former Iraqi officials to hundreds of prominent international figures to top U.N. officials.
BNP, besides being a major moneylender to Saddam, was one of the financial institutions that teamed with top cellular-phone manufacturers several years ago to create the Mobey Forum to drive mobile financial services. In March, Iraq's Governing Counsel launched a probe

From transcript of April 28, 2004, hearing:

ROSETT: BNP itself is entirely unforthcoming, certainly as far as questions from outside.... The further conflicting statements I have received -- and in keeping with what Ms. Pletka told you -- are that there are five or six banks. It would seem to me an easy number to keep track of. These are banks -- a program involving billions.
CHRISTOFF: That is still a question that I don't have a definitive answer to. I know the U.N. external auditors recommended that the U.N. diversify and not just rely on BNP-Paribas.


  This issue must be developed in the record; on the current record, BNP's applications could not legitimately be approved.

June 7, 2004

  In Congress last week, Rep. Kelly said that the $100 million fine the Federal Reserve Board recently imposed on UBS AG for conducting illegal currency transactions with four countries subject to U.S. sanctions was "a mere slap on the wrist." What then of the mere $70 million fine of Citigroup for predatory lending, including misleading examiners and shredding documentary evidence?

   Meanwhile, see, e.g., the New York Times of June 6, 2004, " Lockboxes, Iraqi Loot And a Trail To the Fed" --

WHEN a United States Army sergeant broke through a false wall in a small building in Baghdad on a Friday afternoon a little over a year ago, he discovered more than three dozen sealed boxes containing about $160 million in neatly bundled $100 bills. Later that day, soldiers found more cash in other hideaways near the Tigris River, in an exclusive neighborhood that elite members of Saddam Hussein's government once called home. By the end of the evening, they had amassed 164 metal boxes, all riveted shut, that held about $650 million in shrink-wrapped greenbacks.... The investigation led quickly to the vaults of four Western banks that were among a select group handling the sensitive task of distributing freshly printed dollars overseas: the Bank of America, the HSBC Group, the Royal Bank of Scotland and UBS. ... After American forces in Iraq discovered an additional $112 million in hidden cash, on top of the $650 million they had already found, the Fed's cashiers tracked it to the same vaults and to a Fed vault at HSBC in Frankfurt, a Royal Bank of Scotland vault in London and to other locations the Fed has not disclosed. (Emphasis added).

ICP has raised this in a timely comment on RBS - Charter One...

June 1, 2004

   The American Banker of May 25 profiled Office of the Comptroller of the Currency employee Cathryn FitzGerald, now stationed in the Green Zone in Baghdad, a technical assistance adviser to the Coalition Provisional Authority's Ministry of Finance. What she (and the OCC) will do after June 30 remains to be seen. The article claims that " she and her colleagues, Martin Wiseman, Steven Strasser, and a third whose identity was not released, have been welcomed by Iraqi regulators." The unnamed one, especially, was very welcomed. The Banker recites that "Iraq has eight state-owned banks and 17 private banks, most of which are very small. Two of the state-owned banks, the Rafidain and Rasheed banks, hold about 90% of the 6.5 trillion dinars deposited in financial institutions in the country of 25 million people. Discussions are ongoing as to whether the state-owned banks will be privatized." Discussions by whom?

May 24, 2004

  Last week's Washington Post (5/18) quoted Immigration and Customs Enforcement official Allen J. Doody that raids on small money transfer storefront are not directed at immigrants. " "We're not concerned with someone trying to get $100 home to Mom," he said. But that's generally the operations that they've been closing down. As with Section 326 of the Patriot Act, it's little people being harmed by (or sacrificing for) the law, while bigger shots (and banks) suffer few consequence (see, for example, ICP's currently campaigns regarding SunTrust, Royal Bank of Scotland and others)...  

May 3, 2004

  On April 27 in Newark, New Jersey, the USA Patriot Act was debated by banks and bank shills. Valley National Bank's CEO Gerald Lipkin claimed that at his institution, the cost of complying with the Patriot Act "is in the millions on an annual basis." VNB has 129 branches in New Jersey and New York. A counsel for the New York Fed, Richard Charlton, said that "there are SARs (suspicious activity reports) coming through that were derived from institution-to-institution sharing that was not required before." Many more suspicious-activity reports are being filed by banks, and the efficiency of collection of information into a central database has improved, he said. Also, electronic filing of reports has become almost universal since the Patriot Act took effect. And, Charlton said, "I'm sure every [report] gets looked at." We'll see... 

April 26, 2004

   Thou dost protest too much: on April 25 on Meet the Press, Saudi Ambassador Prince Bandar bin Sultan protested that there is no link between a U.S. investigation into a Washington bank's possible failure to follow anti-money laundering laws and his country. The OCC is considering civil monetary penalties against Riggs Bank in connection with potential violations of the Bank Secrecy Act and failure to comply with a consent order aimed at ensuring Riggs' compliance with anti-money laundering laws. "Riggs Bank's problem is a regulation problem that has nothing to do with Saudi Arabia," Bandar strummed. We'll see. Meanwhile, the GE Capital and Nauru scandal continues, barely covered in the U.S. press. GE Capital, has a $236 million loan to the Nauru Phosphate Royalties Trust . It called in receiver PPB to the landmark Nauru House in Melbourne and other properties on Friday after months of negotiations. Nauruan president Rene Harris said on April 20 that the trust's facility with GE Capital had expired on January 4 and, because of "internal issues", Nauru had been unable to refinance. Developing...

April 19, 2004

  Turning east this week to Nauru and Russia, where the Central Bank prohibited Sodbiznesbank to attract money from private depositors for six months and instructed this bank to "struggle against money laundering more actively and to increase capital sufficiency." Sodbiznesbank was established in 1993. As of January 1, 2004, its shareholders were six Moscow-based companies. On January 1, assets of the bank amounted to 5.8 billion rubles (the 112th place) and pretax profit amounted to 120 million rubles (the 97th place). On April 8 the Central Bank prohibited Sodbiznesbank to attract private deposits and to buy and sell foreign currency for six months and instructed the bank to tighten control over counteraction of money laundering and financing of terrorism, as well as to ensure observance of requirements of the laws and norms of the Central Bank including requirements to capital adequacy. Back in October 2003, former Interior Minister Boris Gryzlov said that Sobdiznesbank "legalized 500 million rubles in a criminal way" and four its employees were arrested. CEO of Sodbiznesbank Roman Petrov stated that the accusations were applicable to the "old team" of the bank and the Financial Monitoring Committee did not have any clams to the incumbent team of the bank. On April 13, Petrov refused to discuss information about the sanctions imposed by the Central Bank. Senior Deputy Central Bank Chair Andrei Kozlov, curator of banking supervision, and representative of the Financial Monitoring Committee also refused to comment on the situation. How transparent...

  Meanwhile, it turns out that GE Capital is a major lender to, and now forecloser on, the island republic of Nauru, most known in recent years for money laundering. The Nauru government's Australian spokeswoman Helen Bogden said receivers had been appointed to the Nauru House Property Trust. They had taken control of Nauru Trust properties in Australia, including a Melbourne high-rise called Nauru House, Sydney's Mercure Hotel and Royal Randwick Shopping Center, and the Downtowner and Savoy Park Plaza hotels in Melbourne, Bogden said. The country of 12,500 people owes around $169 million to GE Capital, which has a mortgage over Nauru's Australian property investments. Bogden said GE Capital had lent money to the trust in relation to the properties and was seeking to have it recovered. "There are still negotiations going on between the Nauru government and the receivers. Until Monday we won't have any further details," Bogden said. She refused to say whether Nauru would ask for Australian help to solve the crisis. Canberra has already indicated it was unwilling to step in because the issue is a commercial one. "The Australian government has consistently told Nauru that sound economic management and good governance is essential," a foreign affairs spokeswoman said Friday. A Nauru opposition political newsletter published this week said the country faced foreclosure by May 5 after failing to meet several other deadlines....

April 12, 2004

  UAE Central Bank governor Sultan bin Nasser Al Suwaidi, speaking on the sidelines of an IMF-backed gathering in Abu Dhabi to create a system to police hawala, said:  after "more than 100 money exchanges submitted their control to the (central) bank 15 months ago. 'Suspect' hawala offices were subsequently seized, though their funds were limited." He refused to provide further figures or reveal which countries they were transferring money to...
At a Capitol Hill hearing on April 7, Alabama Sen. Richard Shelby asked that serial preempter, U.S. Comptroller John Hawke, "Has Riggs met the deadlines established in the order? Are you satisfied with their progress to date?" Hawke said he would submit answers in writing to the committee within a few days...

April 5, 2004

   Ah, corruption: federal investigators are examining a corporate account controlled by the president of the West African nation of Equatorial Guinea, Teodoro Obiang Nguema Mbasago, at a Riggs National bank in Washington, the NYT's Tim O'Brien (back on the beat) reported on April 2. Millions of dollars in money that regulators and the bank have identified as questionable have flowed through that account, the report said. It was opened under the name of a corporation called Otong, and money began moving through it as early as 1999, according to a regulatory report dated Jan. 30 that Riggs filed with federal regulators. Exxon Mobil Corp. (XOM), the oil giant, deposited about $300 million into Mbasago's personal Riggs accounts, the report said.... Federal officials are looking into the possibility that money in the Otong account was used to bribe employees of U.S. companies or involved the proceeds of political graft, the report said, citing an individual with direct knowledge of the investigation...

March 29, 2004

  On Capitol Hill on March 25, Treasury Secretary Snow was told that FINCEN should be "more active" in ensuring banks are complying with regulations -- specifically, that it should conduct examinations, and not leave the task to the OCC, OTS and other bank regulatory agencies which are "more concerned about safety and soundness," as one Congressman put it. Snow dodged the recommendation, saying vaguely that "We need to make the banking system an ally in the war on financial terrorism. Through the Patriot Act, we've made enormous progress in that arena." Hmm.... We'll be following this. Also, upcoming on April 3-5 in the United Arab Emirates is the Second International Conference on Hawala. Some 400 delegates, including representatives from the International Monetary Fund, the World Bank and the Financial Action Task Force, are slated to attend... 

March 22, 2004

  Carrot or stick? Raids carried out on hawala centers, especially in the United States and Britain, contributed to the sharp increase in the formal flow of remittances between 2001 and 2002 in Pakistan, from 1.1 billion to 2.4 billion dollars, according to an ADB newsletter. The increase was also brought about by government incentives, which promised benefits such as free issuance and renewal of passports to Pakistanis who remitted at least 2,500 dollars through official channels. In Bangladesh, the crackdown on the hundi system, as well as a reduction in the commissions on remittances, improved banks' efficiency, while incentives to workers who sent money through banks boosted the official remittance flow by 21 percent between 2001 and 2002. The Philippines, ranked third among developing country recipients of workers' remittances, has attempted to capture remittances by establishing Filipino bank branches in major destinations like Singapore and Hong Kong.

   While some governments are using the carrot, others are turning to the stick. South Korean migrant workers are required to remit at least 80 percent of their earnings through the Korean banking system to qualify for an exit permit. While this has worked for South Korea, attempts by the Philippines, Thailand, Pakistan and Bangladesh to implement similar laws have failed because much of labor migration occurs outside of government influence. But despite the various government efforts, many workers are still clinging to the underground way of moving money. Although official remittance flows into Pakistan have increased, senior bankers in the country estimate the actual flow to be between eight billion and 10 billion dollars, geography professor Graeme Hugo wrote in a report for the International Organization for Migration. In Bangladesh, a study published by local newspaper The Independent in 2002 found that 40 percent of remittances were still being sent through the hundi system. This is due to the efficiency of informal networks. An ADB report on Bangladesh said the hundi system is dependable as it works on the basis of trust and goodwill. "Hundi operators also maintain complete secrecy of transaction and thus ensure safety from theft or robbery. Sending money through hundi is also more profitable as the remitters get a premium rate of exchange, which is often significantly higher than the official rate," the report stated. The inefficiency of official channels compounds the problem. "Absence of investment opportunities, political instability and inadequate social security discourage the inflow of remittances through the official channels," the report said....

March 15, 2004

  U.S. Treasury Secretary John Snow, speaking March 9 in Washington to the smaller bank association ACBA, painted a rosy picture:

Out of the horror of September 11th, 2001, came a tremendous resolve in the financial community to cut off the terrorists' lifeblood: their money.Institutions large and small have committed themselves to the task. America's community banks have done everything that the Treasury Department has asked of you during this fight, and I want to personally thank you for your efforts. Your compliance with Section 314 of the Patriot Act - which requires everyone to share information - has been exemplary. Under our 314 process, law enforcement provides the names of suspected terrorists or significant money launderers to Treasury's Financial Crimes Enforcement Network (FinCEN), which scrubs the names and, if appropriate, sends them on to you. We've asked that you then search your recent account and transaction records for potential matches, and report them back to FinCEN. You've done it, and our country is safer because of it. We understand that the 314 process is an extraordinary tool. it is one that provides law enforcement with valuable leads to follow the money trail. And without your help it would be useless. We've also asked you to establish risk-based procedures to verify the identity of your customers who open accounts, pursuant to section 326 of the Patriot Act. While we insist that you form a reasonable belief as to the customer's identity, we have also worked hard to ensure that the regulation give you the flexibility to decide which forms of identification works best for you in your communities to verify customer identity. This reflects our judgment that you are in the best position to make such decisions. We believe this flexibility enhances the effectiveness of this regulation. And we're always looking for ways to provide you with more and better guidance concerning FinCEN's regulations. This is our part of the bargain, our half of the partnership. So let's keep up the dialog. let us know when we're not clear, or when we can do better - because the better our regulations are understood by you, the more successful our critical enforcement efforts will be. So please know that we appreciate our working relationship on the war on terror...

  Meanwhile, the New York County district attorney is actively investigation with the second-largest U.S. bank, JPM Chase, violated Know Your Customer rules in connection with $5.5 billion in money transfers... It was reported March 9, 2004, on CBS Marketwatch that Beacon Hill Service Corp. "was convicted Feb. 23 on four felony counts of operating as unlicensed money transmitter," and that Beacon Hill "took deposits and transmitted money on behalf of clients in Central and South America, including wealthy individuals and money-exchange houses... J.P. Morgan Chase was Beacon Hill's bank and accepted deposits from Beacon." A relevant and unanswered question is whether JPM Chase "violated 'know your customer' rules in the movement of $5.5 billion" -- ICP has commented to the Federal Reserve that on JPM Chase's applications to acquire Bank One, the comment period should be extended, and hearings held. 

March 8, 2004

   Hudson United, a bank which ICP/Fair Finance Watch has identified as having a weak fair lending record -- on March 2 paid a $5 million fine for money laundering violations at one its New York City branches. About $1.3 billion flowed, without proper records, through accounts at Hudson's Manhattan office. The money, some it drug-related, came from casas de cambio, offshore money remitters and black-market currency dealers in South America. Meanwhile, Hudson United has a weak record of lending to low- and moderate-income people, particularly Latinos... .

March 1, 2004

  On Feb. 27, FATF announced that it has removed Ukraine and Egypt from its list of non-compliant countries. "This is evidence that ... countries are taking substantive action to clean up their financial systems," said FATF head Claes Norgren, adding that "this is good news for Ukraine, Egypt and the international community." We'll see. Still on the list of those that have failed to take strong measures to stamp out money laundering are Cook Islands, Guatemala, Indonesia, Myanmar, Nauru, Nigeria and the Philippines...

February 23, 2004

  In the United Arab Emirates last week, Governor of the Central Bank Sultan bin Nasser al-Suwaida pronounced that the UAE's anti-money laundering legislation - introduced in 2002 - has been effective at reducing the number of 'serious suspicious transactions'. However, he said that it is an ongoing effort and that the UAE is 'continuously co-ordinating with the US and international parties to confront illegal money operations'. He went on to say that concerns about money laundering via the informal money remittance (hawala) system had been dealt with via the registration of more than 100 Hawaladhars, or brokers, with the Central Bank. Suwaida added that the freezing of 13 suspicious accounts in the wake of the 11 September 2001 attacks in the US was related to terrorist financing, not money laundering. And so far, what repercussions have there been for the banks involved? None...

February 16, 2004

  Parmalat and offshore shenanigans: the EU commissioner in charge of the internal market, taxation and customs, Frits Bolkestein, last week said: "The apparent size of the Parmalat fraud is staggering. And the apparent complicity of a number of people from distinguished, liberal professions together with the failures of regulatory control - equally so." He said that "the commission's latest salvo on corporate governance will tighten the squeeze on offshore financial sectors, which have come under intense scrutiny amid concerns about money laundering and terrorism." He also said that new EU laws against money laundering should contain provisions to boost financial supervision in the offshore centers... In December, the OECD a discussion document as part of public consultation on fighting terrorism in shipping by improving transparency of beneficial ownership. That's true of many industries...

February 9, 2004

What's in a name? As Australia moves to implement that FATF's provisions for scrutiny of accounts of "politically exposed persons," the Australian Bankers Association is asking for a list of all such persons, similar to the terrorism-related designations. Another phrase in the mix is "senior foreign political figure" -- but banks work around it, for example by doing business with the sons of Sani Abacha, and not ol' Sani himself... 

February 2, 2004

  FinCEN's SAR Activity Review - Trends, Tips and Issues, Issue #6, provides an update on what it calls "informal value transfer systems" or IVTS. FenCEN states that it has completed an analysis of a sampling of Suspicious Activity Reports referencing IVTS or IVTS-like operations, finding four "themes" -- (1) unlicensed and/or unregistered money transmitters; (2) hawala or other types of IVTS; (3) Black Market Peso Exchange (BMPE); and (4) evasion of the International Emergency Economic Powers Act...

  Note: in Saudi Arabia, Article 25 of the 1981 Charitable Organizations Charter, the law that would theoretically regulate how charities are run and overseen, explicitly excludes all charities associated with the royal family--that is, almost all Saudi charities. 

January 26, 2004

   Hank and hawala: AIG announced last week that it will offer policies of $10,000 of accidental death and dismemberment coverage to U.S.-based remittance customers of the National Bank of Pakistan. The press spin recites that more than 700,000 Pakistani nationals live and work in the United States. Together, they control about $250 billion of assets; individuals remit $300 to $500 per month abroad. Those who remit funds for distribution overseas through the National Bank of Pakistan will automatically get the insurance at no additional cost; the bank is to pay the premiums. Coverage is to be given for 12 months from the first remittance, and only one transaction is required to become eligible. The coverage is available to anyone using the bank's branches in New York or Washington. Hank (Greenberg) and hawala...

January 20, 2004

  The case which opened in London last week, BCCI's liquidators versus the Bank of England, seeking $1.8 billion for negligent supervision (!) leads one to wonder why other regulators are sued more often? Anyway, a quick refresher course: The BCCI was originally set up in Pakistan by Aga Hassan Abedi. The London office followed in 1972. With investors such as the Bank of America (25%) and Sheikh Zayed, the ruler of Abu Dhabi and BCCI's main investor, the bank grew rapidly, particularly when oil prices shot up during the Yom Kippur War (1973). By 1982 it had 280 branches in 57 countries. Essentially, BCCI's head office and base of operations became London, though it was actually incorporated in the offshore haven of Luxembourg. Regulators from both countries took responsibility for overseeing its actions --and that sure worked out well, no? 

January 12, 2004

  Following Newsweek's Jan. 12 report on the U.S.'s Miami-based financial task force that "targets the sources of public corruption and bribery in foreign countries," we have to ask if the U.S.-based bank who accept and process such funds will suffer some sanction. The article cites as a "prominent example" that "U.S. authorities have tied drug-related laundered funds to officials in former Mexican president Carlos Salinas de Gortari's government." Well, that'd be Citigroup ... The article goes on: "U.S. Customs Service agents recently opened an investigation of former Nicaraguan tax-authority chief Byron Jerez and his ex-boss, former Nicaraguan president Arnoldo Aleman. Last month the United States seized a $2.7 million condominium on Key Biscayne, Florida, they say is owned by Jerez, along with $150,000 from an account he had in a U.S. bank. Jerez was found guilty on criminal charges including fraud last summer in Nicaragua, but his conviction was overturned in part in December. The prosecutor is appealing and Jerez is free pending the appeal. A Nicaraguan judge last year sentenced Aleman to 20 years under house arrest on charges of fraud, embezzlement and criminal association. Aleman has appealed the conviction, and says his prosecution is a politically inspired witch hunt by his successor. 'We've been successful right from the get-go in [seizing] property and identifying a number of [corrupt] foreign officials,' says Arico." We'll see...  

January 5, 2004

   The Senate Finance Committee's Dec. 22 letter to Office of Foreign Assets Control director Richard Newcomb stated that "Checking for compliance with OFAC sanctions and restrictions is not the top priority of bank regulators, who use a risk-based' approach to their examinations." That's true -- see Inner City Press' Federal Reserve Watch for ongoing report on this. The AP's account of the letter noted "several instances in which Newcomb met outside the office with representatives of companies under investigation by his agency and took uncoordinated enforcement actions that potentially compromised criminal investigations." Sounds like the bank regulators... Also, "the United Nations and the European Union in 2001, before the Sept. 11 suicide hijackings, had ordered their members to freeze the assets of several high-ranking al-Qaeda leaders, including Bin Laden's brother-in-law and a security coordinator. OFAC did not take similar action.. More recently, a money laundering newsletter divulged that three people listed in a December 2002 U.N. report as terrorist financiers weren't blacklisted by OFAC, even though some of the financiers' groups were blocked - leaving a potential loophole for terrorist financing." Yep...  

December 29, 2003

  In this shortened, holiday-week report, we'll ask a question, based on a Dec. 3, 2003, ABC News report about Iraq:

"The captured finance minister, al-Azzawi, has described a scheme involving banks in Beirut, Lebanon and Amman, Jordan, U.S. officials told ABCNEWS. According to al-Azzawi, those banks disguised their requests for U.S. cash by using the London headquarters of a British-based bank as a go-between. Officials say the bank unwittingly arranged for the cash shipment from the United States to London and then to the Middle East. Iraqi officials, including former Deputy Prime Minister Tariq Aziz, then used their diplomatic status to move the U.S. cash from Beirut, Lebanon, and Amman, Jordan, into Baghdad, said officials. "

  So -- HSBC? Or Standard Chartered? And what does "unwitting" mean, in this day and age?

December 22, 2003

  In this cold season, Inner City Press has just received hot documents on Chase Manhattan, and has redirected them to the Federal Reserve, in a timely comment opposing Chase's application to the Fed to set up Chase FSB to preempt state consumer protection laws. The comment includes documents obtained from the Oregon Department of Justice (OR-DOJ). Among the documents in the ORDOJ's first FOIA response to ICP is correspondence concerning Chase Manhattan Mortgage Corp. ("CMMC") and false social security numbers -- an issue that the state regulator received complaints about, and then, for whatever reason, allowed Chase itself to investigate. According to Chase Associate General Counsel Laura O'Hara's June 5, 2003, letter to ORDOJ:

"Chase conducted an investigation with respect to the allegations set forth in your Letter. We related the results of that investigation upon your agreement that it would not constitute a waiver of the attorney client privilege. As part of that investigation, Mr. Hernandez was asked to come to our New Jersey headquarters and was interviewed by two attorneys and a senior investigator from our Fraud Prevention and Investigation Department ('FP&I'). After a thorough and intensive questioning, we found no evidence that Mr. Hernandez had 'condoned the use of bad social security numbers'... When Chase was notified by HUD that there were possible invalid SSNs on the Cortez and Alejandro Sierra loans in 2001, these files were immediately referred to our Quality Assurance Department. That department determined that the SSNs were invalid and determined that the borrowers had supplied falsified documents to Chase... If he were applying for a loan today... we would have found material misrepresentation in connection with the SSN submitted and would have declined the loan. This would be reported as a borrower misrepresentation in the Suspicious Activity Report ('SAR') that we file with FINCEN."

   Even the ORDOJ, in responding to the above, noted that

"It appears there were Social Security number problems in all three consumer files including Gonzalez which apparently you had not yet discovered... we have persons claiming different things... Chase is very quick or possibly too quick to act once a person in possession is shown to have a bad social security number... You indicate Mr. Hernandez himself investigated after an alert and found two numbers incorrect; but while he found the third one correct it looks like that is now called into question as well... Whether Mr. Hernandez ever in fact winked at the use of a bad number we'll never know though I know you believe the evidence is he did not. Still, three transactions is a lot."

  And it's more than three -- we hear this not only from OR-DOJ, but also with regard to Chase's mass-purchase of loans in the Poconos with inflated appraisals. Something's wrong at Chase Manhattan, and putting it under an agency, the Office of Thrift Supervision, that's just desperate for assessment fees is sure not the answer, including on anti-money laundering issues... This has now been raised to the U.S. Federal Reserve...

December 15, 2003

  The New York Times of Dec. 12 reports that "investigators with the Department of Homeland Security have identified $100 million that they say was sent through illegal money-transmittal businesses, like hawalas, to countries with possible terrorist ties. But the efforts to trace terrorist financing have been marred at times by turf wars between agencies and occasional conflicts in mission." And there's at least one other problem: the pedigree of those banks found to be involved in the transfers. Take, for example, Royal Bank of Scotland's and its Citizens Financial Group's involvement in transfers to Al Barakaat -- what penalty was ever imposed? None. Then RBS was fined by the FSA in London, for lax anti-money laundering controls. But it's allowed to buy up more banks, in Switzerland, the US and elsewhere. Dubious..

December 8, 2003

    We must note Royal Bank of Scotland's CEO's recent denunciation of anti-money laundering laws, see, e.g., The Herald (Glasgow) of December 4, 2003: "Goodwin, known as Fred the Shred for his cost-cutting prowess, said: 'Many of the penalties are so draconian that you might as well report every transaction.'" Yes: if you move money, as RBS has, for companies on the Treasury Department's watch list, you might want to report - or even avoid - the transaction... Royal Bank of Scotland attempting to affect and undermine anti-predatory lending -- and now anti-money laundering -- legislation enacted by duly elected legislatures is, to put it diplomatically, distasteful.

    Also this week, a plug and a link: Commonweal magazine of Dec. 5, 2003, under the heading "Critics' Choices for Christmas," says this of Predatory Bender: "as vivid an account of life in the Bronx as you are likely to read; more than that, it is a brilliant act of subversion, for within the thriller plot is found a dramatic account of the ways corporations prey on the poor while the rest of us aren't looking."

  Speaking of looking, ICP's Constitutional challenge to the Delaware Freedom of Information Act's "citizens-only" provision is proceeding, having been assigned to Judge Joseph Farnan, is now described on FirstAmendmentCenter.org (click here to view); a editorial in the Wilmington News-Journal of December 4, 2003, "Our View: Change the State's Open Records Statute So It Applies to All," recounts ICP's "federal lawsuit asserting Delaware's open-records law is unconstitutional because it refuses access to non-residents," then opines that the "exclusion is silly and probably unconstitutional. The General Assembly should attend to this when it returns to session next month." We'll see.

December 1, 2003

   Chess game in the South Pacific: at last week's conference in Brisbane, Australian Federal Police Commissioner Mick Keelty warned, "It's not beyond a possibility that small Pacific island nations may be used as transit points or may be used as staging points to commit crime, not only in Australia but in other countries within the region...We recognize that often, like other forms of transnational crime, criminals will take advantage of different countries' structures, particularly for things like financing of terrorism...Transnational crimes such as terrorism, money-laundering and drug trafficking can only be combated through a collegiate approach." Collegiate?  

November 24, 2003

   Here's a report from Palau that's related, in a sense, to Bank of America's attempt to include deposits in Guam, Puerto Rico and even Palau, it seems, in "U.S. deposit" so as to appear to be under the 10% deposit cap in connection with this applications to acquire FleetBoston Financial - click here to view ICP/FFW's opposition. Here's the report:

The Palau National Congress has passed banking law changes that opponents say open loopholes for money laundering and risk adverse action abroad. The United States and Japan have expressed concern in letters to Palau about the bill, which Congress maintains is aimed at helping two homegrown banks reopen their doors. The bill is now before President Tommy Remengesau, who has opposed the changes but is facing a veto override if he strikes down the bill outright. Congress has "to understand that there are serious ramifications that come with re-licensing two banks. We could be blacklisted or penalized," said Remengesau, noting the heightened global concern with money laundering following Sept. 11 terrorist attacks has made governments less tolerant.... Palau, in 1999, was one of three Pacific Island countries targeted by the international banking community because of suspected money laundering activity involving the Russian Mafia. Nauru was named as the main player, but Palau, which did not yet have effective banking regulations, was later cited by the Bank of New York as funneling $1.7 billion through some of its banks during an 18-month period. A stunned Palau responded by writing banking regulations enacted in 2001. Palau Central Bank and the Melekeok Government Bank could not meet the new regulations and were closed in late 2002...

November 17, 2003

  Nigerian Speaker of the House of Representatives, Hon. Bello Masari, said in Abuja on Nov. 10 that Nigeria was busy looking for investable funds, whereas it had billions of dollars looted from its treasury and stashed in foreign banks. Delivering a keynote address at the opening of a three-day meeting by legal experts of the Inter-Governmental Action Group Against Money Laundering in Africa (GIABA), Masari noted that Nigeria's money stashed in foreign banks could settle all its foreign debts. Masari, who was represented by the Deputy Speaker, Austin Okpara, said progress on money laundering could be achieved through preventive activities that reduced source of the funds meant for laundering. He commended the initiative of ECOWAS/GIABA for harmonizing legislation aimed at eradicating money laundering in the West African sub-region and urged legislators in the various countries to promptly pass the harmonized document into law. "We in the legislative arm of governments in the sub-region should take up the gauntlet and see to it that the harmonized document is promptly passed into law in our various countries," he said.

   In light of reports, in the Washington Post and elsewhere, of the Patriot Act's use to get from Las Vegas strip clubs financial records that have nothing to do with terrorism, check out this new ICP map, which addresses state laws and efforts to preempt them -- click here to view.

November 10, 2003

    ...Nearly one-quarter of the total suspicious transactions reported to Canadian police last year by the Financial Transactions and Reports Analysis Centre of Canada, or Fintrac, involved terrorist groups. The agency, charged with tracking illicit money flows, released its annual report Wednesday. The report says Fintrac passed on 103 cases to police involving $460 million worth of possible money laundering and terrorism transactions. Of that amount, 24 cases involving $22 million related to terrorist groups, 78 involved money laundering and one involved both. The report is for the year ended March 30....Horst Intscher, Fintrac's director, said the number and amounts involved in terrorism-related cases is cause for concern. Yeah, we'd say so.... Jump-cut, though not a big leap (the USA Patriot Act, believe it or not, being the connector) -- we try not to be self-serving, much less crassly commercial -- but if we didn't use this space to announce the availability of Inner City Press' new book, "Predatory Bender," it'd mean we didn't believe in the book, right? And we do. So click here for more information, including sample chapters. It is also available for direct credit card order here (this is the fastest way), through Amazon.com, Powells.com, Barnes and Noble.com, etc.. Freedom of the press...

November 3, 2003

    This week we devote our Finance Watch report to comments we're just filed on AXA's proposal to acquire MONY. There are Community Reinvestment Act (rating) issues, questions about the companies' current impact on low- and moderate-income communities, previous money laundering inquiries, and involvement in the developing mutual fund scandal. Here's a summary of the issues that ICP/Fair Finance Watch raised in its November 3 comments filed with five government agencies:

   AXA-controlled Alliance Capital Management is currently embroiled in the what is being called the mutual fund scandal, to a decree that the financial position, stock price and future prospects of AXA are being impacted. See, e.g., the AFX News / CBS Marketwatch report of September 30, 2003, that AXA's

New York-based Alliance Capital said it suspended a portfolio manager of the AllianceBernstein Technology Fund , and an executive involved with selling Alliance Capital hedge fund products after an internal investigation 'identified conflicts of interest in connection with certain market-timing transactions'... information posted on the company Web site lists the manager of the AllianceBernstein Technology fund as Gerald T. Malone, a senior vice president who joined the firm in 1992. A spokesman for the firm did not immediately return phone calls asking whether Malone was the fund manger who was suspended. Malone's voice mailbox was full, and a person who took a call for him referred inquiries to the press office. A fact sheet on the Technology fund also lists Andrew Frank as assistant portfolio manager as of June 30. Reached at his office by telephone, Frank said, "I'm not going to comment at all," and referred a reporter to a company spokesperson. Shares of Alliance Capital fell as much as 7 percent on the news, to a low of $32.60. They were last trading at $33.06.

   The impact -- and import -- for AXA cannot be missed. For example, the Australian Financial Review of October 8, 2003 ("US Crisis Hits Axa As Portfolio Manager Suspended") reported that "[t]he fallout from the US mutual fund crisis has reached Australia, after Axa's global technology fund was downgraded to "under review" by an independent researcher following the suspension of a portfolio manager for a possible conflict of interest." These are issues that must be addressed under the statutes applicable to AXA's MONY proposal, on which ICP is hereby requesting a hearing.

   We further note that Advest's last Community Reinvestment Act (CRA) performance evaluation resulted in a rare Needs to Improve rating. The exam, available on www.ots.treas.gov by searching for "Advest," stated among other things that

"The institution is rated 'Need to Improve.' Because the institution draws its customers from the relatively affluent clientele of an affiliated stock brokerage, reaching low- and moderate-income borrowers and neighborhoods poses unique challenges. However, there have been few attempts to serve these borrowers or areas during the review period. As a result, the institution's performance does not compare favorably with other institutions in the Hartford area... [P]revious efforts aimed at reaching these groups appear to have been reduced significantly."

   We are aware of legal switches and evasions since then -- which among other things reduced even more any potentially positive input by Advest or its parent in low- and moderate-income areas -- we still find the CRA NTI of import, as well as the other adverse issues sketched below in the Preliminary Comment. ICP is requesting a copy of AXA's application, and of the OTS's communications with AXA and/or MONY. For the reasons set forth below, ICP is requesting a hearing, at the Office of Thrift Supervision and in the various states. The Arizona Insurance Department, for example, has previously held hearings (on AIG - American General / USLIFE CREDIT LIFE INSURANCE COMPANY of ARIZONA, 01A-183-INS) in which it has allowed ICP to participate and present evidence. Pursuant to A.R.S. §20-481.07(B), "any other person whose interests may be affected... shall have the right to present evidence, examine and cross-examine the witnesses and offer oral and written arguments at the hearing." ICP looks forward to the requested hearing, after appropriate discovery.

   ICP's Comments also note that AXA senior management -- and its founder -- have been interviewed in connection with money laundering investigations. See, e.g., The Post magazine of June 21, 2001 ("AXA Bosses Under Investigation"), which reported that "Henri de Castries and Claude Bebear, present and previous chief executives of French insurer Axa, were last week freed on bail of GBP 180,000 each after being investigated for an alleged tax evasion scheme in Luxembourg. Mr de Castries and Mr Bebear were held overnight in police custody." See also, the London Independent of June 15, 2001 ("AXA Founder in Criminal Inquiry"), reporting that

"The founder and president of the AXA insurance group, Claude Bebear, has been placed under criminal investigation in France in allegations of "money -laundering", it was confirmed yesterday. The case concerns not money -laundering in the usual sense but an alleged tax-evasion scheme operated by a life insurance company, PanEurolife, which belonged to Axa in 1996-98. Mr Bebear, 65, was arrested on Tuesday and held for almost 36 hours. The chief executive of Axa, Henri de Castries, has also been mis en examen - or placed under investigation, a step short of a charge - in the same case."

   This gave rise to disputes in the U.S. that are relevant to the statutory factors applicable to AXA's instant proposal -- see, e.g., Agence France Presse of February 18, 2002 ("US Nationwide Mutual Insurance demanding compensation from AXA"), reporting that

Nationwide Mutual Insurance of the United States said on Monday it was demanding compensation from French insurance giant Axa as part of a dispute over Nationwide's 1998 purchase of Luxembourg group PanEuroLife, now under investigation for money laundering. The US insurer said it had begun an arbitration procedure with the International Chamber of Commerce to obtain damages and interest from Axa. The action 'is aimed at, among other demands, obtaining major damages and interests from Axa,' said a French-language statement released in Paris. Axa declined to comment. The French insurance giant sold PanEuroLife to Nationwide in 1998, but the Luxembourg firm was charged in an investigation last year with setting up a money-laundering ring between France and Luxembourg that handled ill-gotten gains, and allowed companies and individuals to avoid paying French taxes. The system is alleged to have been set up when PanEuroLife was owned by UAP, which Axa took over in 1996. Claude Bebear, head of AXA's supervisory board, and Henri de Castries, head of the group's management board, were placed under investigation last June by officials looking into the charges.

  These too are issues that must be addressed under the statutes applicable to AXA's MONY / Advest Trust proposal, on which ICP has requested public hearings.

* * *

Some previous reports, and this preface: The plane-bombings of the World Trade Center and U.S. Pentagon on September 11, 2001, have resulted in a renewed (and needed) campaign to reform anti-money laundering, tax haven and bank secrecy laws.  This Report will be ongoing; the initial Background is below, Sept. 23, 2001.

October 27, 2003

   Last Monday's ICP Bank Beat report included portions of ICP's comments to the Swiss regulatory agency, opposing Royal Bank of Scotland's Coutts Bank's proposal to acquire HVB's Bank von Ernst. When, the Swiss regulators responded on October 23, and now we've replied, as follows:

Dear Messrs. Franchetti and Robert-Nicoud and others the SFBC:
On behalf of the non-governmental organization Inner City Press / Fair Finance Watch (collectively, "ICP") this responds to your letter of October 23-24, 2003, and is in further opposition to the proposal by Coutts Bank (Switzerland) to acquire Bank von Ernst. Your letter, which we appreciated, asserts among other things that ICP's October 20 comment "target various entities associated with the Royal Bank of Scotland" but do not "directly concern[] Coutts Bank - a duly authorized and supervised Swiss Bank - and as such is not relevant to its acquisition of Bank von Ernst."

This letter provides relevant information about Coutts Bank (Switzerland). Your letter acknowledges that the SFBC is required to investigate complaints that allege possible violations or unauthorized activities, and "regulates the ownership of Swiss banks." ICP and its Fair Finance Watch contend that these two duties are related: that before allowing, affirmatively or by inaction, a bank - in this case RBS' Coutts Bank (Switzerland) - to acquire a Swiss bank, the SFBC must review relevant adverse information, particularly but not only concerning lax anti-money laundering procedures - about the banks. We believe that such is implicit in the discourse of the Basel Committee on Banking Supervision and other relevant bodies and treaties (including those cited in our Oct. 20 Comment).

The RBS material we have provided is relevant to RBS' direct, 100% owned subsidiary Coutts Bank (Switzerland). But, directly as to Coutts Bank (Switzerland), note that the Philippine Daily Inquirer of September 5, 2003, "Senate to Re-Open Probe of $2 Million Extort Case," reported that

"On Dec. 12, 2002, the Money Laundering Reporting Office Switzerland of the Federal Police Office passed information to the Prosecution of the Swiss Confederation concerning Perez and the others... On March 27, 2001, EFG Private Bank SA, Geneva branch, opened Account No. 338'128 in the name of Ernest de Leon Escaler. The bank opened another account, No. 338'372, at the request of Escaler but in the name of Lucky Clover Enterprises Ltd. Someone authorized by Capcept Ltd. signed the documents for the opening of this account while the company EFG Financial Advisory Pie Ltd. tied up the banking transaction.
"Documents relative to the opening of Account No. 338'118 of Rosario Perez and Arceo said Escaler was the 'center of influence of EFG Financial Advisory in the Philippines.' Accounts were opened in the name of the same holders at EFG Private Bank SA, Guernsey branch.
"Pointing out Philippine news stories that these people were involved in the bribe scandal, it was confirmed that Account No. 338'118 received $ 1 million from the account of Escaler at the Coutts (Schweiz) AG Hong Kong." (emphasis added).

Your letter chided ICP for not having commented directly on RBS' Coutts Bank subsidiary (which the above addresses); your letter also sought to limit your jurisdiction to violations of Swiss (rather than international law, or the applicable laws of countries in which Coutts Bank (Switzerland) and RBS do business). As to Swiss law, see, e.g., the Manila Standard of September 5, 2003, reporting that Mark Jiminez

"accused Perez of extorting $ 2 million from him, forcing him to transmit $ 2 million from his account in the Trade and Commerce Bank of Uruguay to the account of Escaler at Coutts Bank in Hong Kong.
"Osmena said the details provided by Jimenez jibed with the details provided by the Swiss government... If the paper trail is established, Perez will be facing not only money laundering charges in Switzerland but also plunder charges under Philippine laws." Emphasis added.

The transfers involving Coutts Bank (Schweiz) AG are related to alleged corruption and environmental and social harm. As summarized by the Manila Bulletin of September 4, 2003, authorities

"accused Perez of accepting $ 2 million in exchange for his approval of the controversial power contract with Argentina firm Industries Metalurgicas Pescarmona C.A. (IMPSA) involving an amount of $ 470 million. Perez, after giving out a legal opinion in favor of the Impsa - Caliraya-BotocanKalayaan hydroelectric plant, allegedly deposited $ 2-million in Coutts Bank in Hong Kong in the name of his brother in law and business associate Ernest Escaler."

Note that "Escaler is a former consultant of Coutts Bank for the Philippines," Philippine Daily Inquirer of August 19, 2003, "OPLE CONFIRMS SWISS GOV'T PROBING PEREZ." We assert that the lack of standards -- lack of human rights standards, lack of anti-money laundering safeguards, enabling of predatory lending -- that we have sketched at Royal Bank of Scotland is also evidenced at the RBS subsidiary before you, Coutts Bank (Switzerland). We reiterate our request for a hearing and appropriate inquiry, and that RBS / Coutts Bank's applications and proposal be denied, stopped and/or enjoined.

Respectfully submitted,

Matthew Lee, Esq., Executive Director

October 20, 2003

   ICP/Fair Finance Watch has today filed comments with Swiss bank regulators, opposing Royal Bank of Scotland's proposal to acquire another "private" bank, Bank von Ernst. Portions of FFW's comment are in this week's ICP Bank Beat Report, click here to view.

October 13, 2003

   The Patriot Act in Chinatown: the Sing Tao Daily newspaper reports that in "New York's Chinatown alone, 10,000 people" and "as many as 10 Chinese banks doing business with the exploding undocumented immigrant community are affected by the new law." Section 326 of the Patriot Act is the Customer Identification Program that requires financial institutions to collect and be able to verify a customer's name, address, date of birth, and an identification number.... "Unquestionably it's going to cause a lot of undocumented aliens not to use the financial services," said Thomas Sung, chairman of the Abacus Federal Savings Bank. Mr. Sung says he is trying to find alternative solutions to the law such as a Chinese version of the Mexican consular ID card that would be recognized by the Treasury Department as an official identification. If no alternative is found, Mr. Sung predicts a potential loss of millions of dollars and up to 30% of his business due to the new regulations. Sung says, "We are a bank that is just big enough to take that responsibility seriously and really work to overcome it." We'll see...

October 6, 2003

   In the run-up to FATF's Stockholm meeting, attention focused on the so-called Nine Rogues, the "uncooperative countries" of Ukraine, the Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria and the Philippines. According to the Israeli daily Haaretz, in mid-September during a meeting in Jerusalem with the director of the Justice Ministry, Aharon Abramovitz, a FATF delegation informed Israel of its decision to remove the country from the list of countries under international observation...

September 29, 2003

  The Central Bank of Russia last week issued a regulation which classifies offshore banking centers as to (compliance) risk. Or, as the CBR's head of regulation and supervision Simanovsky puts it, "There are civilized offshore zones, less civilized, and utterly uncivilized." It is, he says, based on the "state of law, quality of banking supervision, the offshore zone transparency and its conformity with international requirements, including measures for fighting money laundering and financing terrorism." "This is practical evaluation of the country risk and requirements for creating reserves against this country risk," Simanovsky says. "These requirements are milder when it comes to civilized offshore zones - the rules for them are the same as for "non-offshore" countries - that is, we have introduced reasonable differentiation." Drum roll -- the list goes a little somethin' like this: the first group (0% reserve on operations) includes Channel Islands, Isle of Man, Ireland (Dublin, Shannon); Cyprus; Malta; China (Hong Kong); Luxembourg; Switzerland; and Singapore. The second group (50% reserve): Antigua and Barbuda; Bahamas; Barbados; Bahrain; Belize; Brunei Darussalam; Anguilla, Bermuda, British Virgin Islands, Montserrat, Gibraltar, Turks and Caicos, Cayman Islands; Grenada; Djibouti; Dominica; China (Macao, Aomyn); Costa Rica; Lebanon; Mauritius; Malaysia (Labuan); Maldives; Monaco; Antilles (the Netherlands); Cook Island, Niue Island, United Arab Emirates (Dubai); Panama; Portugal (Madeira); Western Samoan; Seychelles; Nevis & St. Kitts; St. Lucia; St. Vincent; US Virginia Islands, Puerto Rico Commonwealth, Wyoming and Delaware states; Tonga; Sri Lanka; and Palau. The third group (100% reserve) includes Andorra; Angevin Islands; Aruba; Vanuatu; Liberia; Liechtenstein; Marshall Islands; Nauru, Serbia and Montenegro.

That Group Three -- a/k/a, as in the World Cup, the Group of Death -- is really something. Other regulators, in the U.S. and Europe, beat around the bush, including at the behest of their largest banks. Anyway, there for now is the list...

September 22, 2003

  In the run-up to the World Bank / IMF meetings this week, the United Arab Emirates put its spin on its anti-money laundering record, and its "vigilance" on hawala... The report noted that the UAE efforts to combat illicit money dealings date as far back as 1993 when the Central Bank issued a circular to all banks, ordering them not to open real, secret or fake bank accounts to any individuals without proper documentation, including authentic passports, commercial licenses and other documents. The circular which showed the UAE vigilance on the issue long before the events of September 11, 2001, also prohibited the opening of bank accounts in the name of charity groups or welfare associations without producing the original copy of the Labor Ministry decision permitting the operation of such a charity or social welfare bodies.

   Below in this Report you'll find the details regarding from where the funds wired to the 9/11 hijackers came, and how. So we take the above with a grain of salt, while noting the funds also moved through Citibank, HSBC, SunTrust, et al., and that these institutions have either done little since, and have been far from transparent about what little they've done...

September 15, 2003

  Spanning the globe: in Mozambique on September 11, Prime Minister Pascoal Mocumbi said, "we have been strengthening banking supervision, and we are paying attention to the foreign exchange bureaux and the other financial institutions". But he said that the movement of capital was "on far too vast a scale to be controlled by just one country, and needed joint efforts internationally. One exchange bureau in particular has long been suspected of money laundering. This is Unicambios, owned by Ayob Abdul Satar, one of the six people who, in January, were found guilty of the murder of Mozambique's foremost investigative journalist, Carlos Cardoso, and sentenced to lengthy prison terms. Evidence produced during the trial suggested that Unicambios is a center for illicit financial activity. But when asked why Unicambios is still trading, Mocumbi replied "There must be a legal decision leading to the closure of Unicambios; without that, there is no reason to close it"...

September 8, 2003

Last week the Czech Republic was put on the Kimberley Process list of countries into which it is forbidden to export diamonds, due to the failure to enact legislation that would permit greater control and supervision over trade in diamonds. "This inclusion among embargoed countries is devastating morally. Diamonds are used to launder money and to finance terrorist organizations," said a spokesman for the Czech Gemology Association. The Ministry of Finance is working to submit the missing law to the government in a matter of weeks. We'll see... 

September 1, 2003

  At a U.N.-sponsored seminar in Islamabad on August 25, Nadeem Ahmed of the Anti Narcotics Force stated that "[i]n the absence of an anti-money laundering law banks do not feel bound to report suspicious transactions," and that "no bank in Pakistan had ever provided the ANF with a suspicious transactions report." Yowdza... Earlier in the month, a Swiss judge found former Pakistani prime minister Benazir Bhutto, her jailed husband Asif Zardari and a Swiss lawyer guilty of money laundering. Bhutto, Zardari and Jens Schlegelmilch were guilty of arranging an illegal six percent commission worth 12 million dollars for awarding a customs inspection contract to Swiss firms Societe Generale de Surveillance (SGS) and Cotecna, according a copy of July 30 judgement... The funds were laundered in accounts of Barclays Geneva and UBS Geneva... 

August 25, 2003

   Routine terror: the NYT of August 23 reports on the targeting of Nicaragua's ex-president Arnoldo Aleman, "who is imprisoned there on charges of embezzling $100 million before he left office in 2001. Agents in Miami in recent months have seized about $5 million in Florida bank accounts and real estate holdings that they believe was laundered by the former president, his family and associates.... Agents in Miami have relied in part on expanded financial powers granted to them under the USA Patriot Act. Little-noticed provisions have given the government authority to seize foreign bank accounts in the United States in money-laundering cases and to pursue embezzlement and fraud cases overseas that previously might have been considered off limits to investigators. Money laundered into American financial institutions by corrupt foreign leaders totals as much as $2 billion by some estimates, as they "park" their money in American banks, real estate holdings, securities and even insurance policies." Ah, whatever happened to "know your customer"?

August 18, 2003

   In light of the death of Idi Amin, we focus this week on anti-money laundering safeguards in Uganda. According to the Kampala publication New Vision, the Bank of Uganda (BOU) this past weekend issued forex bureau operators with guidelines on how to prevent money that has been made from criminal activities from going through their bureaus. The idea is for forex operators to check for money laundering in their day to day transactions with customers. The guidelines require forex operators to check the identities, backgrounds and nature of business operations of their customers. The operators are also required to specifically indicate on their outflow forms the reason why the customer is buying or selling forex. However, as was pointed out by Steven Mwanje, the chairman of the Uganda Forex Bureaus Association, dealers' volumes are going to go down, as some customers turn back to the kibanda market that asks no questions. Nor do the operators require you to fill out forms. Great... We have also noted, to one of American International Group's regulators, AIG's ongoing operations in Zimbabwe, click here for a bit more...

August 11, 2003

   Fine of the week: the UK FSA fined National Australia Bank's subsidiary Northern Bank 1.25 million pounds ($2 million) for weaknesses in its anti-money laundering controls. "The steps Northern Bank took to satisfy itself that its customers, particularly business customers, really were who they claimed to be, were inadequate," the FSA's Carol Sergeant said-in-a-statement. 

August 4, 2003

    ...Beyond Salinas, Abacha and all the rest, Citigroup continues being identified by government agencies as being lax on money laundering. For the record, reported six weeks ago from Lagos, Nigeria:

Citibank CEO Docked for Money Laundering

Vanguard (Lagos) June 19, 2003 Innocent Anaba, Lagos

The Federal Government has preferred a four-count charge of money laundering against Citibank Nigeria, its Managing Director, Arif Usmani and an employee of the bank before a Federal High Court sitting in Lagos. Citibank Nigeria was alleged to have sometime in August 2002 at Lagos within the jurisdiction of this court failed to report to the Central Bank of Nigeria international transfer in respect of account No. 1528033 in favour of Elder Dempster Agencies Nigeria Limited and thereby committed an offence contrary to Section 2 and 15(1)(e) and punishable under Section 15(2)(b)(i) of the Money Laundering Act No. 3 of 1995. *That you, Citibank Nigeria sometime in June 2002 at Lagos within the jurisdiction of this court failed to report to the Central Bank of Nigerian international transfer in respect of account No. 1231049 in favour of Ferrostaal (Nig.) Ltd. and thereby committed an offence contrary to Section 2 and 15(1)(e) and punishable under Section 15(2)(b)(i) of the Money Laundering Act No. 3 of 1995.

*That you, Arif Usmani and Franklyn A. Nlerum, being a director and employee, respectively of Citibank Nigeria at Lagos within the jurisdiction of this court failed to verify the identities and addresses of your customers to wit: (a) MTN Nigeria Communication Ltd., (b) Sims Nigeria Ltd., (c) Ranona Ltd. and (d) Olm Nig. Plc. before opening accounts or entering into a fiduciary transaction with them and thereby committed an offence contrary to Section 5 and 15(1)(f) and punishable under Section 15(2)(b)(1) of the Money Laundering Act No. 3 of 1995.

*That you Arif Usmani and Franklyn A. Nlerum, in the month of July 2002, being a director and employee, respectively of Citibank Nigeria at Lagos within the jurisdiction of this court failed to disclose and report to the National Drug Law Enforcement Agency in writing, 12 lodgements, transfers and/or transactions each in excess of N2 million and in favour of Ronona Limited Account No. 783018, you thereby committed an offence contrary to Section 10(1)(b) and 15(i)(f) punishable under Section 15(2)(b)(1) of the Money Laundering Act No. 3 of 1995.

Citigroup's standardless activities in Africa are worse than "mere" money laundering -- click here for more.... 

July 28, 2003

   We've previously covered Nauru -- but things got even weirder last week. Nauru's president Scotty announced the closure of Nauru's diplomatic missions in the United States and China. "The missions had not been staffed by Nauruan nationals and were not serving their intended purposes," Scotty said. "These missions were created following a visit to the U.S. by late former President Bernard Dowiyogo, in part to assist Nauru to fulfill its obligations with regard to anti-money laundering, and also to assist with other matters affecting Nauru's external relations." Dowiyogo died in a U.S. hospital during the visit. In an email, the man who claims to represent Nauru in Washington, Steven Ray, said he had not been advised by Scotty of the closure. "His announcement is politically suspect," Ray said, adding that diplomatic missions in the United States and China cost nothing. "There was no physical property in Washington, only a mail drop. Nauru did not front any of the costs involved in the Beijing embassy, and there was certainly never any salary or expenses paid to either representative," he said.  In February, U.S. Secretary of State Colin Powell urged Nauru to halt its passport-selling scheme after six alleged al-Qaida operatives were arrested in Malaysia carrying Nauruan passports. Nauru has since ceased its Citizenship Investment Scheme and closed its offshore banking system. For now... 

July 21, 2003

   On July 16, the U.S. Office of the Comptroller of the Currency hit DC-based Riggs Bank with a cease-and-desist order for violating money-laundering laws. Unhelpfully, neither Riggs officials not the OCC specified if the consent order was tied to any particular customer, or how many transactions Riggs failed to report over what time period. The Washington Post (July 17) reported that "[s]ources said that in a separate but related investigation, the FBI continues a months-long probe into whether charitable contributions made by a Saudi princess with checks drawn on her Riggs account indirectly benefited two of the Sept. 11, 2001, hijackers. The sources, who asked not to be named, said bank regulators have exchanged information about the transactions with the Washington field office of the FBI. Spokesmen for the FBI and the OCC would not comment. Last fall, Saudi officials said that Princess Haifa al-Faisal, wife of a former Saudi ambassador, wrote checks to a family for charitable purposes but that the family had contacts with a person who helped two of the hijackers when the hijackers arrived in the United States." Meanwhile, Riggs trumpeted an inflated Community Reinvestment Act it received from the OCC, also last week...

July 14, 2003

  The L.A. Times of July 8 quoted a representative of the DC-based Fund for Peace that "Africa is wide open because there are so many failed or failing states without an ability to control borders, monitor financial transactions or control resources like diamonds or timber that is used for money laundering." Subsequently at a background briefing in Abuja, a "Senior Administration Official" said that "President Obasanjo talked about our anti-crime cooperation, particularly on drug trafficking and money laundering." 

July 7, 2003

  The Supreme Court punted on the Nike case, which raised the question of when and how court can compare a corporation's claims to its actual practices. Last week ICP's Fair Finance Watch raised a somewhat similar question to the Federal Reserve Board, with regard to a bank, Crédit Agricole ("CA"). CA recently acquired Crédit Lyonnais, in the largest European bank merger since Royal Bank of Scotland's take-over of NatWest. The combined CA claims to have human rights and environmental standards, but refuses to answer questions about these standards, or about the CRA and mortgage lending record of a bank it owns in the U.S. So on July 3, in the spirit of independence, ICP/FFW raised these issues to the Fed, in "a timely comment opposing the Applications of SAS Rue la Boetie, through Credit Agricole, to acquire control of Espirito Santo Bank." [For community lending issues, see this week's ICP CRA Report.]

  Regarding Espirito Santo Bank, we hereby timely bring to the FRB's attention the report earlier this year in the Miami Daily Business Review (February 5, 2003) that

"[a]lmost $1.2 million in 'secret commissions' from the sale of military aircraft and equipment is said to have been deposited in Miami's Espirito Santo Bank on Brickell Avenue. A long-playing corruption scandal that rocked NATO and the governments of Belgium and Chile in the 1990s - featuring the suicide of a Belgian general and millions in payments to a mysterious arms dealer tied to former Chilean dictator Augusto Pinochet - now is following a money trail into Miami. According to papers filed in U.S. District Court in Miami, a Belgian prosecutor has asked the U.S. attorney's office to obtain records from Miami's Espirito Santo Bank about an account in which nearly $1.2 million in "secret commissions" from the sale of military aircraft and equipment was deposited. The prosecutor wants to determine the identity of the beneficiary of that account, No. 116154103... That money is part of $14.5 million in under-the-table commissions allegedly paid on behalf of Berthier Investments Inc. from money that originated as Chilean government funds. The "beneficiary" of Berthier Investments, a British Virgin Islands firm with a Miami post office box, is a Chilean arms dealer of Czech origin named Carlos Honzik, according to court papers. The papers indicate that Honzik, a reputed friend of Pinochet, is now dead."

   We further note the report in the London newspaper The Guardian, of October 11, 2001, which reported that Credit Agricole had handled $92,000,000 for Nigerian ex-dictator Sani Abacha, raising a red flag of a lack of human rights standards and, relatedly, a lack of anti-money laundering safeguards. As yet one more example, we note that Crédit Lyonnais (of which we understand Crédit Agricole now owns over 97%) was, at least less than two years ago, a funder of the questioned Chad-Cameroon oil pipeline project...

   So we'll see.... Lax and laxer: the Office of Thrift Supervision, rarely transparent, has now ended the extra scrutiny imposed on Trustco Bank after the OCC accused it last August of violating laws against money-laundering. In October, the OTS approved the merger of Trustco Bank and Trustco Savings Bank into one entity, bringing the bank under the supervision of that agency, which regulates thrifts, instead of the OCC, which regulates national banks. Talk about being able to flee your regulator for an (even) easier one...

June 30, 2003

   On June 26, the U.S. Treasury Department's FinCEN announced a fine of $1.1 million to be paid by Korea Exchange Bank (KEB) for, between March 1998 and May 2001, failing to file in a timely manner some 39 suspicious activity reports involving nearly $32 million in transactions through its Broadway branch in Manhattan. Speaking of Manhattan, the New York County District Attorney on June 26 announced an indictment against Beacon Hill Service Corp., which had offices on E. 54th St. from 1994 until it closed in February, saying that it sent more than $3.2 billion out of the country in 2001 and 2002, including "significant amounts" to Saudi Arabia and the United Arab Emirates...

   Speaking of the UAE: from the mail bag:

Subj: Fund transfer

Date: 6/24/03 2:09:05 PM Eastern Daylight Time

From: [Name withheld]

To: FinanceWatch [at] innercitypress.org

Dear Sir,

I am... working in Dubai High Tech Company for 10 years. I had deposited my income and income from came from selling native property. I deposited those money as personal asset and inheritance fund before 6 years in 1997. This money is lodging with Al-Barakat finance company in Dubai. Things are changed in the World after the Sep, 11 2000. Now, I requested to transfer those amount money into the United States for long term investment. This money is not related to the any of the suspected transaction like as money laundering, money trafficking, and terrorist support. I have all the vital documents. May know from you that how I can transfer my fund safely? Where I should be contacted to get legal coverage certificate? If I transfer this fund in my own risk, what are the penalties will be charged? I hope you will reply my queries from your human rights groups. Thanks with regards

June 23, 2003:  ICP's Fair Finance Watch has challenged Royal Bank of Scotland's proposals to acquire Port Financial in the U.S., and Churchill Insurance in the U.K.. On money laundering, RBS' response tries to "spin" the heavy FSA fine of December 2002, and refers misleading to "a wire sent by Al-Barakaat (an entity that appears to have provided funds to Al-Qaeda) through Citizens Bank of Massachusetts to a bank in the United Arab Emirates (the 'UAE'). The UAE was not at the time of the wire (or today) in the high-risk for anti-money laundering category as determined by either FinCEN or the FATF." RBS apparently does not dispute being used as a conduit of money for terrorism, nor to, since then, having been subject to a major fine for lack of anti-money laundering policies and procedures. ICP has replied, to the U.S. Federal Reserve and to RBS' primary supervisor, the UK FSA.

June 16, 2003

  Name and shame? In that spirit (and in light of banks' duties to monitor their counter-parties, including those for whom they perform correspondent services), we offer this, from the ONASA News agency in Sarajevo, circa June 10, 2003: "Fictitious companies in BiH have over the past two years laundered more than 1.5 billion KM through business banks, BiH Federation (FBiH) Television said, quoting a Report of the FBiH Money Laundering Prevention Office. A total of 23 banks have been accused of enabling laundering. It is suspected that the money was used to finance war criminals, terrorism, corruption and privatization. The Report read that 441,000,000 KM were laundered through the Mostar subsidiary of the "Zagrebacka" bank, 290,000,000 KM through the Mostar subsidiary of the Bijeljina "Nova" bank, 208,000,000 KM through the Mostar subsidiary of the "Hipo Alpe Adria" bank, and 202,000,000 KM through the Mostar subsidiary of the "Raiffeisen" bank. The banks are accused of violating the Law on prevention of money laundering and opening of transaction accounts on the basis of forged documentation." 

June 9, 2003

   In Hong Kong, the IMF has reported the local controls on remittance agents and money changers are insufficient. Hong Kong tightened controls over remittance agents under a law passed in June 2000. The law requires them to register with police and keep records of clients who make transactions of more than $ 20,000 for six years. Since then, 783 remittance agents have been registered and 37 people have been prosecuted for failing to comply with the law. The IMF has now recommended that monitoring measures more similar to those adopted by banks be imposed on remittance agents. Bank officials above a certain rank are required to be "fit and proper" persons, and banks have to appoint a compliance officer to report suspicious transactions to financial intelligence unit. The IMF report also urged Hong Kong to take measures to resolve problems of customer identification in the case of shell companies, which the police said were commonly used to launder money...

June 2, 2003

   Speaking of money laundering, ICP / FFW took action this week on Royal Bank of Scotland, raising to the Federal Reserve that, in December 2002, RBS was hit with an unprecedented fine for lack of anti-money laundering safeguards. See, e.g., Financial Times of December 18, 2002, "RBS Fined over Anti-Laundering Controls"

A probe by the Financial Services Authority found RBS staff failed to obtain or keep documentation to establish customer identity in an "unacceptable" number of accounts opened in early 2002. In some cases the bank had not taken copies of basic proof of identity or address, such as a driving license or recent utility bill, to verify new customers were who they said they were.

   Since this break-down in anti-money laundering safeguards became public not only after the last FRB review of RBS, but after ANY U.S. acquisition review, it is imperative that it be inquired in to at this time. It is extremely surprising that RBS did not address this important issue in its application, as has been provided to ICP -- note in this regard the nexus to post-9/11 issues, see, e.g., the Wall Street Journal of November 9, 2001 (Network Suspected of Funding Terrorists Used Major Banks for Money Transfers), reporting that Al-Barakaat (which was raided by the FBI on November 7) opened an account with RBS' Citizens in March 2000, and subsequently wired nearly $600,000 to the United Arab Emirates ("UAE"). "Between July 5 and Sept. 26 of this year, $595,373 was sent from Citizens to... Emirates International Bank in Dubai." Id. The WSJ article also reports that "[a]ccording to regulators and bank officials, neither Citizens Bank nor Key Bank made any effort to ascertain whether Barakaat was legally permitted to be wiring such huge sums back and forth to Dubai. Both banks said they complied with all regulations. 'We saw no suspicious activity,' Citizens spokeswoman Barbara Cottam said."

   RBS' Citizens public position, still, is that the wiring of nearly $600,000 by an institution which had been denied a license by the Massachusetts regulators was not, in RBS' Citizens' view, any "suspicious activity." This calls into question the compliance practices of RBS and Citizens, and militates for the public hearing ICP / FFW is requesting....

May 26, 2003

   From the U.S. Treasury Department's May 20, 2003, news release: the "Department and the Philippines Ministry of Finance today agreed to work together to improve mechanisms for overseas remittances services to the Philippines...According to government statistics, over seven million overseas Filipino workers sent over US$6 billion in remittances to the Philippines in 2001. Of this, approximately 70% was sent through banks and wire transfer services, with fees reaching as high as 15% of the value of the remittances. Experience has shown that competition and improved technology can enhance access to remittance services via the banking sector and significantly reduce the fees for such services The Treasury Department in collaboration with the Federal Deposit Insurance Corporation and the Federal Reserve will work with their Philippines counterparts to identify deficiencies in currently available channels to send remittances to the Philippines; jointly understand the role of the private sector in this area; strengthen the critical financial infrastructure that supports remittances and minimize any vulnerabilities that may exist; promote financial literacy among those who do not use traditional banking channels; and ensure proper implementation and full compliance with international anti-money laundering and counter-terrorist financing standards." We'll see...

May 19, 2003

... The Mauritius Financial Services Commission, which regulates all financial services apart from banking, has recently issued separate codes on the prevention of money laundering and terrorist financing for management companies, investment businesses and insurers. According to the FSC, the introduction of the codes on May 2 is designed to safeguard the integrity and reputation of Mauritius as a financial services center, and they should be treated as minimum standards by financial services companies. The codes set out practices to be followed in areas including know your customer procedures, checking clients' identity, the retention of records, and compliance with the provisions of Mauritius's Financial Intelligence and Money- Laundering Act 2002.

May 12, 2003

    The U.S. Federal Reserve's William Ryback, speaking May 6 at a Bankers Association for Finance and Trade conference in Phoenix, said that the Fed has detected more deficiencies in financial institutions' anti-money-laundering programs in the past two years. "That's why we hired more specialists to look at money-laundering controls, and they tend to take a much more harsher view on what is being done in the institutions on a daily basis," Mr. Ryback said. He also cited failures to do timely updates of their anti-laundering policies....

May 5, 2003

  On April 30, the U.S. Federal Reserve required HSBC to sign a commitment to improve its anti-money laundering safeguards. As reflected below, ICP has been raising these issues since at least November 2002; the Federal Reserve dodged requiring any application for approval by HSBC to acquire Household International... 

April 28, 2003

   The White House has yet to issue its annual planning document to coordinate the federal government's strategy for combating money laundering. The administration says the plan, due in February, is late because new Treasury Secretary John Snow is still reviewing it. Until it is released, agencies involved in the effort lack a list of priorities that require their attention. (And, as we've reported, the largest banks do too little, and seek confidential treatment for what little they do.)

April 21, 2003

  On April 18 in Karachi, officials of the State Bank of Pakistan announced that they've frozen a total of 24 accounts, containing $ 10.2m in deposits, in the last year and a half. They acknowledge that most targeted groups had already withdrawn most of their funds from accounts before they were frozen. A State Bank directive, dated March 29, proclaims that the new policy is part of the "heightened global efforts to prevent the possible use of the banking sector for money laundering, terrorist financing, transfer of illegal, ill-gotten monies." 

April 14, 2003

    Rose-colored glasses: the Financial Times of April 9 quotes Ellen Zimiles, national financial services industry leader for KPMG Forensic, that she has detected a "huge uptick in interest from US organizations and foreign organizations that want to be up to the US standard - from typical banking channels to insurance companies and brokerage firms." That's a source that's paid to praise the industry. More troublingly, James Sloan, director of the U.S. Treasury Department's Financial Crimes Enforcement Network is quoted that "The industry has become one of the most important partners we have." Yeah, the largest banks have been doing a great job -- particularly Citigroup and HSBC.... 

April 7, 2003

  The South African publication Business Day opined last week that "the Southern African Free Trade and Development Agreement between the US and the Southern African Customs Union (Sacu) appears to be driven by the commercial interests of US business in search of global markets. Scratch the surface, however, and its true motivation lies in a pursuit for US national security.... Except for Swaziland, all countries in the region have accepted the principles of democracy. It is expected the US will exert pressure on Swaziland to adopt a new democratic constitution. SA, and other Sacu nations, will have the opportunity to take the lead in securing political reforms in Swaziland. Capacity building priorities will focus on proper enforcement of the rule of law. Free trade agreements encourage the development of enforceable contracts, and fair and transparent governance. Capacity building assists governments in the region to properly enforce laws to expose corruption, fight crime and combat the growing underground economy. Underground economies are magnets for money laundering and smuggling of gold and diamonds by international terrorists."

It's an interesting point -- but one directly contradicted by a detailed account of the U.S. strong-arming of Nauru, a portion of which is online here.

March 31, 2003

   At the International Money Laundering Conference in Miami last week, Citigroup's global money laundering director, Richard Small (yes, the ex-Fed regulator), complained that "It's somewhat stressful to gear up for something when we don't know what it will look like when it comes out." He speculated, in the nature of lobbying, that banks will have to police travel agencies, jewelers and other non-financial businesses that may fall under money laundering rules.

March 17, 2003

    From the money-laundering margins: a death and a resignation. On March 11 in Washington -- where he'd come for talking about money laundering -- Nauru's president Bernard Dowiyogo, who had been the nation's leader for less than two months, died after extensive heart surgery. He was 57. It is anticipated acting President Derog Gioura will remain in the position through April. Nauru, with more banks than people, has been sinking into the sea. It's become the poster-child (and/or scapegoat) of money laundering: it's so absurd, that focus on its bird-excrement splattered bankers' row takes the focus off money centers through which more hot money flows...

March 10, 2003

   From P.R.-land: The Saudi Arabian Monetary Agency (SAMA) has begun to implement a major technical program to train judges and investigators in how to deal with the many complicated issues surrounding terrorist financing and illegal money laundering. The program is part of a concentrated effort by the Kingdom to crack down on the illegal use of private funds to assist terrorist organizations. As part of this ongoing effort, SAMA's new program seeks to educate judges and investigators in all of the legal aspects of the issue of terror financing, including money laundering methods and methods that suspects commonly use to exchange information in order to make prosecution of those involved in such criminal activities more effective...

February 24, 2003

    Meeting in Paris over the weekend, the G-7 ministers agreed over dinner to "step up surveillance on money laundering and technical aid to developing countries to help eliminate funding for terrorists." Meanwhile in Hong Kong, Insurance Commissioner Benjamin Tang claimed on Feb. 20 that he's reviewing Hong Kong's self-regulatory system of insurance intermediaries, making further improvements on the prudential supervision of life insurers, and exploring the feasibility of establishing policy holders' protection funds. "Amidst the wave of globalization, IT revolution and market convergence, we shall strengthen our dialogue and cooperation with other financial services regulators, both local and overseas," Tang said.

     ICP' is "on the road" -- see our Global Inner Cities report for comments we've just filed in a dozen African nations, opposing HSBC's proposals there, including the "export" of Household's practices, and an acquisition of 40% of the shares of Equator Bank; this is not unrelated to money laundering issues, as you might imagine... Meanwhile, in connection with its applications to try to acquire the subprime lender Household International, HSBC continues to downplay public reports of its money laundering, although the OCC has now asked about the issue.

February 10, 2003

    At a conference in Kuwait last week, money laundering was the main issue. Ibrahim Al-Ghanim, the general manager of General Administration of Customs, proclaimed that Kuwait was always at the forefront of supplying other countries with all developed and improved techniques" [?] The conference was organized "in co-operation" with the U.S. Department of Justice...And now Deputy U.S. Treasury Secretary Ken Dam has resigned as well...

February 3, 2003

   U.S. Treasury Undersecretary for Enforcement Jimmy Gurule -- we hardly knew ye... From the Arabian Gulf: the U.S. Customs Service is opening its first permanent base in the Middle East -to help track the flow of money to terrorist organizations. The office will be located in Dubai, United Arab Emirates, often described as a financial center for al-Qaeda. Offices are to be located in the capital of Abu Dhabi, and at the U.S. consulate in Dubai. In response to Western concern over the emirates' lackluster finance regulation, the central bank has speeded up legislation controlling money-laundering and has started to regulate hawala. 

January 27, 2003

     The United Nation's money-laundering adviser, Marie-Christine Dupuis, speaking at an Interpol conference on Jan. 23, named Hong Kong as one of the top three financial hubs in the world in terms of its potential for large-scale money laundering, along with Zurich and New York. Ms Dupuis said the sheer scale of monetary transactions and free flow of currency through such financial centers raised the scope and potential for large-scale money laundering. U.S. FBI agent Charles S. Prouty added, "Anytime you have a major banking center like Hong Kong, Zurich or New York they run the risk of being exposed to being used as a money-laundering tool in the financing of terrorism and organized crime." Meanwhile, the Hong Kong Securities and Futures Commission has recently published a consultation paper to revise the guidance note on money laundering. It will extend guidance to all associated entities, and update the note with the newly enacted anti-terrorist financing law, which criminalizes the supply of funds or financial services to terrorists or their associates...

January 21, 2003

    The U.S. Justice Department on Jan. 16 said Puerto Rico bank Banco Popular de Puerto Rico agreed to forfeit $21.6 million to the federal government and take responsibility for failing to file appropriate reports of suspicious activity. Under terms of the accord, the bank agreed to file the report, accept responsibility for its behavior and forfeit funds to settle all of the government's civil claims. The Justice Department, in turn, agreed to recommend to the court that prosecution on criminal charges be delayed for 12 months and then dismissed if the bank complied with the agreement. Which is getting off pretty easy...

December 30, 2002

    Speaking in Dubai on Dec. 25, UAE Central Bank Governor Sultan bin Nasser Al Suwaidi said that the UAE has made much headway in bringing in, and enforcing, new regulations that deal with curbing financing for terrorist activities and money laundering. He explained that these laws are not about hindering the flow of business transactions, but at stopping the wrong type of transactions being carried out in the country. The UAE is taking part in the international fight against terrorist financing and money laundering. In fact, this drive is taking big part of our time. Our objective is to develop a system that would be easy for the banks to use to report any such activity, he added. With the implementation of the WTO, there will be a decision, probably, in the year 2005, on issues related to creating an open market. This could see the allowing of more foreign banks access to the UAE, he explained. Talking about the developments in the Basel Committee, he said that these are times of major changes in the global financial services market, which have seen the issuance of new proposals by the Base Committee on capital accords.

     HSBC, in a response submitted to federal and state regulators on Dec. 23, recites some but by no means all of the adverse issues ICP has timely put into the record. On those that HSBC does purport to address, not only did Spain's Commission on the Prevention of Money Laundering and Monetary Infraction fine HSBC -- it raided HSBC's Madrid office, only last month. This is a serious matter, that is not resolved by HSBC's vague statement that it "is considering its right to appeal." HSBC, despite reciting the public reports of profiting from money looted by Nigeria's ex-dictator Sani Abacha and holding money for 9/11/01 hijacker(s), does not deny either of these. Rather it refers vaguely to "internal systems" regarding which it does not provide any information. Developing... For more on the campaign against HSBC - Household, click here. And... happy New Year!

December 23, 2002

    The FATF on Dec. 20 imposed sanctions on Ukraine for its failure to enact effective legislation against money-laundering. The FATF faulted Ukraine for a law dated Dec 7 that it said does not "address the main deficiencies" in the country's efforts to stamp out money laundering. In Kiev, Ukrainian Prime Minister Viktor Yanukovytch was quoted by the Interfax news agency as saying his government will "do everyting to have a new law adopted that reinforces the fight against money laundering." Yanukovytch also called for urgent talks with the FATF on the issue...

December 9, 2002

    Another way the cat's being skinned: A scheme to launder some $80 million in Colombian drug money through life insurance companies in the United States, the Isle of Man and other locations has been uncovered by law enforcement officials from all three countries. Colombian drug-trafficking organizations, through a small number of insurance brokers, were purchasing investment-grade life insurance policies in the United States, the Isle of Man, and other locations, with cartel associates as the beneficiaries. These policies were funded with tens of millions of dollars worth of drug proceeds sent in the form of checks and wire transfers to insurance companies by third parties around the globe, according to a statement from the U.S. Customs Service. Law enforcement officials from the three countries have identified more than 250 policies linked to drug proceeds in the ongoing two-year investigation, the Customs Service said. Once an investment-grade life policy is created, it operates much like a mutual fund. Customers can overfund the policy beyond its face value and make early withdrawals, but with substantial penalties. the U.S. Attorney for the Southern District of Florida said Dec. 6 that a grand jury has indicted five Colombian nationals on money-laundering violations, accusing them of laundering about $2 million worth of drug proceeds through insurance companies

November 25, 2002

     From Hong Kong -- and then, from Madrid: A prominent Hong Kong businessman is under investigation in Latin America over a haul of explosives, alleged money laundering, and the suspected funding of Middle East terrorist groups. The Sunday Morning Post has reported that a business associate, an employee and the niece of Hong Kong-based Indian exporter Rajkumar Sabnani have been under house arrest in the Paraguayan border city of Ciudad del Este since authorities raided their apartment in July this year. None of them has been charged and no warrant has been issued for Mr Sabnani's arrest. One of his business partners, Hong Kong resident Sandra Ho Wai-ling, was briefly detained in the neighboring Brazilian city of Foz do Iguazu after she visited Paraguay this year, but was released without charge. Paraguayan prosecutors said the raid uncovered bomb-making materials, a fax order for AK-47 assault rifles with Mr Sabnani's name on it, and authorization from unknown persons for him to use $30 million (HK $234 million). Police sources in Hong Kong say they are aware of the case but there is no investigation under way yet in Hong Kong.

     On November 20 in Madrid, Spain's Commission on the Prevention of Money Laundering and Monetary Infractions imposed on HSBC a $2.1 million fine for failing to identify account-holders by name, and for not investigating the unusual operation related to numbered overseas accounts linked to collapsed brokerage Gescartera (Reuters, 11/20/02). What was that about HSBC's ethics again? Click here for ICP's ongoing HSBC Watch, and for Sir David Eldon's 11/20 quote about HSBC's ethics. 

November 4, 2002

    From last week's American Bankers Association money laundering conference: "The Patriot Act has labeled international correspondent banking as high-risk business and has placed a Bank Secrecy Act and anti-money-laundering bull's-eye on it," said Clemente L. Vazquez-Bello, a partner with Miami law firm Gunster, Yoakley & Stewart. "My clientele feel that they have been unfairly walloped by this legislation," he said. "They feel as though they have been hit by a two-by-four and that they did not deserve this."

     Even after last week's sale of 28%, Citigroup still holds a 20% stake in Saudi American Bank (SAMBA), Saudi Arabia's largest listed bank. SAMBA shares fell 5.2 percent in the first four days of last week on the Saudi stock exchange on rumors that Citibank had sold its entire 22.8 percent stake, but then recovered some losses after a Saudi newspaper reported that the U.S. bank only sold 2.8 percent of SAMBA. The Riyadh-based bank became one of the largest banks in the Middle East after it merged with United Saudi Bank in July 1999. The remaining SAMBA shareholders are mainly Saudi government institutions. 

October 21, 2002

    The evidence used to indict the Benevolence International Foundation and Enaam Arnaout was primarily obtained at BIF's Bosnian office in a raid last March. But Matt Piers, one of BIF's lawyers, notes that most of the allegations - even if they can be proved by the government - date from periods when the US was supporting the same groups that Mr. Arnaout is alleged to have financed. These include Afghans fighting the Soviet occupation in the late 1980s, Bosnian Muslims resisting Serbian aggression in the 1990s and Chechen rebels fighting for independence from Russia. "It troubles me when the government presents this kind of effort as a great victory in the war on terrorism," he says.

October 14, 2002

   Last week, Cook Islands Minister of Police Geoffrey Henry accused the OECD of "taking upon itself the responsibility of 'terrorizing' the small offshore finance centers around the globe." In a speech to participants at the 31st annual South Pacific chiefs of police conference on Rarotonga, he that the OECD's FATF "has shown no appreciation whatsoever for the real lack of resources in the small countries they are targeting. It has promised to help but given none. It seems intent on destroying the many small offshore finance centers around the world... The Cook Islands government of today is determined to clean up its act," he said. The government has zero tolerance for money-laundering of any kind and will largely be guided by the rules being constantly changed by the FATF. We will change our laws regarding offshore banking activities if we believe it is right to do so. We will not, however, engage the FATF game unless we are assured that there is a level playing field for all players." Right now, he said, it has been estimated that 92 per cent of all money-laundering in the world takes place in six member countries of OECD. It has also been estimated that worldwide only a fraction of 1 per cent of money-laundering occurs in the Pacific. He said the turnover of money laundering in one hour in New York, London and Zurich equates to something like the same happening in the Pacific over 20 years. "Yet the OECD smartly distracted attention from its members and came down on small offshore finance centers like a ton of hypocritical bricks. The majority of the business of our offshore finance center is now being happily practiced in Delaware, America, completely free of the attention of the FATF. The hypocrisy is gut-wrenchingly nauseous." Yowdza!

October 7, 2002

     In a speech on October 1, Indonesian Foreign Minister Hassan Wirajuda argued that the Indonesian government has tried to combat terrorism in the best possible way and firmly rejected foreign accusations, primarily from the US, that Indonesia is running in the slow lane in fighting against terrorism. "We have optimized the efforts to fight against terrorism in Indonesia. We have arrested suspected migrant terrorists. How could people say that we are too slow?" he said. For an account of the housing crisis for low-income people in Indonesia, see this week's Global Inner Cities report.   On a lighter note, click here to view ICP's editor's Oct. 3 poem (doggerel) on Citigroup, "Song of Solomon [Brothers]," on the WallStreetPoet.com site...

September 16, 2002

    As the one-year anniversary of 9/11/01 came around, round-up stories reported that SunTrust Banks -- where the Sept. 11 hijackers had nine accounts -- is "fully cooperating" with the crackdown, according to bank spokesman Barry Koling. "In retrospect, it's chilling for us to see what these guys did," Koling intoned of the accounts in Florida that the hijackers used while in flight school. The reports continued: the FBI has traced about $300,000 in transactions by the hijackers through U.S. banks. By keeping transactions small, they were able to use credit cards, checks and cash machines to move the money without raising suspicions. Some money going through the SunTrust accounts flowed through Standard Chartered Plc, a U.K. bank that was a conduit for more than $78,000, according to U.S. prosecutors. The lack of mention of, or follow-up on, Citigroup (recounted below on this page) is surprising...

September 3, 2002

       From the South China Morning Post, August 31: "a draft United Nations document had identified Hong Kong as one of five financial centres where Al-Qa'idah held banking accounts. The other centres mentioned were Dubai, London, Malaysia, and Vienna." Meanwhile in Dubai, "The basic premise is that there is a piece missing in the puzzle. There isn't a financial centre between Frankfurt and Singapore," said Dubai International Financial Center (DIFC) spokesman Geoff Rapp. "We are not about brass plating. We are creating a market. It is not an offshore center," Rapp said....

August 26, 2002

    On August 20, the Swiss Federal Justice Office in Bern announced that that it has returned to Peru $ 77.5 million deposited in its banks by Vladimiro Montesinos and other former Peruvian officials charged with corruption and human rights crimes, having deposited the money in Peru's Banco de la Nacion account at Citibank in New York. "Montesinos received bribes for at least 32 transactions, each worth 18 percent of the purchase price," according to the Swiss authorities' official statement. For the purchase of three Russian MiG combat aircraft alone, the former Peruvian official pocketed $ 10.9 million, said investigators. Montesinos was sentenced in Peru last month to nine years and four months in prison for crimes involving the misuse of power. He faces least 65 more criminal charges as well as 140 other complaints that are pending...

August 12, 2002

      A reflection of the U.S. Federal Reserve's less than transparent policies on the terrorism-related money laundering that Congress sought to address in the USA Patriot Act: in a July 30 letter to Inner City Press' Fair Finance Watch, Fed Deputy Secretary Robert deV. Frierson rejects ICP's request that "Royal Bank [of Canada] and its affiliates should be compelled to disclose information required under the USA PATRIOT Act... [T]he United States operations of Royal Bank and the operations of RBC and Bank are subject to examination for compliance with applicable provisions of the USA PATRIOT Act. The Board took into account available supervisory information, including confidential findings related to compliance when it considered the application." And on Enron: "You submitted a new allegation in light of reports that Royal Bank is involved in a cross-suit with [Rabobank] over a swap transaction entered into by Rabobank for an affiliate of the Enron Corporation. The lawsuits involving Royal Bank and Rabobank are pending... The Board has reviewed available supervisory information related to this matter and has considered this information in light of the overall financial and managerial resources of Royal Bank. Your request has been presented to the members of the Board... no member of the Board has requested that the Order by reconsidered or modified in any manner. Accordingly, your request for reconsideration is hereby denied."

August 5, 2002

    More on the U.S. Treasury Department report issued July 25: it states that since 9/11/01 $112 million in terrorist-related assets have been frozen, and that at least 160 countries have frozen funds and more than 500 accounts have been blocked. The Washington Times opines that "the actions of the September 11 hijackers exposed some of the shortfalls in America's approaches to tracking terrorists' financial transactions. Leading up to September 11, these terrorists used three known methods for moving money: commercial U.S. banks, money transmitters and, apparently, a centuries-old network for transferring money, prevalent in South Asia and the Middle East, known as hawalla. Hawalla functions with money rarely crossing a border, as agents receive and pay out transfer orders from around the world, and settle up differences later. Clearly, the hijackers knew the ins and outs of U.S. banks' reporting requirements, and moved at least $325,000 into about 35 U.S. bank accounts without ever causing the banks to file suspicious-activity reports with the government."

July 29, 2002

    The U.S. Treasury Department's 2002 National Money Laundering Strategy "for the first the describes a coordinated, government-wide strategy to combat terrorist financing," according to the document, noting that tracking down terrorist money "is a top priority." The 2002 strategy focuses on the use of charities and other nongovernmental organizations "to raise, collect and distribute funds to terrorist groups." It also creates an interagency group to identify money laundering groups "and systems used by money launderers, including the smuggling of bulk cash and the use of alternative remittance systems.. We ... recognize that the fight against money laundering is integral to the war against terrorism, and that effective anti-money laundering policies will save innocent lives." Meanwhile, the American Bankers Association's EVP shucked and jived in a letter to the editors at the New York Times, published July 23: It's unfair to imply that banks were somehow culpable in not piecing together in advance the secretive financing schemes that went into the Sept. 11 terrorist attacks." As to Citigroup and SunTrust, which processed the transfers, how about getting a real social security number before opening an account? Citigroup's prioritization of profit over compliance is well-known, and now being widely reported on.

July 22, 2002

    Remittances from Pakistanis living overseas more than doubled in the financial year that ended last month - their most robust growth for years, the country's central bank said on July 18. In June, expatriate Pakistanis sent back $268.5 million through banking channels, versus $85.5 million during the same month a year ago, the bank said. Remittances during the last (July-June) financial year of $2.29 billion were substantially up from $ 915 million a year before. The jump in officially recorded remittances is largely due to fear of US-led worldwide investigations into money laundering, which prompted some of the 5m Pakistanis living overseas to use regular banking channels instead of to the unofficial hawala system, central bank officials said....

July 15, 2002

     In the U.S., ABC News' broadcast of July 10 reported "new details about the ease with which the September hijackers... were able to open 35 bank accounts in the US using false Social Security numbers. The bank officials never checked them... On July 19, 2000, hijackers Mohammed Atta and Marwan Al Shehhi received $9,985 from the United Arab Emirates. The money was wired to a Florida Sun Trust bank account. One month later, Atta and Al Shehhi received $69,000 from the same country. The overseas funding was part of the roughly $500,000 needed to finance the September attacks... To place hundreds of thousands of dollars in US bank accounts, including at Sun Trust, all the hijackers had to do was show a valid passport and another form of identification, such as a driver's license. But some of the hijackers opened accounts using made up Social Security numbers, never verified by the banks... If the Social Security numbers were proven to be bogus, then banks and law enforcement officials might have started asking questions." As readers of this Report will remember, Sun Trust claimed it fully complied with all anti-money laundering regulations. Psshah... Now what will the U.S. Federal Reserve do?

July 1, 2002

   Based on a survey of 102 financial institutions, the U.S. Treasury Department inspector general found 74 banned transactions that went through despite U.S. sanctions in 2000... In a letter sent June 26 to Treasury Secretary Paul O'Neill, U.S. Senator Charles Grassley (R-Iowa) said he was concerned by "serious gaps" in the Treasury Department's efforts "to disrupt the financial lifeblood of terrorists, drug kingpins, criminals and rogue nations." Grassley told O'Neill that "with the stakes to our national security and the war on terrorism so high, OFAC must close these gaps ... and use more aggressive and direct enforcement to carry out its mission." Aggressive efforts to educate the financial sector, along with the banks' "desire to avoid negative publicity" if they are found in violation of U.S. sanctions, have driven the compliance, OFAC director R. Richard Newcomb said in response... But banks like Citigroup have repeatedly been found involved in money laundering -- and still they apply for regulatory approvals without addressing the issue, as Citi has in connection with its proposal to acquire Golden State Bancorp...

June 24, 2002

    With the OECD's Financial Action Task Force on Money Laundering's June 21 removal of Israel, Hungary, Lebanon and St. Kitts and Nevis, its remaining list of countries considered to be "non-cooperative" in the campaign against money laundering includes Egypt, Lebanon, Russia, Ukraine, Guatemala, Nigeria, the Cook Islands, Dominica, Grenada, St. Vincent and the Grenadines, the Marshall Islands, Nauru, Niue, the Philippines, Indonesia and Myanmar.... And why not Switzerland, you ask? So does German Finance Minister Hans Eichel. On June 21 at the E.U. summit in Seville, Eichel said of Swiss bank secrecy laws that "I object to a nation wanting to make its living long-term by turning itself into a fortress for hiding tax evasion taking place in other countries. It is totally clear that fighting terrorism, money laundering and tax evasion are all the same thing." 

June 10, 2002

       At the American Bankers Association conference on money laundering, held June 5 in New Orleans, Peter Djinis, associate director of FinCEN, said that from April 1, 1996, through Sept. 11, 2001, only about 30 SARs had been filed in connection with potential terrorist activity -- but in the months since then more than 1,600 terrorism-related SARs have been filed. Ex-Federal Reserve anti-money laundering guru Richard Small was at the conference shilling for his new employer Citigroup. Among other things he said that "[w]e may identify people that have more suspicion because we've lowered the parameters on what we're looking at on account opening but for somebody to say we're [that is, Citigroup is] going to pick up potential terrorists scares me considerably." Thus the excuses are ready already...

    And stealth, too: in Royal Bank of Canada's June 7 response to ICP's May 24 comment, RBC claims that the information required by the post-9/11/01 USA Patriot Act is "solely [for] the regulators" ICP is contesting this. Additionally, RBC's Response does not mention, much less address, the FRB's October 6, 2000, letter to counsel for Bank of Cyprus, which questioned "the policies and procedures that [Bank of Cyprus] uses to monitor transactions of Bank of Cyprus (Channel Islands) Ltd., which is operated as an administered banking unit by the Royal Bank of Canada (Channel Islands)... identify the scope and frequency of on-site examinations of Bank of Cyprus (Channel Islands) Ltd. conducted by the Central Bank." Emphasis added. These questions -- including about the frequency of on-site examination -- should be put to RBC (Channel Islands and elsewhere), by the U.S. Federal Reserve... . 

June 3, 2002

     On May 28, the U.S. Financial Crimes Enforcement Network (FinCEN) announced that a pilot test of the new online Patriot Act Communications System has begun. The initial test will involve about 30 banks, representing some of the largest institutions, as well as smaller banks and credit unions, over a period of two months. "We are optimistic that financial institutions will employ the PACS system as their filing tool of choice," FinCEN Director James F. Sloan said in a statement, adding that information banks provide through PACS will be relayed to law enforcement officials on an expedited basis. FinCEN said the new system will help speed the processing of more than 13 million BSA reports that are processed annually at the Internal Revenue Service's Detroit Computing Center.

May 27, 2002

    The United Nations reported on May 22 that $103.8 million in assets "associated with terrorist groups" have been frozen between September 2001 and March 2002. For comparison's sake, the head of the Italian secret service, Nicolo Pollari, on May 15 told a conference on terrorism in Priverno, southern Italy, that al-Qaeda has assets worth around five billion dollars... The U.N. report, required by Council Resolution 1390, says that the U.N. is looking into allegations that Al Qaeda "may be diversifying financial aspects of its logistics support by converting parts of its assets into gold, diamonds and other precious stones, for example lapis lazuli and sapphires." The report added, "Another way in which criminals and terrorists move their money to avoid detection is by means of the Internet." Very helpful, that....

May 20, 2002

    The Central Bank of the United Arab Emirates last week held an "International Hawala Conference" at which the U.S. FBI's Greg Bretzing reported that 4,000 suspicious reports relating to financial transactions have been filed since January 2002 by U.S. banks and financial institutions. The U.S. Customs Service's Michael Marzigliano said some $ 200 billion flows through the money transmitting industry in the U.S. annually with at least 160,000 U.S. entities involved in the business. At the conference's conclusion, the "Abu Dhabi Declaration on Hawala" was adopted, stating that "the international community should continue to work individually and collectively to regulate the hawala system for legitimate commerce and to prevent its exploitation or misuse by criminals and others." The U.S. officials stated that "many transfers were made through non-banking entities to the U.S. to the accounts of hijackers, the amounts ranging from $ 10,000 to $ 70,000 from July 2000 to September 2000." Wait -- only "non-banking entities"? What about SunTrust, Citibank, et al.?

May 6, 2002

     The U.S. Treasury Department's Office of Foreign Assets Control April 19 added more names to its list of Specially Designated Nationals and Blocked Persons, including

NASREDDIN, Ahmed Idris (a.k.a. NASREDDIN, Ahmad I.; a.k.a. NASREDDIN, Hadj Ahmed; a.k.a. NASREDDINE, Ahmed Idriss), Corso Sempione 69, 20149 Milan, Italy; 1 via delle Scuole, 6900 Lugano, Switzerland; Piazzale Biancamano, Milan, Italy; Rue de Cap Spartel, Tangiers, Morocco; DOB Nov. 22, 1929.

      Also, the Treasury Department on April 26 released a 26-page report concluded that "it would be both wasteful of resources and disruptive to the administration of the Bank Secrecy Act to transfer these functions [from the IRS] especially since there is no other comparable agency with a similar combination of expertise and resources that could readily assume them."  

April 29, 2002

    The U.S. Treasury Department on April 23 issued regulations that will extend anti-money laundering requirements to mutual funds, credit card system operators, money services businesses, Securities and Exchange Commission-registered brokers and dealers, and futures commission merchants and accompanying introducing brokers that are registered with the Commodity Futures Trading Commission. The rules will be open for comment for 30 days. Senior Treasury officials also said during the briefing new anti-money laundering rules will also apply to insurance companies and hedge funds "in a few weeks." Treasury will delay up to six months applying the regulations, which implement Section 352 of the USA PATRIOT Act, to dealers in precious metals, store or jewels, pawnbrokers, loan or finance companies, private bankers, travel agencies, telegraph companies, vehicle sales operations (automobiles, airplanes, boats), persons involved in real estate closings and settlements, investment companies other than mutual funds, and commodity pool operators and commodity trading advisers, according to a Treasury statement...

    The bank trade associations were happy to see the requirement extended to other industries. "Our perspective has been that only covering banks makes little public policy sense," said John Byrne of American Bankers Association. "It only makes sense that if you're going to try to plug the flow [of funds] you don't just look at one part of the sieve," said Robert Rowe of the Independent Community Bankers of America. Byrne said now may be an opportune time to take another look at the information systems that already are in place. For example, financial institutions are required to file currency transaction reports (CTRs) with Treasury for cash transactions of $ 10,000 or more, as well as reports of suspicious activity. "This may be the time not just to tinker with CTRs but to get rid of them," the ABA's John Byrne said. Opportune?

April 22, 2002

     The Basel Committee on Banking Supervision issued a statement April 17 endorsing joint action by banking authorities in identifying and halting funding for terrorist activities. The BCBS said it believed a "key element in combating terrorist financing is the establishment of a highly effective customer due diligence program." Such a program "would consist of thorough customer acceptance and identification practices, ongoing transactions monitoring and a robust risk management program," the BCBS added. In addition to highlighting customer due diligence, the Basel Committee said bank supervisors "must ensure that adequate systems and procedures are in place to carry out group wide consolidated risk management for banking groups operating internationally." Information-sharing arrangements "should exist to ensure that, in circumstances where the financing of terrorism is suspected, there are formal procedures to notify both home and host supervisors," the committee added. Basel Committee members include representatives from bank supervisory bodies and central banks in Belgium, Canada, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the United Kingdom, and the United States.

April 15, 2002

    The French Banking Commission referred only 14 of 6,298 cases of suspected laundering reported to the Finance Ministry to the public prosecutor, according to a report issued last week by Arnaud Montebourg, a deputy of Prime Minister Lionel Jospin. When Montebourg issued his report on the U.K., the Cayman and Channel Islands, et al., U.K. defenders challenged him to look at his own country. Now he has, concluding that Bank of France Governor Jean-Claude Trichet "needs to open his eyes and do much more." A French magistrate is due to decide in coming months whether Trichet will stand trial over a 1990s false accounting probe into bank Credit Lyonnais SA. In June, French judges placed Axa SA Chairman Claude Bebear and Chief Executive Officer Henri de Castries under investigation as part of a probe into tax evasion and laundering at a former unit of Axa. Societe Generale is also the subject of money-laundering investigations in China and Israel, while officials of the U.K.'s Barclays Bank Plc are being investigated in a probe into a suspected money-laundering network between France and Israel...

    The revolving door between the Federal Reserve and Citigroup works both ways: Laricke D. Blanchard, a vice president and counsel for federal government relations at Citigroup, starts this week in the congressional affairs office of the Federal Reserve Board. Citigroup hired the Fed's "money laundering guru" Richard Small; now a longtime Citigroup lobbyist becomes the Fed's lobbyist. The lines get murkier and murkier...

April 8, 2002

    Bloomberg News last week quoted Juval Aviv, president New York-based investigative firm Interfor, Inc., that "a full-fledged investigation of a customer in the U.S. costs as much as $5,000 and triple that if it extends overseas." Aviv said that so far, financial services companies have been hesitant to pay outside companies to conduct background investigations on potential customers, partly because they don't want to lose wealthy clients to competitors by asking too many questions or making the customer wait for an investigation. "Banks cannot afford to challenge every large depositor and pay for a sophisticated, in-depth investigation that the law requires," Aviv said. "All the new compliance laws are against the nature of the business."

   Months after it made a FOIA request, ICP has received thousands of pages of documents from the Federal Reserve regarding Bank of Cyprus' application to acquire Interbank of New York. The Fed asked Bank of Cyprus and its counsel at Shearman and Sterling a number of questions, including "please describe the polices and procedures that Bank of Cyprus uses to monitor transactions of Bank of Cyprus (Channel Islands) Ltd, which is operated as an administered banking unit by Royal Bank of Canada (Channel Islands) Ltd... Please confirm (or modify as appropriate) our understanding that BOC has implemented its anti-money laundering policies and procedures at Bank of Cyprus (Channel Islands) Ltd." After asking these questions, the Fed extended its review time for the application. On June 15, 2001, Bank of Cyprus wrote to William Ryback of the Fed, informing his that its agreement to acquire Interbank of New York "expired and/or terminated as of 14 June 2001, according to clauses 1 and 5(B) of the said agreement." Bank of Cyprus withdrew its application. But--

    On June 21, 2001, Bank of Cyprus reapplied, this time to "set up a branch of Bank of Cyprus Ltd in New York." The Fed followed with questions including "please describe in detail the process BOC follows in establishing nominee accounts (including, but not limited to, anonymous accounts). Bank of Cyprus had estimated "that the number of customers holding nominee accounts [is] below 10,000." But BOC (and the Fed) have withheld the basis of that estimate, and any further information about it. BOC had also represented that the "Central Bank of Cyprus is in the process of amending customer identification rules" and that, under the proposed amendments, "banks will no longer be allowed to open accounts without directly establishing the identity of the beneficial owners." So let's get this straight: Bank of Cyprus has "anonymous accounts" for which it did not "establish the identity of the beneficial owners"?

April 1, 2002

    First, 9/11-specific: Newsweek of April 1 reports that "the Bush administration's latest crackdown on terrorist finances could touch some raw political nerves. Last week federal agents raided more than a dozen U.S.-based Islamic businesses and charities looking for ties to Al Qaeda and other terror groups. Newsweek has learned that a main target of the raids, a Saudi-backed charity called the SAFA Trust, has provided funding for an influential Islamic political group with close ties to the GOP and the Bush White House. The group, the Islamic Institute, which operates out of the same D.C. office suite as GOP activist Grover Norquist, was set up in 1999 to mobilize American Muslim support for the Republican Party. Since then Norquist and the group's chairman, Khaled Saffuri, have arranged meetings between Islamic leaders and top Bush officials. . Sources close to the case told Newsweek the raids were prompted by evidence showing the SAFA Trust and related groups transferred millions of dollars to obscure entities on the Isle of Man, a notorious money-laundering haven. Records also show that the president of SAFA Trust once served on the board of a firm associated with Al Taqwa...".

March 18, 2002

    U.S. banks and their hired guns are already complaining about the anti-money laundering provisions of the USA PATRIOT Act. "We're disappointed in this proposal because when (the law) was being debated, the industry was a strong supporter of a two-way street," said John J. Byrne, a senior counsel for the American Bankers Association. "Unless there are some major changes, there is no government sharing with the industry. The industry had expected more specific information coming back to the banks." "Some of the issues are concerns about the scope of the reporting requirement," said Satish M. Kini, a partner in the Washington office of the Wilmer, Cutler & Pickering law firm -- and an ex-Federal Reserve staff attorney....

March 11, 2002

     Cognitive dissonance, presented this week in classic journalistic he said - she said form: in the United Arab Emirates last week, U.S. Treasury Secretary O'Neill said, "Without the cooperation and initiative taken here, we wouldn't have been able to designate [on the list of indicted terrorist suspects] some places as we did during the last couple of months of last year." He also said, "We have not frozen the assets of any Islamic charitable institutions. It is not true. We have no intention of harming charitable institutions." But "some banks and charities were unwittingly used by terrorists," O'Neill said, without giving details. "Our intention is not to close them but to stop channels of support for terrorist funding.... The UAE's efforts are swift, clear and unconditional in joining the war against terrorism," O'Neill said. Earlier in the week in Bahrain he'd said, "I never in my life uttered a negative word about Islamic banks." Thou dost protest too much...

March 4, 2002

   Swiss update: the deputy director of the country's Money Laundering Reporting Office, Lorenzo Gerber, told reporters that week that Swiss asset managers have blocked 37 million Swiss francs ($22 million) in accounts they suspect fund terrorist organizations. About 45 percent of the 95 transactions reported to the Money Laundering Reporting Office since September originated from Geneva; a third came from Bern, and 14 percent from Zurich. Geneva's private banks, including Pictet & Cie, Switzerland's biggest, and Darier Hentsch & Cie, its second-oldest, manage about 10 percent of the world's private-banking assets. According to Mr. Gerber, half of the transactions reported originated from foreign banks with offices in Switzerland and 10 percent from Swiss private banks, which manage money for customers with at least 1 million francs to invest. Thirty-seven percent of the account- holders were from Saudi Arabia and 35 percent from Switzerland...

February 25, 2002

    The Financial Times of February 21 reported that, since September 11, 2001, more than $104 million has been seized from "from 168 individuals and groups. The FBI has reviewed more than 320,000 documents obtained from subpoenas involving 10,500 accounts. The U.S. says 147 countries have participated in blocking at least some terrorist funds." A separate FT article of the same date reported that " At least two banks in the UAE, one local and one foreign, are known to keep cadres of staff whose sole job is to cater to individual cash demands, which could be anything from Dollars 500,000 to Dollars 2m a time from local VIPs." Emphasis added. The identity of this "foreign bank" should be of much concern. We'll see.

February 18, 2002

     These week: some squibs, then a book review.

    Before the House Financial Services Committee on February 12, Treasury deputy assistant secretary Juan Zarate said, "We are looking at ways of regulating the credit card industry... We are fully engaged in the issue and certainly recognize that credit card use can form a way of not only laundering money but financing terrorist cells around the world."

   A book we've been meaning to address for a while -- relevant to this Report, if only indirectly -- is Barbara Garson's "Money Makes the World Go Around," just out in paperback from Penguin. The all the abstract talk about globalization, pro and con, Ms. Garson's book is timely. She begins by depositing her book advance in the small bank north of New York City, the Bank of Millbrook. Then she follows the money, first to J.P. Morgan Chase's Fed funds desk, then east to Bangkok, Malaysia and Singapore. Her narrator is self-consciously open minded, eager to brag about the positive effects "her" money is having. It's an effective strategy, at least in terms of making the book appealing to a wide audience in the United States. Particularly in the wake of the September 11 plane-bombings, a book that begins with the assumption that the U.S. and global financial markets are exploiters will have trouble, as a matter of marketing and proselytizing. The image of a short, upbeat woman traveling the world to find out how it all works is appealing.

  Ms. Garson arrives at a Chase-funded oil refinery in Map Ta Phut, Thailand. "Northeast Thai welders," she writes, "had an almost legendary aura, like Native American bridge spanners... Actually, they were all my workers, I figured. After all, these men and women were eating NOW, before the refinery they were working on produced any income... In this case the power to pay was based on borrowed capital, and I was supplying it."

   In her next stop, Malaysia, she visits a non-governmental organization called Yayasan Bina Ilma (Foundation for the Upliftment of Knowledge) which helps fishermen get bank loans. "The boat loans, typically between 1,000 and 3,000 ringgets, were made by major Malaysian banks to the individual fishermen, but the foundation backed the loans with its own credit because the fishermen had no assets that a bank could foreclose on." She describes Malaysia's "Bumi Putra" policy, under which "large employers [a]re required to hire a percentage of Malays... Universities [a]re required to assign places to Malays, Chinese and Indians in proportion to their numbers in the population which is roughly 60 percent Malay, 30 percent Chinese, and 10 percent Indian."

    In Singapore, Ms. Garson interviews Thai immigrants in a run-down mall on Sunday. One realizes: Burmese immigrate to Thailand; Thais immigrate to Singapore; nursing students from the Philippines emigrate to the United States (where many work in hospitals in The Bronx, for example). It's a game of musical chairs until suddenly there are fewer chairs than people; money is disinvested, countries' currencies are attacked by speculators, and those who never took the large bank and IFI loans are conscripted to pay them back, through structural adjustment. Ms. Garson starts chipper, then lets the facts speak for themselves. It's a book well worth reading. 

February 11, 2002

    This week: reports from Pakistan, Switzerland and Saudi Arabia. In Islamabad on February 7, the Chairman of Securities and Exchange Commission of Pakistan (SECP) Khalid A Mirza assured visiting U.S. officials "of full cooperation from the commission and sharing of public information". Precisely what this means in unknown. Among the U.S. representatives there were the Treasury Department's George Edwin Smith, the State Department's Mike Gayle, and Carol A Mesheske, chief special activities division of supervision of the FDIC. The FDIC has before it a comprehensive brief on Citigroup's various involvements in money laundering, including its funneling of money from the United Arab Emirates to the Florida (SunTrust) bank accounts of several of the 9/11 hijackers..

February 4, 2002

     In Senate testimony last week, the U.S. Federal Reserve made various claims about its enforcement of anti-money laundering laws. For an opposing view of the Fed's seriousness, simply keep reading below on this page. Concerning the Fed's "transparency," consider this: in November 2001, Inner City Press sent the Fed a Freedom of Information Act request, for all documents concerning ABN AMRO's sale of its branches in Kenya (to Citigroup) and in Chile (to Fleet). ICP wanted the documents quickly, in order to comment on the proposals, either in the U.S. or in Kenya and Chile.

   But the Federal Reserve Board waited more than a month, to December 27, to respond. And the response was simply a letter unilaterally extending the Fed's time to respond. Last week, ICP received a second response from the Fed, dated Jan. 29:   "With respect to your request for documents related to Fleet's acquisition of ABN AMRO branches in Chile and Citigroup's acquisition of ABN AMRO branches in Kenya, staff searched appropriate Board records and made suitable inquiries, but found no responsive records through November 20, 2001, the date of receipt of your FOIA request.... Accordingly, we cannot provide you any information related to this portion of your request."

    That Citigroup and Fleet may not have submitted applications for the Fed's prior approval to acquire branches in Kenya and Chile is one question, with raises its own issues. But for the Fed, having delayed two months in responding to a FOIA request, to say it only looked for documents as of the date of the request, and not confirm or deny whether any documents since then have been submitted or created -- is gamesmanship, to put it mildly. The Fed's lack of transparency ill-served, and makes it difficult to assess or improve, the Fed's enforcement of anti-money laundering (and other) laws. FATF? 

January 28, 2002

   On January 24, U.S. Treasury Undersecretary Kenneth Dam announced that the U.S. and 147 other nations have frozen $80 million in assets since the 9/11 plane-bombings, and that U.S. intelligence shows that terrorists are "feeling the pinch."

     Meanwhile, the real money laundering story of the week is from France, where a parliamentary committee has branded Luxembourg a "banking paradise" that facilitates tax evasion and money laundering through its tight banking secrecy laws and the non-taxation of foreign account holders. The report, Luxembourg: A Veritable Banking Paradise at the Heart of the European Union, and an Obstacle to the Fight Against Money Laundering, published Jan. 22 and available here, in French, also accuses the European Union's smallest member of hindering or failing to cooperate in cross-border money laundering and tax evasion investigations. The report also issued harsh criticism of Luxembourg's corporate legal framework, citing the existence of more than 15,000 tax-exempt holding companies and the possibility for investors to create financial trusts that allow beneficial owners to remain anonymous as major impediments in the battle against money laundering...

January 7, 2002

    We will learn in 2002 whether the "Uniting and Strengthening America by Providing Tools Required to Intercept and Obstruct Terrorism Act of 2001"-- more commonly known as the USA Patriot Act -- will be fully enforced or not. The comment period is open on the Treasury Department's proposed regulation applicable to broker-dealers and the securities industry. The regulations would impose a $5,000 reporting threshold: suspicious transactions exceeding that amount would have to be reported. Among the transactions outlined as "suspicious" are those structured to fall below the currency transaction-reporting requirements of the Bank Secrecy Act and those that "appear to serve no business or apparent lawful purpose, and for which the broker-dealer knows of no reasonable explanation after examining the available facts."

     Ex-Federal Reserve staff attorney Satish Kini, now advising the industry at Wilmer, Cutler & Pickering, explained that "[t]here is a sense that the discourse about these proposed rules has changed, and there is a general realization in the securities and banking industries that there are different expectations now, post-Sept. 11."

     But as 9/11 recedes, the industry is becoming more open in its grumbling. Patrick McCarty, a Managed Funds [that is, hedge funds] Association lobbyist, says that "money laundering is the issue of the moment in Washington" and advises hedge funds to lobby to persuade regulators not to be overly zealous -- that is, not to label offshore hedge funds as "shell banks" (which, in essence, they are). In December, a spokesman for $ 2.1 billion-asset Southwest Bank in St. Louis complained to the St. Louis Business Journal that it had taken a bank employee a full day to go through each of the terrorist lists received from the government. And the lists have grown. Added on December 20 were Lashkare-Tayyiba (a.k.a. Army of the Righteous, a.k.a. Lashkare-Toiba, a.k.a. Lashkar-i-Taiba), an organization based in Pakistan; Sultan Bashir-Ud-Din Mahmood (a.k.a. Sultan Bashiruddin Mahmood, a.k.a. Dr. Bashir Uddin Mehmood, a.k.a. Sultan Baishiruddin Mekmud), a Pakistani national; Abdul Majeed (a.k.a. Chaudhry Abdul Majeed, a.k.a. Abdul Majid), a Pakistani national; Mohammed Tufail (a.k.a. S.M. Tufail, a.k.a. Sheik Mohammed Tufail), a Pakistani national; and Ummah Tameer e-Nau, an organization based in Afghanistan and Pakistan. Added on January 2 were Benevolence International Foundation, Inc., with offices in New Jersey and Illinois, and Global Relief Foundation and its Illinois offices.

December 31, 2001

    During the holiday lull, U.S. Federal Reserve Governor Gramlich signed two Freedom of Information Act (FOIA) appeal denials, both on the topic of money laundering compliance. In response to a FOIA request regarding the Fed's awareness of and action on public reports of dirty money moving through U.S.-based holding companies, the Fed provided a mere dozen pages. Inner City Press appealed. Gov. Gramlich writes that "your appeal has been reviewed in light of the Board's extensive experience as a federal banking supervisor... it appears that the information you requested, which was voluntarily provided to the Board, would not have been customarily disclosed to the public by the originating entity." But ICP's request covered newspaper articles collected by the Fed to monitor the compliance activities of the institutions it supervises. Either the Fed does not track such matters, or the FOIA response, including on the appeal, is bogus. Or both.

    On January 1, 2002, the Fed has to begin implementing the provisions of the USA PATROIT Act (Pub. L. No. 107-56), which among other things amends Section 3 of the Bank Holding Company Act and the Bank Merger Act (under which SunTrust applied to acquire and close the Huntington branches, see below) to require review of applicants' anti-money laundering compliance records in connection with mergers. Note to the Fed, with particular regard to Citigroup (which hired Fed staff Richard Small in 2001) -- merely hiring Fed staffers is not a carte blanche under this new statutory factor. And, public comment must be allowed on this factor, and relevant information must be released to the public, contrary to the logic of Gov. Gramlich's end-of-2001 FOIA appeal denials. Onwards and upwards.

December 24, 2001

      In what looks to be the U.S. Federal Reserve Board's last word in 2001 on 9/11-related money transfers, the Fed on December 17 approved an expansion application by SunTrust Bank in Florida. As recounted below on this page, ICP had asked the Fed to address SunTrust's anti-money laundering compliance. Here's the Fed's treatment of the issue, in its Order:

As part of this review, the Board has considered comments by a commenter that provide new reports suggesting that individuals believed to be involved in the attacks of September 11 might have had accounts at a Florida office of [SunTrust] Bank and might have received foreign wire transfers there. Bank has been cooperating with federal law enforcement authorities regarding accounts and transactions that involve persons on the lists maintained by the Office of Foreign Asset Control.

     The Fed's Order is dated December 17, 2001. Earlier in December, the Department of Justice announced an indictment of which specifically named the hijackers' accounts at SunTrust, and wire transfers in and out of the accounts, by date. So the Fed's phrasing -- "might have had accounts" at SunTrust -- is a bit strange. Recently, an ICP source in Florida, as a lark or experiment or test, entered a SunTrust branch to open an account, and was told, in the course of this visit, "here is the telephone number you use to wire money." Wire away!

December 17, 2001

     The event last week on which this Report will focus was the unsealing of the United States' indictment against Zacarias Moussaoui, the so-called "20th hijacker." As relates to finance, the 31-page indictment names only two financial institutions, but names each of them repeatedly. SunTrust Bank in Florida first appears in paragraph 22 of the indictment, in connection with a $9,985 wire transfer from the United Arab Emirates; thereafter, SunTrust is named in paragraphs 24, 25, 26, 52 and 91. Standard Charter's Dubai branch first appears in paragraph 57 (Mustafa Ahmad opening an account, in June 2001); thereafter, StanChart appears in paragraphs 76, 91, 97, 98 and 99.

     Our question this week: why were no other financial institutions named in the indictment? For example, the (London) Independent of November 20, 2001, reported that Ramzi Muhammad Abdullah bin al-Shibh, one of the "flatmate" at 54 Marienstrasse in Hamburg (and the prospective hijacker that Moussaoui allegedly replaced), "transferred $2,200 (pounds 1,500) from his account at Citibank in Hamburg to a Florida bank on 15 August," 2001. This would seem to be one of the key wire transfers. And it has been widely reported that other transfers were routed through Citi in New York, as a correspondent bank (which also happens to be the largest single user of the global SWIFT money transfer system). So why was Citibank not named in the indictment?

      Similarly, presumably credible sources from the Wall Street Journal to Time Magazine have reported the hijackers' use of credit cards from Dime Savings Bank of New York. But the indictment, while it mentions "VISA cards," does not name Dime.

    Our question: is that just a matter of Citigroup's (and, to a lesser degree, Dime's) lobbying strength? Who at the Department of Justice (or elsewhere) decided on the specifics of the indictment -- including which banks to name -- prior to its filing and release? We note, as simply another example of Citigroup's "access," that on December 13 Treasury Secretary Paul O'Neill met with seven "industry representatives," including Citigroup senior vice president (and lobbyist) Roger Levy. Any reader with more insight or information is encouraged to chime in.

December 10, 2001

     Now, an update on the Sept. 11-specific investigation. Newsweek (12/10) reports that "banking records indicate more than $200,000 used by the hijackers went through the United Arab Emirates. One key mechanism was a checking account at an Emirates branch of HSBC... The account was opened in July 1999 by Marwan Al-Shehhi, who authorities believe piloted the hijacked flight that hit the World Trade Center's South Tower. Between July 1999 and November 2000, investigators say, about $100,000 flowed through the HSBC account... In July 2000, Al-Shehhi opened a joint account at a Venice, Florida, branch of SunTrust Bank with Atta, pilot of the plane that hit the WTC's North Tower. Over the next three months, this account received what investigators think was the primary funding for the attacks: four transfers totaling $110,000, all from a currency exchange in Dubai. The money was delivered by men calling themselves "Mr. Ali," "Isam Mansour" and "Hani." U.S. officials say that before September 11, government supervision of money transfers in the Emirates was virtually nonexistent. Some U.S. investigators believe suitcases of cash were brought to the Emirates from wealthy Saudi and Kuwaiti Islamists. Emirates sheiks have now launched a sweeping money-laundering crackdown."

     Oh, really? This just in: Andhra Bank on December 6 announced a "rupee drawing arrangement" with the UAE Exchange Centre LLC of Abu Dhabi for facilitating "private remittances" to India. According to the bank's press release, people in the UAE can now obtain drafts on Andhra Bank in Indian rupees from the UAE Exchange Centre. These rupee drafts would be paid at par by the designated branches of Andhra Bank in India, including 69 branches in Andhra Pradesh.

     The UAE is also the headquarters of Al-Barakaat. On this topic, Inner City Press last week received a letter from the U.S. Federal Reserve Board, denying ICP's request that the FRB reconsider its approval for Royal Bank of Scotland and its U.S. subsidiary to acquire Mellon's bank branches. The Fed letter, dated November 29 but only recently received, due to ongoing problems with the U.S. Postal Service (and at the Fed) speaks for itself:

[t]he members of the Board have carefully considered your request... in light of press reports that the Boston, Massachusetts, office of an affiliate of Al-Barakaat, an organization suspected of funding the Al Qaida terrorist group, wired money from its accounts at Citizens Bank of Massachusetts to accounts in the United Arab Emirates. The Board has consulted with other federal agencies and received confidential information concerning this matter and Citizens' record of compliance with anti-money-laundering laws and regulations as well as government directives related to official sanctions lists. Based on all the facts of record, the proposal is consistent with approval. Your request has been presented to the members of the Board to give them an opportunity to determine whether reconsideration of the Order is warranted... [N]o member of the Board has requested that the Order be reconsidered or modified in any manner. Accordingly, your request for reconsideration is hereby denied.

    And so it goes. In the wider world of money laundering, the FATF imposed "counter-measures" on Nauru last week, due to the Nauru Government's failure to enact appropriate changes to its Anti-Money Laundering Act by the taskforce's November 30 deadline. "The taskforce will follow the situation in Nauru closely and discuss it again at the next plenary meeting in Hong Kong on January 30 and February 1," FATF said. The Wellington, New Zealand newspaper Dominion reported that the counter-measures could include "requirements for identifying clients and improving advisory notices to financial institutions before business relationships are established with people or companies from Nauru." For the record, Nauru only has 10,000 residents...

December 3, 2001

     At least the numbers are getting more specific. The Financial Times of November 29 reported that "[w]hen Mohamed Atta... opened a bank account in southern Florida in June 2000, a wire transfer of $69,985 from the Gulf three months later prompted SunTrust Bank to make a suspicious transaction report to the U.S. Treasury's Financial Crimes Enforcement Network." Readers of this report will remember that SunTrust has resisted confirming or denying that it filed an SAR report. "U.S. investigators believe about half the $500,000 that the hijackers spent on the September 11 plot was sent by Mustafa Ahmad, who is today regarded by investigators as bin Laden's finance chief, via Dubai money exchanges through Citibank in New York and on to Florida." Citigroup, whose new crisis is Enron, has also not stated whether it filed an SAR report when this money passed through it.

      The FT also provides more detail on al-Shamal Bank in Khartoum, quoting its acting general manager, Ismail Mohamed Osman that "Bin Laden contacted us as a businessman, and opened a foreign currency account in the name of the al-Hijra company [Al-Hijra Construction, which built roads for the Sudanese government]. He never came himself to the bank. The foreign account was replenished from outside Sudan, mainly from Gulf states and from America, through bank transfers. Over three or four years, probably $1 million went through these accounts."

      Also finally nailed down is the financing of Al Qaida's 1993 aircraft purchase, alluded to in the African embassy bombing trial earlier this year: "The money was wired from the Wadi al-Aqiq account at al-Shamal bank via Bank of New York to a Bank of America account held in Dallas, Texas by Essam al-Ridi. Al-Ridi, an Egyptian flight instructor who met bin Laden in Pakistan in 1985, flew the plane to Khartoum."

      And so, in the public record: SunTrust, Bank of New York, Bank of America, Citibank. The latter two are both national banks, whose "primary supervisor" is the Office of the Comptroller of the Currency, a unit of the U.S. Treasury Department.

November 26, 2001

  ...In connection with SunTrust's application to acquire Huntington's Florida branches, ICP raised a number of questions to the Federal Reserve, including various public reports of a $70,000 wire from the United Arab Emirates, through Citigroup, to the hijackers' accounts with SunTrust in Florida. SunTrust's outside counsel, Skadden Arps, responded last week:

ICP's comments focus on... reports about the fact that some individuals involved in the September 11 attacks maintained retail deposit accounts at SunTrust. The names of the terrorists involved in those attacks were added to the Office of Foreign Assets Control ("OFAC") lists shortly following the attacks. Like other financial institutions, SunTrust has been working closely with federal law enforcement officials to identify and provide complete information about any accounts and transactions that involve individuals on the OFAC list.

Even before these events, SunTrust had adopted strongly anti-money laundering policies, procedures and controls to ensure that employees take appropriate measures to detect and report suspicious customer activity. SunTrust has appointed a compliance officer, who is responsible for the bank's compliance with the Bank Secrecy Act and related Treasury regulations. The compliance officer oversees implementation of the bank's policies and procedures in this area. SunTrust monitors customer accounts for suspicious activity (including money laundering) through a dedicated Financial Intelligence Unit. This unit uses automated reports, as well as referrals from individual employees, to identify suspicious transactions or patterns of activity. The unit also investigates potentially suspicious activities and, where warranted, files Suspicious Activity Reports with the Financial Crimes Enforcement Network as required under the Bank Secrecy Act and regulatory guidelines. SunTrust employees receive training on how to identify potential money laundering or other illicit financial activities, and on procedures for notifying the Financial Intelligence Unit of suspicious activities. Compliance with SunTrust's anti-money laundering compliance program is periodically reviewed by SunTrust's internal audit department.

    Over 250 words, but no mention of the $70,000 wire transfer, and whether any Suspicious Activity Report was ever filed... The same silence remains true from Washington Mutual / Dime....

November 19, 2001

     While large banks -- at least those based in the U.S. and Europe -- have yet to suffer any repercussions from the continuing wave of anti-money laundering crackdowns, al-Barakaat's assets were frozen last week in Sweden. The newspaper Dagens Nyheter quoted Finance Inspectorate information chief Helena Ostman that "during the course of Wednesday 14 November we will be sending letters to all companies under our jurisdiction to remind them of the law which came into force on Tuesday. We also telephoned the major banks on Tuesday." The organizations in Sweden affected and whose assets must in consequence be frozen immediately are Somali Network, Barakaat International and Barakaat International Foundation, all in the Stockholm suburb of Spangaa.

    As in the U.S., representatives of al-Barakaat expressed outrage. The Swedish newswire Tidningarnas Telegrambyraa quoted Abdirisak Aden, the secretary of the Swedish branch of al-Barakaat, that "the allegation that the money from al-Barakaat's activities is used to finance international terrorism is an 'insulting, inhuman and groundless accusation.' Every transfer from sender to recipient is documented and the Swedish police have been given access to our records. We are working with the authorities concerned to provide them with information about our activities and we have nothing to hide." Al-Barakaat assets in Sweden of around $94,000 dollars have now been frozen. "This sum is the total of around 500 Swedish Somalis' gifts to their relatives on the eve of the Muslim holy month of Ramadan. These people now suddenly find themselves without income and risk starvation." Abdirisak Aden also expressed outrage that neither Al-Barakaat nor the private individuals affected have been informed about the basis for the accusations that have led to their assets being frozen.

     On November 12 in Ottawa, al-Barakaat's Liban Hussein was arrested in Ottawa. Reuters quoted Royal Canadian Mounted Police spokeswoman Louise Lafrance that Hussein would immediately face an extradition request from the U.S. government, which claims that al-Barakaat "moved more than two million dollars through a U.S. bank between January and September." Reuters didn't name the U.S. bank(s): J.P. Morgan Chase, and Rhode Island-based Citizens Bank, which is owned by Royal Bank of Scotland. Why have these banks faced no repercussions?

    In fact, Liban Hussein was released on bond in Canada, after the judge found that the U.S. had not sufficiently shown his involvement in the funding of terrorism. Back in Boston, Liban's brother pled not guilt on November 15. The Boston Globe (Nov. 16) reports that

Mohamed Ali, a Somali native living in Boston for the past 15 years, said the Husseins' business was the only way he and other Somalis could get money to relatives in Somalia, torn by civil war. He said Somalis in America now fear that relatives will suffer because that financial pipeline has been shut off. 'People in [Somalia] will starve to death because of this,' Ali said. 'This [Barakaat] is the only path they have to [receive] money.'

Mohamed Hussein's attorney, Sam Osagiede... issued a five-paragraph statement in which Hussein insisted that he is not a terrorist and 'never knowingly transferred any funds to terrorists or terrorist organizations.' Mohamed Hussein said he understands Americans are anxious and suspicious of people 'different than themselves,' after the Sept. 11 attacks. He said the search for enemies has created a 'climate of hate and distrust' that has ensnared him. 'Viewing the facts of this case through eyes clouded with passion colors the facts in a distorted way,' the statement said. 'Mr. Hussein is not an enemy of this country and the evidence . . . will show that.'

     On November 14, State Bank of India agreed to pay the U.S. Treasury a fine of $3.75 million to settle charges that its five U.S. offices were guilty of "reckless engagement in unsafe and unsound practices" because of a failure to establish required anti-money-laundering safeguards. The bank also agreed to pay $3.75 million to the New York State Banking Department for "failure to maintain accurate books and records." Where this money goes... is unclear. In a 27-page cease-and-desist order issued by the Federal Reserve Board and signed by P.K. Sankar, a deputy managing director of State Bank of India, the institution agreed to better due diligence on account openings, improved transparency in its record keeping, and limits on wire transfers out of the United States. The bank cannot open any new accounts in the United States without satisfying all these requirements.

     An update on ICP's raising of S11 issues with regard to SunTrust: the Sarasota Herald-Tribune of November 14 reported that " Inner City also cites the fact that some of the Sept. 11 hijackers opened checking accounts at SunTrust offices, including one in Venice that was used to pay for flight lessons last year. The group said the bank failed to comply with proper money laundering and 'know your customer' practices by not noticing large international wire transfers into the accounts. The bank has said that none of those transactions were more than $10,000, the amount that triggers a report to the federal government." But regulators in the United Arab Emirates have acknowledged wire transfers as large as $70,000, to a bank in Florida they wouldn't name, but which is known to be SunTrust...

November 12, 2001

     On November 7, FBI agents raided offices of Al-Barakaat, a money transfer and telecommunications business headquartered in the United Arab Emirates, but most of whose business is in Somalia. Offices in Boston, Seattle and Columbus, Ohio were closed.

    On November 8, the United Arab Emirates followed suit, ordering all financial institutions in the UAE to freeze the assets of Al-Barakaat and Al-Taqwa, which was also named by U.S. President Bush on November 7. Close readers of this page will remember our earlier report into Al-Taqwa and its principal, Youssef Nada. Mr. Nada was questioned by Swiss police for six hours on November 7. They'd picked him up at his residence in the tax haven of Campione d'Italia.

    The Wall Street Journal of November 9 details how Al-Barakaat's operation in Boston was able to open accounts with Royal Bank of Scotland's Citizens Bank unit, and then to wire, via J.P. Morgan Chase, $600,000 to the United Arab Emirates. Now the U.S. cracks down on Al-Barakaat. But what of the U.S. and European banks which facilitated its operations?

    Well, Morgan Chase's CEO William Harrison gave a speech in Boca Raton, Florida, on November 9. He intoned that "the end result of what happened on Sept. 11 may be the exact opposite of what the perpetrators imagined or hoped for." He did not refer to that day's WSJ report that Morgan Chase wired money for the al-Barakaat hawala, which the FBI shut down on November 7: "Between July 5 and Sept. 26 of this year, $595,373 was sent from Citizens to Chase in New York, then on to Emirates International Bank in Dubai." ICP has raised this to the Federal Reserve. But the Fed seems committed to talking about this issue, while holding no large institution accountable.

     On November 9, the U.S. Federal Reserve Board approved Royal Bank of Scotland's / Citizens' applications to acquire Mellon Bank's branches -- this despite RBS' continued withholding of information concerning its correspondent banking practices. ICP had raised this issue to the Fed on September 25. On October 9, the Fed asked RBS about it, and directed RBS to send a copy of its response to ICP. RBS never did. On November 5, ICP received from RBS a copy of a cautiously-worded cover letter (dated October 31), with all attachments withheld. ICP telephoned the Fed to inquire about the withheld documents, and was told to submit a Freedom of Information Act request. Meanwhile, the Fed simply approved RBS' application. Then, on November 10, ICP received a copy of a November 2 FRB memo stating that

On October 22, 2001, Reserve Bank and Board staff called Eric Fischer and David Shore, counsel for Applicants, to inform them that the staff had reconsidered what information was needed to complete the record. Staff requested that Applicants provide a response to [ICP's] comment letters of September 25 and October 4 rather than provide the information requested in the telephone call on October 9, 2001. Staff also requested that a copy of the written response to the revised information request be provided to [ICP].

    So why did the Fed "reconsider" and withdraw its request for information about RBS' and Citizens' correspondent banking practices? ICP has submitted a formal request for reconsideration of the Fed's November 9 rubber-stamp, citing the information in the WSJ's November 9 story, linking RBS/Citizens and Al-Barakaat.

   ICP submitted a detailed comment on October 1, to which the Fed responded on November 1:

Thank you for the information provided in your letter of October 1, 2001. Although this information relates to matters that are very important, the Board's authority is this area is limited. Accordingly, we have forwarded your letter to the Department of the Treasury so that it may also review this information. We will respond separately to your request dated September 24, 2001, for information under the Freedom of Information Act on these matters.

     But the Fed's response to ICP's detailed September 24 FOIA request included only 12 pages of documents, most of them print-outs of Internet pages. The Fed stated that "[a]pproximately 5 linear inches of documents will be withheld from you in their entirety." Since ICP's request was for all documents related to the Fed's awareness of and action of public reports of money laundering at several large banks, it's more than a little surprising that only 12 pages were provided in response. ICP has appealed.

     Also, on November 12, ICP submitted comments to the Fed on SunTrust's application to acquire the Florida branches of Huntington. As widely reported, SunTrust held accounts for several of the September 11 hijackers, and received a $70,000 wire transfer to them, from the United Arab Emirates. Among the twelve pages the Fed released in response to ICP's September 24 FOIA request was a Federal Reserve Bank of Atlanta e-mail, stating that "SunTrust reports that they have been working directly with the FBI since last week to provide information on several of the names on the FBI's list who banked with SunTrust. They are in the process of scrubbing their system for the additional names, and will let us and the FBI know of any additional hits." In the Fed's FOIA response, there is no follow-up on this. This week's ICP Beat Beat summarizes the comments.

October 29, 2001

      ...Citigroup and HSBC were contacted to respond to the reports that Atta had an account at a Citibank branch in Dubai, and that Marwan Al-Shehhi had an account at HSBC.  HSBC's Dubai-based spokesman responded: "All I can say is that we are cooperating very closely with the relevant authorities."

      Citigroup's spokeswoman Leah Johnson said: "We are committed to cooperating in any way possible with the government's far- reaching investigation and the ongoing battle against terrorism. However, we do not comment publicly on what if any information is being shared with law enforcement.''

     Citigroup, it must be noted, lobbied extensively against the anti-money laundering bill. To the end, Citigroup conducted business with shell banks. The Sun-Sentinel's intrepid Antonio Fins got Citigroup's reaction to the legislation on October 26, reporting that Citigroup "has said it permits business with a shell bank if its parent is a financial institution, not necessarily a bank. But that policy, as well as its liberal use of correspondent accounts, might have to end under the new anti-money laundering law. Citibank officials reiterated Friday their position that it has limited its contacts to 'reputable and financially robust institutions.'" Such as, until quite recently, the Sudan-based Al-Shamal Islamic Bank...

      Also of benefit to Citigroup was a little-noticed change in the final bill, which removed a provision that made fraud against a foreign government a predicate offense to money laundering. So business with the Sani Abacha's and Raul Salinas' of the world can continue apace... (Click here for a more detailed report on Citigroup, including Citi's "private banking" activities).

     With all that accomplished, it appears that the banks involved will now defer to their trade associations, and to the purported NGOs that they fund. Transparency International, for example, is planning a meeting with major banks. The director of TI's Berlin office, Jermyn Brooks, says that "it may be that the prime focus of the (meeting), based on some of the initial discussions between the private banks and Transparency International, could be 'How do the banks protect themselves from the disclosure that they have been holding accounts for terrorists?'" Note the wording: how do banks "protect" -- that is, defend -- themselves from "the disclosure that they have been holding accounts for terrorists." How indeed...

Brief Update of October 25, 2001: On October 24, the U.S. House of Representatives passed a watered-down money laundering bill, 357-66. The Senate is expected to re-ratify the measure and present it to President Bush for signature by the end of the week.  Beginning on October 29, the Financial Action Task Force will be meeting in Washington about the coordination of international laws. The U.S. Treasury Department's Jimmy Garule stated this week that "to date, 144 countries have committed to joining the international effort to disrupt terrorist assets...".

     While Mr. Garule's list is sure to include Scotland, we note that the American Banker newspaper of October 25 quotes Fred Goodwin, the CEO of the Royal Bank of Scotland, as scoffing off questions that have been raised about RBS' correspondent banking relationship with institutions on United Nations sanctions lists. In full disclosure, Inner City Press raises these issues, citing the Bankers' Almanac, to the U.S. Federal Reserve: "the Mellon deal is set to close by yearend, and Mr. Goodwin said it will not be delayed by Inner City Press/Community on the Move. The New York advocacy group wrote to the Federal Reserve after Sept. 11, asking it to look into possible Royal Bank relationships with the Afghan National Bank. 'Absolute nonsense,' Mr. Goodwin said of the allegations."

      But note that a Federal Reserve memorandum dated October 10 (only mailed to ICP on October 17) reads as follows:

To: Files     October 10, 2001

From: Maya Wilson

Subject: Telephone conversation with counsel for the Royal Bank of Scotland plc ("RBS") and Citizens Financial Group Inc.

       On October 9, Reserve Bank and Board staff called Greg Lyons, counsel for Citizens, to ask him to provide the following information in writing to the Reserve Bank: (1) an explanation of RBS's relationship with Afghan organizations, (2) a description of RBS's due diligence process regarding banks for which RBS offers correspondent services, and (3) a list of RBS's correspondent banks. Mr. Lyons agreed to provide a written response to our request. Staff also requested that a copy of the written response be provided to [ICP]

      As of October 24, ICP has not received a copy of any response by Royal Bank of Scotland. "Absolute nonsense" or not, Royal Bank of Scotland is required to respond to these questions.  And a key question, on this policy issue, will be whether RBS seeks to withhold the Fed requested "list of RBS's correspondent banks." 

Update of October 22, 2001

     ...In other murky news, in Athens on October 17, Greek government spokesman Dimitris Reppas told reporters that "after initial checks, it is confirmed that there are accounts in the names of foreign citizens, which are similar to names of people included in lists as being involved in terrorist activities." In the Bahamas, prime minister Hubert Ingraham on October 15 announced that a $20 million bank account of an individual on the U.S.'s most recent terrorist list has been identified and frozen. Mr. Ingraham refused to name the bank which held the account, only stating that "the institution is well-established and operates in 'most if not all' of the industrialized western countries."

     Journalist's aside: on October 12, U.S. Attorney General John Ashcroft issued a memorandum encouraging federal agencies to withhold more documents in response to Freedom of Information Act requests. A 1993 Department of Justice memorandum set forth the standard for denying requests: "foreseeable harm" flowing from release of the information. The new standard is only that the agency have a "sound legal basis" for withholding information. Foreseeable harm does not need to be shown. The Ashcroft memo, as clarified by the DOJ's FOIA Post, does not purport to overrule then-President Clinton's 1993 FOIA directive. How this will play out on this beat remains to be seen. On September 24 Inner City Press submitted a FOIA request to the Federal Reserve Board for documents concerning the Fed's anti-money laundering initiatives; the Fed denied ICP's request for expedited processing, and as of October 19, had not provided any responsive documents.

Update of October 12, 2001

     A brief update is required, mostly in light of fast-moving U.S. legislation. But first, some investigation updates.

    On October 11, the U.S. Treasury Department announced that in the month since September 11, bank regulators around the world have frozen $24 million in assets related either to Al-Qaeda (under the Treasury's list of 27) or the Taliban (primarily, under the 2000 United Nations Security Council list, which apparently was not much acted on prior to September 11). Treasury says that "nearly four million dollars" have been frozen in the U.S., that the Netherlands has blocked two accounts with $550,000 in assets associated with bin Laden and al-Qaeda, and that the Bahamas has also blocked accounts connected to the September 11 attacks.

     The reference to the Bahamas sent journalists digging, mostly following a lead from the February 2001 testimony of Al Qaeda CFO Al Fadl, mentioned the Taqwa Investment company. In Lugano, Switzerland, the company was renamed "Nada Management Company" (not for the Spanish word "nada," meaning "nothing," but for its managing director, Youssef Nada). The connection of the day was to Bank Al Taqwa, Ltd, at PO Box N-4877, Nassau, Bahamas (it's telephone number is listed, in the Bankers Almanac, as 242 326-5766 -- which turns out to be nothing by a fax number).

      Now, the U.S. legislative news: late on October 11, the U.S. Senate passed S. 1510, including anti-money laundering provisions. As noted below, the new due diligence standards have been limited from applying to all correspondent banking accounts, and, in S. 1510, only apply to banks with "offshore banking licenses" or to banks in jurisdictions which have "been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member" -- i.e., the FATF.

    Also on October 11, the House Financial Services Committee passed its anti-money laundering bill after a five-hour mark-up, during which language even weaker than the Senate's was adopted. An adverse finding by the FATF would not trigger enhanced due diligence under the House bill. The U.S. Treasury Secretary would only be required to "consider" the FATF's findings.

     The thus-weakened House bill passed the Committee 62-1. The dissenter was Rep. Ron Paul (R-Texas). Here's a previous "greatest hit" of Rep. Paul, a proponent of the type of offshore services that Citigroup offered to Raul Salinas, Sani Abacha and others:

"In truth, there are very legitimate financial reasons for an American citizen to `go offshore'. These include avoiding exposure to costly domestic litigation and excessive court damage judgments and jury awards, protection of assets, unreasonable SEC restrictions on foreign investments, the availability of more attractive and private offshore bank accounts, life insurance policies and annuities, avoidance of probate and reduction of estate taxes."

-Statement of Hon. Ron Paul of Texas, 2000 Congressional Record, page E1868-E1869. October 19, 2000.

        Some say that the House anti-money laundering bill may reach the floor on October 12, or earlier next week. Expect continued industry lobbying to further weaken it, both before the House vote, and in the subsequent conference committee. The Washington Post of 10/11 reported that "Citigroup executive Rick Small has proposed language that would soften a provision barring U.S. banks from doing business with offshore shell banks that have no physical office and no affiliation with an established bank. Until recently, Small was one of the Federal Reserve Board's top money-laundering experts. He didn't return calls." 

     So: Citigroup's public spin was that it was putting its money-laundering past behind it, by hiring the Fed's expert. Now Citigroup uses this hired gun to lobby against anti-money laundering proposals.... The Washington Post's Kathleen Day also named J.P. Morgan Chase as lobbying against the anti-money laundering legislation... We will have more on all this on October 15.  

Update of October 11, 2001

      As the bombing of Afghanistan continues, the U.S. House of Representatives' Financial Services Committee is scheduled today to consider a watered-down money laundering bill. Whereas the initial House bill would have increased due diligence requirements on all correspondent accounts, the bill now reverts to the Senate Banking Committee's version, limiting the new due diligence standard "only to banks operating under an offshore license, or banks in countries that do not subscribe to international anti-laundering standards." As just one example, we note that Newsweek (10/15) has now nailed down American Express Bank's delay in closing its correspondent account with Sudan-based Al-Shamal Bank: the account wasn't closed until September 17, 2001, despite Al-Shamal Bank being named as bin Laden-owned in 1996, and despite February 2001 court testimony. And note that the Sudan is neither "offshore," nor on the FATF's lists... The mark-up is today at 9:30 a.m. in 2128 Rayburn House Office Building in Washington.

    In Paris on October 9, MP Arnaud Montebourg released a scathing report on money laundering in the United Kingdom (and its Dependencies and Overseas Territories). The report quotes Phillip Thorpe of the U.K.'s Financial Services Authority that "each time we raise a flaw with a financial institution we are told it is somebody who took the decision on their own, who took it upon themselves to put profit before ethics." This certainly has been Citigroup's defense for each documented incident of money laundering....

     Montebourg's report has a 70-page annex entitled "The Economic Environment of Osama bin Laden" which brings together public evidence to make a case that the network behind the closed-down BCCI bank is still active, including for Al-Qaeda. The report focuses on the U.K., but could have ramifications for the U.S. as well. As to the U.K., it states: "Tony Blair, and his government, preaches around the world against terrorism. He would be well advised to preach to his own bankers and oblige them to go after dirty money... Great Britain must also dismantle the legal and banking havens of the Crown dependencies and the overseas territories for which it has particular responsibility." The U.K. Dependencies include Guernsey, Jersey and the Isle of Man; the U.K. "overseas territories" including Gibraltar, Bermuda, the British Virgin Islands, Anguilla and the Cayman Islands. The last of these three are in the bottom tier of compliance, according to a 2000 IMF report...

     Reacting to Montebourg's report, a British Treasury spokesman told reporters: "The UK has one of the world's most comprehensive systems of controls and laws to combat money laundering and the financing of terrorism."

    The London newspaper The Guardian took a different tack, noting (10/11) that "earlier this year, Howard Davies, chairman of the financial services authority, told a committee of MPs who were criticizing him on just these grounds, that one of the biggest tranches of London money then under inquiry - Dollars 92m (pounds 63m) looted by the regime of Sani Abacha in Nigeria - went to a bank over which the UK regulator had no control. 'Under the European rules, that is supervised by its home state,' Howard told the MPs - and said he wasn't able to name the bank in question. The bank was in fact Credit Agricole."  So there.  Montebourg says his next report will, in fact, assess the prevalence of money laundering in France (and, one hopes, Monaco).

    In Washington on October 8, NSA advisor Condoleezza Rice said that "the total [frozen] across the world already reaches several hundred millions dollars," adding that Treasury Secretary Paul O'Neill "is ready to expand the list." Treasury spokeswoman Michele Davis on October 9 told reporters that "we will have more names soon, not today."

     Meanwhile, the Wall St. Journal (and the Philadelphia Inquirer -- both of 10/10) nail down the transfer of funds to Mohamed Atta. The Inquirer quotes an unnamed official that Atta "received the $100,000 in front money... The money came from an account in the United Arab Emirates city of Dubai... A top operative in Osama bin Laden's al-Qaeda network, Mustafah Muhammad Ahmad, also known as Shaykh Saiid, controlled the account, said an official involved in the FBI investigation who asked not to be identified."

    The Journal goes a step further, specifying that a "Suspicious Transaction Report" was filed: "The bank that handled Mr. Atta's $100,000 transaction was sufficiently suspicious that some crime was involved that it alerted authorities last year, people familiar with the matter say." But nothing happened. Similarly, the Journal reports, "Deutsche Bank AG handed over to U.S. and German investigators details on the accounts of Mamduh Salim, the suspected former finance chief of al Qaeda, and Mamoun Darkazanli, a Hamburg-based businessman whom the U.S. government has named as having financial links to international terrorism. Deutsche Bank's files show that Mr. Darkazanli, who says he is innocent, had power of attorney over Mr. Salim's bank account."

     While Deutsche Bank loudly turned over files (while announcing up to 2,600 layoffs -- but that's another story), Canada announced it has frozen C$150,000. The head of the Mexican Bankers Association announced: "We've finished the review and have found no account tied to those names given to us by (Mexico's) Securities and Banking Commission."

Update of October 8, 2001

    As bombs began dropping on Afghanistan on October 7, the lack of enforcement of the United Nations' pre-September 11 sanctions against Afghani / Taliban-controlled banks became more clear. The London newspaper The Observer reported that "Afghan National Credit and Finance, which runs its operations from the fourth floor of an office block on the edge of the City, still has control of more than pounds 10 million of assets.... According to the company's latest accounts, it is a 'London subsidiary of Banke Millie Afghan Kabul, a nationalized company of the Islamic State of Afghanistan.' Banke Millie was among seven corporations blacklisted by the UN in April 2000 as part of a sanctions regime against the Taliban. British authorities should have immediately frozen the assets of these institutions and any related companies. Yet the Bank of England froze only pounds 6.2m of the company's pounds 16.3m worth of assets."

     The Observer's account quotes extensively from The Bankers Almanac (it does not note that this publication still lists Banke Millie Afghan's correspondents as including Citigroup, Chase Manhattan, and NatWest (now owned by Royal Bank of Scotland). Without follow-up, it reports that "the group has an associate company in New York, the Afghan American Trading Co." Inner City Press has followed this up: Afghan American Trading Co. is listed at 122 West 30th Street, 5th floor, New York, New York, 10001. At press time, there was no response at its listed phone number...

Update of October 5, 2001

    In Washington on October 4, the Senate Banking Committee approved an amended anti-money laundering law by a vote of 21-0. The pre-approval amendments included limiting banks' duty of due diligence for correspondent accounts to only those with banks operated under in "offshore financial centers" or located in a country already designated as a money laundering haven by the U.S. Treasury Department or by an inter-governmental group such as the Financial Action Task Force (FATF).

     This narrow scope for due diligence seriously weakens the bill. The more powerful OECD members have been able to keep their favored jurisdictions off of the FATF "shame list." Note, for example, the British press reports of October 5 that over $200 million laundered for Nigeria's ex-dictator Sani Abacha passed through Jersey accounts of Barclays, Deutsche Bank, Bank of India and Citigroup.

     Even the weakened Senate bill was criticized by the American Bankers Association, whose chief lobbyist expressed "some reservations about unintended consequences, particularly in the section dealing with correspondent and private banking accounts." The ABA's senior federal legislative representative Peter Blocklin told the New York Times (10/5) that banks were "already doing due diligence." American banks, he said, were "sort of on the front lines." This ignores, of course, the litany of revelations regarding Citigroup (Raul Salinas, Bongo of Gabon, and Stroessner of Paraguay, see November 9, 1999 Senate staff report, "Private Banking and Money Laundering: A Case Study of Opportunities and Vulnerabilities"), Chase Manhattan (see below), Bank of New York and Russian organized crime, etc.. And observers expect the bill to be further weakened on the Senate floor next week.

Update of October 4, 2001

     Several banks' benign negligence in whom they do business with continues to come to light in the aftermath of the September 11 plane-bombings. This midweek update will review developments so far in October (scroll down for September), and will address the industry's counter-spin, including in a front page article in the October 4 edition of the U.S. newspaper American Banker.

    First, some news: Credit Lyonnais has frozen its (correspondent) accounts with Al-Shamal Bank... UBS has reported four suspicious transactions: three "in the Americas," and one in Europe... The wiring of money from Florida and Maryland to reputed Al Qaeda paymaster Mustafa Ahmad just days before the hijackings has become central to the briefings the U.S. has been giving to NATO, and now in the Middle East. The name of Mr. Ahmad's bank, however, has not yet been disclosed. It appears to be in the United Arab Emirates. Senior officials in the UAE told reporters this week that three of the hijackers each wired $5,000 to the UAE...

    As reported in The Daily Mail of London today (10/4), it has "emerged that several U.K. High Street banks have relationships with Middle Eastern finance houses under investigation by Luxembourg authorities... [A] bank linked to Bin Laden was Faisal Islamic Bank. Barclays is the UK correspondent of its Sudan arm; HSBC acts for its Egyptian operation. Others being investigated by Luxembourg include Bahrain International Bank (UK correspondent: Lloyds TSB) and the Kuwait Finance House (correspondent: Barclays)." The Daily Mail is a couple of news cycles behind: U.S. Treasury officials have already told the Washington Post (9/29) that it's not "Bahrain International Bank," but rather an Islamic bank in Bahrain. Faysal Islamic Bank of Bahrain ("FIBB") has, among its correspondents, National Westminster Bank, now owned by Royal Bank of Scotland (a more complete list of FIBB's correspondents is in our Report of October 1, below).

    Nat West / Royal Bank of Scotland was, as of September 11, also listed as a correspondent of Da Afghanistan Bank, an institution subject to United Nations Sanctions. ICP identified this relationship, and raised it to the U.S. Federal Reserve Board, and to The Scotsman newspaper. A September 26 Scotsman story reported that "RBoS was last night unable to say whether it had severed its links with the Kabul-based bank. A spokesperson said: 'I cannot confirm or deny that they are a correspondent bank.' RBoS declined to comment further. An insider at banking regulator the Financial Services Authority said he was 'surprised' RBoS did not know the status of its relationship with Da Afghanistan Bank."

    The next day, Royal Bank of Scotland issued a statement, subsequently reported in The Scotsman, the Financial Times, the Daily Mail and the Providence (Rhode Island, USA) Journal-Bulletin that the correspondent banking relationship had been dormant since 1995. Which, given the U.N. sanctions, is as it should be. But RBoS' statement, renewed in the American Banker of October 4, does not resolve either (1) what standards the bank has for establishing correspondent relationships, (2) why, on September 25-26, it did not even know what banks it had correspondent relationships with, and (3) why it continues as a correspondent for Faysal Islamic Bank of Bahrain. It should be noted that the U.K. High Court earlier this week ordered Royal Bank of Scotland (and certain other money-center banks) to freeze accounts connected to Nigeria's ex-dictator Sani Abacha. ICP has now raised this to the U.S. Federal Reserve Board.

    The wider industry's counter-spin is exemplified in the Oct. 4 American Banker article. PricewaterhouseCoopers' global director of money laundering compliance services is quoted that banks "are becoming increasingly focused on how they are establishing correspondent relationships and how they monitor activity." When would that increase have been? Since September 11? Because as of September 11, Citigroup, American Express Bank and others were serving as correspondents for Al-Shamal Bank, which the U.S. State Department had named in 1996 as having been founded by Osama bin Laden (see below, Report of October 1, 2001).

    The managing partner of the Sullivan & Cromwell law firm is quoted that "the fact that global banking companies had correspondent accounts with Afghan National 'is not going to be news to bank regulators.'" But if the banking regulators have been on top of correspondent relationships, why was nothing done about Citigroup's and American Express Bank's relationships with Al-Shamal Bank, after it was named by the State Department in 1996, and in federal court testimony in February 2001? (Again, see below for further documentation, and quotes from and links to the testimony). Mr. Cohen added, "The mere fact you have correspondent accounts, I can't imagine the Fed turning down an application on that." Why not? Both the Bank Holding Company Act and the Bank Merger Act require the Fed to review the applicant's managerial resources. A bank's failure to check up on the banks it establishes correspondent relationships with -- in the case of Royal Bank of Scotland, a bank's failure to even know whom it has correspondent relationships with -- go directly to this statutory factor...

Update of October 1, 2001

     The spider web of relations between banks and terrorist organizations, particularly between money-center banks and smaller banks in offshore financial centers and developing countries, has been incrementally exposed since the September 11 plane-bombings. But already a spin-war has set in: excuses from and for the largest banks.

       First, the expanding spider web: last week, regulators in Luxembourg circulated a list of five banks, in addition to the 27 individuals and companies named in the U.S. Executive Order of September 23-24: Al Shamal Islamic Bank, Dubai Islamic Bank, Faisal Islamic Bank, Bahrain International Bank and Kuwait Finance House. Luxembourg has asked its institutions to alert it to any correspondent relationships with these banks.

     ICP has consulted the Bankers' Almanac, and found the following among the listed correspondents of Kuwait Finance House: Citibank, Chase Manhattan, ABN Amro, Barclays, Bank of Montreal, Deutsche Bank, Dresdner Bank, BNP, National Australia Bank, UBS, Fortis, Bank of Cyprus and Bank of Tokyo-Mitsubishi.  Citibank is addressed as greater length below in this Report, which also notes Chase's lobbying against previous calls for a crack-down on correspondent banking relationships. ABN Amro owns LaSalle Bank, Bank of Montreal owns Harris Bank, Deutsche Bank acquired New York-based Bankers Trust, etc..

     The Washington Post of Sept. 29 reported that "Bahrain International Bank said it was erroneously listed. David Mathies, president of a U.S. subsidiary of the bank, said Treasury officials have acknowledged privately that U.S. investigators are pursuing another bank in Bahrain that engages in Islamic banking, and not his, which does not. A U.S. government official confirmed that account." ICP has identified three major Bahrain-based Islamic banks: Bahrain Islamic Bank BSC, Al Baraka Islamic Bank BSC, and Faysal Islamic Bank of Bahrain.

    Among the correspondents of Faysal Islamic Bank of Bahrain are Chase Manhattan, Bank of America, Bank of New York, Royal Bank of Canada, Nat West (now Royal Bank of Scotland), Paribas, UBS, Deutsche Bank, HSBC, and the ubiquitous ABN Amro. The first three are U.S.-based; Royal Bank of Canada recently bought North Carolina-based Centura Bank; Royal Bank of Scotland owns Citizens Bank, and is trying to buy the branches of Pittsburgh-based Mellon Bank, etc.. ICP has now written to the U.S. Federal Reserve Board concerning each of the above-named banks.

     At deadline: the U.K press of October 1 reports the most recent link: wire transfers between Florida (presumably SunTrust) and an Islamic bank in Dubai, to the account of reputed Al Qaeda paymaster Mustafa Mohamed Ahmad, a/k/a Sheikh Saeed. The Bankers Almanac does not list the correspondents of Dubai Islamic Bank; it is also not clear if that is "the" Islamic bank in Dubai referred to. Developing...

     On September 26, the U.S. Senate Banking Committee held a hearing on "Money Laundering and the Funding of Terrorist Activities." The most detailed testimony was by Senator Carl Levin (D-Mich.), who named Khartoum's Al-Shamal Islamic Bank as having been founded by Osama bin Laden, and still owned by him in 2000. Sen. Levin pointed to Shamal Bank's web site, noting that it "currently lists an extensive correspondent network including banks in Europe and the United States. Three of the banks are U.S. banks Citibank, American Express, and the Arab American Bank which was recently acquired by the National Bank of Egypt." Among the European banks are ING Bank, Commerz Bank, Credit Lyonnais, and ABN Amro's Saudi Hollandi Bank.

     Immediately the spinning began. Citigroup spokeswoman Christina Pretto said the Al Shamal account has been "dormant for the last several months," and now had only "a small balance" in it.

    But the U.S. State Department had publicly issued a "Fact Sheet on Bin Laden" as early as August 14, 1996, which stated that "Bin Ladin and wealthy NIF members capitalized Al-Shamal Islamic Bank in Khartoum. Bin Ladin invested $50 million in the bank."

      Citigroup, by its own admission, continued to do business with Shamal Bank until "several months" ago, in 2001.  Given Citigroup's business with Raul Salinas, the family of Nigerian ex-dictator Sani Abacha, the daughters of Indonesia's Suharto, and former Venezuelan president Jamie Lusinchi -- all detailed in Senate hearings on November 9, 1999 -- this may not be surprising. [An aside: at that Senate hearing, the head of Citibank's private bank, Shaukat Aziz, defended Citi. Mr. Aziz is now... the finance minister for Pakistan's military ruler. Also, The Times of London of Sept. 25, 2001 reported that "[t]he Bank of England list includes Ariana Afghan Airlines, the country's national carrier, and its bank accounts. One of the company's accounts is held at the New Delhi branch of Citibank, the US financial giant"].

    At the Sept. 26 hearing, New York Senator Chuck Schumer quickly began the spin-war, suggesting that "jurisdictions" and not particular banks be targeted, asking the Treasury Department's Jimmy Garule

is the administration planning to lead an international effort to cut off jurisdictions that don't cooperate with law enforcement? I've had conversations with some large New York banks that do a lot of the correspondent banking. And they've admitted openly that cutting off non-competitive jurisdictions will not affect their major banking institutions -- you know, the countries that -- because these tend to be smaller countries, et cetera.                       -emphasis added

        Those "large New York banks that do a lot of correspondent bank" include Citigroup, J.P. Morgan Chase and Bank of New York (which is still embroiled in the Russian money laundering scandal).    It should be noted that J.P. Morgan Chase lobbied Congress earlier this year not to crackdown on its correspondent accounts. "David Weisbrod, a senior vice president [at] J.P. Morgan Chase, testified that accounts... held by questionable offshore banks had been opened years ago, before the industry was sensitive to the risks." Wall St. Journal, March 2, 2001. That lobbying followed a Senate hearing which unveiled a Chase internal memo from August 5, 1998, after a Chase officer had advised an inside colleague that "our records show that [Swiss American Bank] has been suspected of money laundering." In the memo, one Chase officer wrote to another one: "I explained to Len that SAB may not necessarily be consciously money laundering but was used as a conduit by their customer. . . . I explained that the revenue from this account was at least $ 100K per annum and we are not going to make a rush judgment to close the account immediately." So, for $100,000 a year, Chase's relationship with a known money laundering bank continued...

     Despite the State Department 1996 Fact Sheet naming Al-Shamal Bank, and the appearance of this bank in ex-Al Qaeda CFO Jamal Ahmed Al Fadl's February 2001 testimony (see below), ABN Amro's stated defense is that "the Al Shamal bank was not on the list of organizations identified by the US government as connected with terrorist activities." American Express continued relations with Shamal Bank until Senate staffers contacted them last week. "'We closed it this week . . . when we found out there might be linkage,' said American Express Bank spokesman Lee Middleton, although he was unable to explain how the account was opened in the first place." Deutsche Presse-Agentur, 9/27/01.

     And that's a major question: what due diligence do the money-center banks have in place prior to opening a correspondent banking relationship with an offshore bank? ICP has now raised this to the Federal Reserve, regarding many of the above-named banks. ICP's filing with the Fed quotes more from the February 2001 testimony in U.S. v. Bin Laden (regarding the 1998 bombings of U.S. embassies in Africa). Mr. Al Fadl was asked:

Q: While you were in the Sudan, did you handle money for Usama Bin Laden?

A: Could you repeat the question.

Q: Did you work on the finances for al Qaeda while you were in the Sudan?

A: Yes.

Q: Did you know where the bank accounts of Usama Bin Laden and al Qaeda were?

A: Yes.

Q: Do you know whose names they were in?

A: The bank account under Usama Bin Laden in Bank Sham[a]l, Khartoum.

Q: That was under Usama Bin Laden's true name?

A: Yes.

   Mr. Al Fadl testified that in 1993 he took $100,000 from Khartoom to an Al Qaeda operation in Jordan.

Q: How did you carry the $100,000?

A: In my bag with my clothes.

Q: Do you recall what kind of bills the $100,000 was in?

A: I remember they all hundred bill...

Q: Who gave you the money?

A: Abu Fahdl, he bring it from Shamal Bank and he bring it to me.

Q: Abu Fahdl brought it from the Shamal Bank?

A: Yes.

Q: Is that a bank in the Sudan?

A: Yes...

Q: Did al Qaeda have any facilities or bank account or anything else in Cyprus?

A: Yes.

Q: How do you know that?

A: I remember when I run Taba Investment in Khartoom, Abu Fadhl al Makkee, he make paper works from the Bank of Shamal and that account that time is shared between me and him in Sudanese pounds and dollars.

     Later in the trial, Essan al Ridi, a/k/a Abu Tareq, was cross-examined by Wahid El Hage's defense counsel, regarding his purchase of an airplane for Al Qaeda:

Q: And during the course of that few months, money was wired into your account from the Sudan, correct?

A: Yes, that's correct.

Q: And about $250,000?

A: Yes.

Q: And from the Shamal Bank in the Sudan?

A: I can't recall the name.

Q: I want to show you what has been marked Defendant El Hage A for identification... Does that refreshed your recollection that the wire transfer came from Shamal Bank in the Sudan?

A: Yes, it does.

     In light of Citigroup and American Express maintaining correspondent accounts with Al Shamal Bank after this testimony, the question arises: why wasn't the Federal Reserve Board monitoring the February 2001 U.S. v. Bin Laden trial? Why didn't the U.S. Attorney's office convey the information they'd elicited from Al Fadl (whom they'd been interviewing since 1996) to the bank regulators, and demand action?

     Looking beyond the U.S. (banks): also named in Mr. Al Fadl's February 2001 testimony was Tadamon Islamic Bank. Among this institution's correspondents, according to The Bankers' Almanac, are ABN Amro's Saudi Hollandi Bank, Credit Lyonnais, and Credit Suisse First Boston. Side notes: The Bankers' Almanac also lists Tadamon Islamic Bank as having a shareholding in Al-Shamal Islamic Bank; also, CSFB's lax policies were demonstrated last year when its business with the sons of Nigeria's ex-dictator Sani Abacha was exposed in London and Switzerland).

     In other international news, the U.N. Security Council late on September 28 passed a resolution calling on member states to enact a variety of terrorism-related legislation, including banking-related legislation. Click here to view the resolution. In France, Finance Minister Laurent Fabius on September 26 said the country has already blocked about $3.9 million in bank accounts linked to Al Qaeada. France's Decree 2001-875 of Sept. 25, 2001, "Regulating Financial Relations with Certain People or Entities," is available here.   In Germany, Deutsche Bank CEO Rolf Breuer told reporters that his institution has identified several suspect accounts. "It's fewer than 10 accounts and the overall total amount is significantly less than one million dollars," Breuer told reporters. "We have cooperated with authorities... We support every endeavor to enable and simplify investigations." Asked whether he would welcome a relaxation of bank secrecy, he said: "Yes, if it helps to fight crime and terrorism -- I wouldn't have a problem with that."

     And ABN Amro's CFO Tom de Swaan was quoted Sept. 29 in the Dutch newspaper Financieele Dagblad that "the rules apparently do not work. It appears to be possible to move large amounts of money to the U.S. to finance terrorist activities... These (rules) are aimed primarily at drugs money and not at the money of terrorists."

     If these banks are sincere, they should drop their opposition to the more-than-moderate proposals of the OECD / FATF. And, in the interim, the U.S. Treasury Department has set up two hotlines, for reporting faster than the hard-copy Suspicious Activity Reports: 1-866-556-3974, and, for information pertaining to the Office of Foreign Assets Control's Specially Designated Nationals List, 1-800-540-6322. Better late than never: the Treasury Department now requests that banks including, on Suspicious Activity Reports, information about correspondent bank names (particularly if the transaction involves a wire transfer). We'll see... This will be updated. For or with more information, or to request e-mailed notifications of the updates, contact us.

Update of September 25, 2001

    Following U.S. President Bush's September 24 press conference, further information has been identified and reported. The Bankers' Almanac lists, as correspondents of Banke Millie Afghan (a/k/a Afghan National Bank), the following institutions: Citibank, Chase Manhattan Bank, and NatWest (now Royal Bank of Scotland).

    The London Daily Mail of September 25 reports that "[a]ccounts at British banks HSBC and Standard Chartered are believed to be coming under scrutiny by U.S. authorities for possible links to Bin Laden and other terrorists."    The Times (London) of September 22 reported that "[t]he FBI is investigating a series of credit card accounts issued by a branch of a leading Middle Eastern bank which it believes were used by the hijackers The Mastercard accounts were issued by Mashreqbank." The list of correspondents of MashreqBank (again, per The Bankers' Almanac) is even more extensive, including ABN Amro, Fortis Bank, Barclays, Bank of America, Credit Suisse First Boston, Banque Nationale de Paris, Banca Nazionale del Lavoro and Westpac. The Financial Times of Sept. 25 reports that "Treasury officials said yesterday their new powers would extend to closing down correspondent relationships with banks which do not co-operate with the hunt for terrorist funds."

    The Bankers' Almanac lists as correspondents of Bank of Afghanistan (a/k/a Da Afghanistan Bank -- listed in UNSC Release 6844) the following: Citibank, Chase Manhattan Bank, Bank of New York, American Express Bank, HSBC and NatWest / Royal Bank of Scotland. ICP has raised this last to the Federal Reserve Board. Developing...

Update of September 24, 2001

     On September 24, U.S. President Bush announced he'd signed an Executive Order freezing the U.S. assets of 27 individuals and organizations, and directing "the Secretary of the Treasury, and other appropriate agencies [to] make all relevant efforts to cooperate and coordinate with other countries... to achieve the objectives of this order...All agencies of the United States Government are hereby directed to take all appropriate measures within their authority to carry out the provisions of this order."

     The 27 persons and entities named in the Executive Order are described as non-controversial; issues will more probably arise as the list is expanded. But how will the above-quoted portions of the Order (and President Bush's statement that "if you do business with terrorists... you will not do business with America") be enforced?  For example, will the Federal Reserve deny applications by banks, and/or banks from countries, which don't comply?  Will U.S. branches of such banks be closed down? And how will compliance be assessed, particularly as to banks' subsidiaries in offshore financial centers like the Cayman Islands, the Isle of Man and Gibralter, etc.?

This Inner City Press / Fair Finance Report will be updated: watch this space.... For or with more information, contact us.

September 23, 2001: Initial Report and Background

     The plane-bombings of the World Trade Center and U.S. Pentagon on September 11, 2001, have resulted in a renewed (sadly, belated) focus on money laundering, tax havens and bank secrecy laws. Prior to the bombings, U.S. Treasury Secretary Paul O'Neill had called the anti-money laundering proposals of the Organization for Economic Cooperation and Development as too stringent; Senator Phil Gramm (R-Tx) had opposed legislation requiring banks to better "know their customers." The largest banks, in the U.S. and elsewhere, have also opposed calls for transparency.

     In May 2001, the Treasury Department had announced the opening of a Foreign Terrorist Asset Tracking Center. But on September 14, 2001, at a press conference addressing the plane-bombing, Treasury Undersecretary Jimmy Garule said that a just called-together "team will ultimately be transformed into a permanent Foreign Terrorist Asset Tracking Center." How could the FTATC not have been formed between, at a minimum, Treasury Secretary Paul O'Neill's May 8, 2001 Senate testimony and September 11, 2001?

     Significantly, evidence was given in open court earlier this year that Osama bin Laden's Al Qaeda organization had accounts with Barclays Bank in London, Girocredit in Vienna, and unnamed banks in Dubai and Cyprus. The transcripts of this testimony were even up on the Internet. And yet it is unclear if the U.S. Federal Reserve or Treasury Department, or any other U.S. regulatory agency, acted on this testimony.

     Only after the plane-bombings did Barclays Bank finally "freeze" the Al Queda-related account. On September 20, Swiss finance minister Kaspar Villiger announced that "[i]n the absence of an official request from the U.S.A. for legal assistance in connection with the attacks perpetrated on September 11, the [Swiss] federal judiciary is carrying out its own investigations which have also led to accounts being frozen." The federal prosecutor's office later specified that only one account had been blocked.

     On September 19, 2001, the U.S. Treasury Department released anti-money laundering guidelines which are woefully inadequate. The FTATC is mentioned once in the 90-page document: in a footnote. Senator Gramm reiterated his previous opposition to increased transparency, stating that "I was right then and I am right now... The way to deal with terrorists is to hunt them down and kill them."

      In this initial Fair Finance Watch report on this topic, we will summarize the public evidence to date, including connections to ABN Amro (al Queda / India), Deutsche Bank (Pakistani intelligence), Citigroup (same), SunTrust, Bank of America and Dime (reportedly held accounts for the September 11 hijackers), and banks in the United Arab Emirates, Cyprus, and such offshore financial centers as the Cayman Islands and Nauru, where 400 "shell banks" operate with little to no scrutiny. How and why has this secret world of finance been allowed to continue, including after the below-quoted terrorism trial testimony?  That is a question we will be seeking to answer in this space in coming weeks, and regarding which we have submitted Freedom of Information Act requests to the Federal Reserve Board and Treasury's Office of the Comptroller of the Currency.

     We will begin, however, with the publicly-available court testimony which was apparently ignored by the U.S. Federal Reserve and other regulators, at least until September 11, 2001:

     On February 6, 2001, in the U.S. District Court for the Southern District of New York, government witness Jamal Ahmed al-Fadl, the former chief financial officer (or "paymaster") of Osama bin Laden's al Qaeda organization, was questioned under oath during a trial related to the bombing of U.S. embassies in Kenya and Tanzania in 1998. He was asked: "do you know if anyone else had accounts for al Qaeda outside of Sudan?" He replied that "Abu Fadhl al Makkee Madana al Tayyab, he got an account in London."

Q: "You said he had an account where?"

A: "In Barclays Bank in London."

Q: "Any other place you are aware of from your work where al Qaeda had accounts?"

A: "I don't know the name of the bank, but I know they got account in Malaysia and in Hong Kong... Khalifa al Omani, he got an account in Dubai."

     He also mentioned al Qaeda bank accounts and trading operations in Cyprus, and named several banks in Sudan: Al-Shamal Bank, Khartoum Bank, Muduhrman Bank, Bank Tadamon Islami, Bank Faisi Islami and Bank of Almusia (Bank of the Farmer). Mr. al Fadl said he had an account at Girocredit in Vienna and another one at Girobank in Kenya." Wall St. Journal, September 20, 2001.

     In the days following the plane-bombings, reporters revisited Mr. al Fadl's testimony, and asked Barclays whether it held such an account. Barclays initially refused to confirm or deny. But press accounts from late 1998 showed Barclays trying to drum up banking business in Taliban-controlled Afghanistan, mere months after the U.S. had fired cruise missiles at that country in response to the bombing of two U.S. embassies in Africa. The Observer (London) of December 13, 1998, had reported that "[a] senior Barclays banker visited Afghanistan last month with a group of businessmen who were investigating potential investments in the country. During a week-long tour, Mark Warner, a director with Barclays Private Bank Ltd - a London-based subsidiary of Barclays - visited a series of sites which the hardline Islamic Taliban regime felt had potential for foreign investment... Last week in Kabul the Taliban's deputy minister of mines and industries, Abdul Salaam Zaeef, showed The Observer Warner's card, complete with a Barclays crest and the number of the direct line to his London desk."

     In the most detailed post-Sept. 11 report, the Sunday Times (London) of September 16, 2001, reported that "[b]ank documents obtained by The Sunday Times show how tens of thousands of pounds were channeled through a Barclays account controlled by the man suspected of leading Osama Bin Laden's operations in Britain. Bin Laden personally appointed Khalid al-Fawwaz, a Saudi dissident with a family home in north London, to run an organization ostensibly devoted to war relief work... Barclays documents show that Fawwaz was the signatory on the account for the Advice and Reformation Committee, the organization that British and American officials believe is a Bin Laden front for his terrorist network. Credit card statements for his Barclaycard show Fawwaz used the account to pay hundreds of pounds for stationery bought from a Huddersfield company, apparently to print thousands of copies of one of Bin Laden's fatwas."

     By September 19, Barclays froze this account. The Austrian newspaper Wirtschaftsblatt on September 19 reported that Wadih El-Hage, a Lebanese-born Al Qaeda supporter, used a bank account at GiroCredit, which was in his name, to transfer $25,000 for an Al Qaeda-related business. "The bank transfers were legal, said Michael Martitz, a spokesman for Erste Bank, which has since taken over Girocredit."

    The Federal Reserve in October 1998 allowed Erste Bank to acquire Girocredit and thereby "establish a federally licensed branch in New York, New York," stating that Erste had "have committed to make available to the Board such information on the operations of Bank and any affiliate of Bank that the Board deems necessary to determine and enforce compliance with the IBA, the Bank Holding Company Act of 1956, as amended, and other applicable federal law."

     One wonders: has the Fed even asked Erste / Girocredit about the public reports of its bank business with Al Qaeda's Wadih El-Hage? A September 21 search of the Federal Reserve's web site found, among the over 12,000 online documents, not a single reference to bin Laden. Given the Fed's status as "umbrella regulators" of the largest bank holding companies, this is strange. Because, despite recent spin that Al Qaeda uses untraceable "hawala" money transfers, other public reports detail Al Qaeda links to other large banks, including ABN Amro (which owns LaSalle Bank in Chicago, among other U.S. operations):

ABN-Amro and Al-Qaeda's Plan to Bomb the U.S. Embassy in New Delhi

    India Today of July 2, 2001, reporting on a thwarted plan by Osama bin Laden's Al-Qaeda organization to bomb the U.S. embassy in New Delhi, transcribed its interview with "Patna-based Sufi cleric Shamim Sarwar."

Q. You even wrote a letter to Osama bin Laden.

A. Yes, I did. That letter was written to satisfy the bosses. The letter was to be delivered by Al Safani to bin Laden to show that things were working out as per plans.

Q. You opened a new bank account to receive all the money promised.

A. Yes. In an ABN Amro branch in Kolkata...

Q. When were you planning to strike?

A. Just after August 15, when security is relaxed in Delhi.

Q. What kind of explosives were you going to use?

A. RDX. With a pencil timer and a remote.

                                                                                               Emphasis added.

     In November 1999, the Federal Reserve granted an approval to ABN Amro. Earlier this year, the Fed allowed Citigroup to acquire ABN Amro's New York bank, European American Bank. And Federal Reserve Bank of Chicago officials are in near-constant contact with officials of ABN Amro's LaSalle Bank.

      Before continuing our review overseas (including into Citigroup's and Deutsche Bank's controversial business in Pakistan), a week after the plane-bombings, information began to trickle out about the hijackers' U.S. banking relationships:

SunTrust, Bank of America and Dime -- and the September 11 Hijackers

     The Miami Herald of September 20, 2001, reported that "SunTrust has already turned over checking account information related to several of the hijacking suspects, said Barry Koling, a bank spokesman. Shortly after last Tuesday's attacks, the FBI 'asked for information relating to several checking accounts opened by people they are investigating,' Koling said....He said the FBI had asked for banking information on 'approximately nine people' and that all the accounts in question were opened in Florida. The Wall St. Journal of September 19 was more specific, reporting both that "[a]n official at SunTrust Bank confirmed at least four suspected hijackers used checking accounts at the bank to purchase their tickets for American Airlines flight 11, which crashed into the Trade Center's north tower last week. The four men -- Mr. Atta, Abdulaziz Alomari, Wail Alshehri, and Waleed Alshehri -- used check cards that allowed them to purchase tickets electronically without having to apply for credit cards" and that "[i]nvestigators believe that suspected hijackers Nawaf Alhazmi and Salem Alhazmi, identified as being on American Airlines Flight 77 when it crashed into the Pentagon, may have purchased their tickets with check cards issued by Dime Bancorp." Various press accounts on September 21 reported that September 11 hijacker Nawaq Alhamzi had a Bank of America account in Southern California. NBC on September 21 reported that the ongoing investigation had identified fully $500,000 in bank deposits that were available to the hijackers. Other press accounts surfaced regarding bank accounts in and around Patterson, New Jersey, and connections to Dar al Mal al Islami and its affiliates (see The Daily Telegraph of Sydney, September 24, 2001) and Mashreqbank (see The Times of London, September 22, 2001). We will be following up on each of these. But now, we return again to pre-September 11 reports of Al Qaeda's banking business:

United Arab Emirates: "Do They or Don't They?"

     As reported above, in his February 6, 2001, testimony, Jamal Ahmed al-Fadl stated that his colleague "Khalifa al Omani, he got an account in Dubai."

     The Wall Street Journal of September 19 reported that "[c]urrent and former U.S. intelligence officials say that investigators have made headway tracing money used by the hijackers to accounts in the United Arab Emirates, which has been used by bin Laden operatives in the past, the U.S. officials say. Investigators don't believe that the UAE was the source for the money but rather that its lax banking laws made it convenient to use. Money transfers from the UAE accounts began as early as 2000, investigators say. In the final days before the attack, some of the hijackers were depleting their bank accounts and sending money back to the UAE, investigators believe. They were also calling UAE from their hotels."

     In a July 8, 1999 press conference, State Department official James Foley was asked about reports that "two countries in the Persian Gulf, UAE and Qatar, have been either cooperating or turning a blind eye to money laundering for the bin Laden organization through their controlled banks." Mr. Foley first denied any involvement by Qatar, then responded to more pointed questions about the United Arab Emirate, Dubai:

Q That is a very narrow answer to what was I thought a quite broad question, which also included the UAE?

MR. FOLEY: Well, in terms of the UAE, we regard the United Arab Emirates, like the other GCC states, as a valued ally with whom we have a close and strong relationship in a broad number of areas. We are also working with the UAE to continue strengthening our counter-terrorism cooperation in many areas, including terrorist money- laundering.

The government of the United Arab Emirates has told us that the Dubai Emirate government has taken steps to clean up the bank, the Dubai Islamic Bank, and to restore its reputation.

Q So if they are taking steps to clean it up, that implies that something had been amiss in the past, at some time in the past?

MR. FOLEY: It does imply that, yes.

Q And what was wrong? Was it --

MR. FOLEY: I can't get into the details of it. I think what I said is significant enough, however.

Q Well, without getting into the details, since we are talking about a bank, are we also talking about money-laundering?

MR. FOLEY: Well, as I said, the government has told us that the Dubai Emirate has taken steps to clean up that bank and that we are also cooperating with the UAE on a number of areas involving cooperation against terrorism, and that includes the area of money- laundering.

Q Are you satisfied with their cooperation?

MR. FOLEY: We believe that -- in this area, it has been sufficient. I know we had a team that was visiting the UAE not long ago, and that they had a successful visit there.

Q So the banking problem has been cleaned up?

MR. FOLEY: Well, we believe that useful work was accomplished in the team's visit. We are pleased with the responsiveness of the UAE officials. As I said before, we have a strong and cooperative relationship with the United Arab Emirates on a variety of national security issues. As we said at the time of the East Africa bombings, we are working hard to interrupt the flow of money to and from the bin Laden organization that supports this terrorist network.

      Click here to view the transcript -- and compare in coming days the above-quoted July 1999 response, to the (re-)new(ed) reports linking Al-Qaeda to the UAE. The UAE, which is a monarchy, on September 21 withdrew its previously-granted diplomatic recognition of the Taliban, a show of the "cooperative relationship" to which Mr. Foley referred, above. But the banking connections... apparently remain. Now, we turn south and east of Afghanistan, to Pakistan:

Deutsche Bank and Pakistani Intelligence Service Heroin Sales

     Business Line of August 10, 2001 (distributed through the Financial Times Asia Intelligence Wire) reported that "[i]n the 1980s, at the instance of the Central Intelligence Agency (CIA), the Internal Political Division of the [Pakistani] Inter-Services Intelligence (ISI), headed by Brig (retd) Imtiaz... started a cell for the use of heroin for covert actions. This cell promoted the cultivation of opium and the extraction of heroin in Pakistan as well as in those parts of Afghanistan under Mujahideen control for being smuggled into the Soviet-controlled areas to get the Soviet troops addicted. After the withdrawal of the Soviet troops, the ISI's heroin cell started using its network of refineries and smugglers to send heroin to the West and use the money to supplement its legitimate economy....After capturing power on October 12, 1999, Gen Pervez Musharraf had Brig Imtiaz, because of his proximity to Mr Nawaz Sharif, arrested and prosecuted for having assets disproportionate to his known sources of income as an officer of the ISI and the Intelligence Bureau. He was convicted by a court on July 31, 2001, and jailed for eight years. According to evidence produced in the court by the National Accountability Bureau (NAB), Brig Imtiaz had foreign exchange bearer certificates worth $20.08 million, a Pakistani rupee account in the Union Bank with a balance of Rs 2.13 billion, a dollar account in Deutsche Bank with a balance of $19.1 million, five residential houses, five commercial units and three shops. This huge wealth was allegedly accumulated by him through heroin smuggling."   -Emphasis added

     In November 1999, the Federal Reserve granted an approval to Deutsche Bank; in connection with Deutsche Bank's acquisition of Bankers Trust, the Fed purportedly reviewed Deutsche Bank's compliance with law, including Know Your Customer procedures. Deutsche Bank is even represented on the Fed's, OCC and SEC's Working Group on Public Disclosure. We question what "disclosure" the Fed has requested, or Deutsche Bank has provided, of DB's above-reported banking relationship with the Pakistani ISI's Imtiaz, now imprisoned...

Citigroup and Pakistan

    The Business Recorder of March 22, 2001, reported that "Syed Muhammad Zafar, the counsel for the [Pakistani] National Accountability Bureau told the Supreme Court here on Thursday that a US Senate's Sub-Committee on Private Banking and Money Laundering had referred to Asif Ali Zardari's financial and legal connections in Switzerland and also listed three accounts in Citibank there of which he was a beneficiary. The former Law Minister told a Special Bench of seven judges hearing appeals of Benazir Bhutto and Zardari against their convictions by an Ehtesab Bench that Zardari had established contacts with the Citibank in Switzerland in 1984 through a private banker, Kamran Amouzgar, and a lawyer who had represented the Bhutto family in Europe for over 20 years, and was also its close friend. He identified the Swiss lawyer as Jens Schlegelmilche, who was mentioned in several documents and referred to by some witnesses during the trial of Benazir Bhutto and Asif Ali Zardari before the Ehtesab Bench of the Lahore High Court."

     Note: Asif Ali Zardari also raised money selling looted Afghani heritage items on the black market. Citigroup other private banking clients have included Nigeria's ex-dictator Sani Abacha, Bongo of Gabon, Stroessner of Paraguay, and Mexico's Raul Salinas. A November 9, 1999 Senate staff report, "Private Banking and Money Laundering: A Case Study of Opportunities and Vulnerabilities," details how Raul Salinas employed Citibank's private banking department to launder over $ 240 million into Swiss accounts. Regarding September 11, Citigroup proffered one of its longest media-responses to date, stating that "[w]e provide typical banking services to the Saudi Binladin Group which has denounced and completely disowned Osama bin Laden. We can't comment on activity with respect to specific accounts. However we are monitoring the situation closely. In addition, we are committed to cooperating in any way possible with the government's far-reaching investigation and the on going battle against terrorism."

    The Federal Reserve in 2001 has approved Citigroup's applications to acquire European American Bank, and the second-largest bank in Mexico, Banamex / Banacci, giving short shrift to evidence of money laundering at Citigroup. In fact, Citigroup in 2001 hired the Fed's money laundering expert Richard A. Small -- click here to read Mr. Small's 1999 Senate testimony, blithely concluding that "[t]he banking system has a significant interest in protecting itself from being used by criminal elements. Individual banking organizations have committed substantial resources and achieved noticeable success in creating operational environments that are designed to protect their institutions from unknowingly doing business with unsavory customers...". The issue with Citigroup: Citi's business with unsavory customers does not appear to be "unknowing"....

      Entities -- companies and countries -- which are profited from their reputations as will to do business with unsavory characters are not presenting a different public face, after the September 11 plane-bombings. As with Citigroup, so with Switzerland:

     Agence France Presse of September 15, 2001, reported that "Switzerland froze several bank accounts held by Afghan banks last year, as part of a United Nations embargo on the Taliban regime, an Economics Ministry spokesman said Saturday. At least six bank accounts were frozen last year, spokesman Alan Kocher said in an interview with the German language daily Tages Anzeiger. The largest account held close to 300,000 Swiss francs (about 200,000 euros, 185,000 dollars), Kocher said, but he did not provide the names of the banks. The ministry holds a list comprising 170 Afghan companies and individuals, including members of the Taliban regime and people associated with bin Laden's Al Qaeda network, who hold money in Switzerland through Afghan banks. The measures taken by the Swiss government were taken months ago, Kocher said, and as yet have nothing to do with an investigation into Tuesday's terrorist attacks on New York and Washington, which US authorities believe were masterminded by Osama bin Laden, the Saudi billionaire who resides in Afghanistan. Tages Anzeiger reported that new accounts were blocked this week and expected to be frozen, following the attacks, but Kocher refused to comment."


    On September 21, 2001, Reuters reported that "the government of Antigua and Barbuda, a tiny Caribbean nation with a thriving off-shore banking sector, said on Friday it would freeze any accounts held by suspected terrorists... In a letter to U.S. Treasury Secretary Paul O'Neill, released on Friday, Antigua's prime minister, Lester Bird, said if Washington sent his government a list of suspected terrorists and their allies, it would immediately take action. It had already told banks to scrutinize a list drawn up by Britain. 'Should we find any such accounts, we will take immediate steps to freeze them and institute measures to confiscate the funds,' he said.

Saudi Arabia

    Osama bin Laden was a Saudi citizen, until the rulers of that country stripped him of citizenship. The St. Louis Post-Dispatch of September 16, 2001, reported that

[t]he Saudi government also ordered Saudi banks to block any effort to distribute money to bin Laden... That order bore fruit in 1997, when the National Commercial Bank of Jedda was caught on the verge of sending bin Laden an undetermined sum of money, according to a Middle Eastern diplomatic source who asked not to be identified. An account of the incident published in USA Today in 1999 said the assets to be transferred included at least $3 million. "One employee from the bank found out and informed the government," the diplomatic source said. The Saudi government forced the bank's owner, Khalid bin Mahfouz, to sell his interest in the bank, and he now lives in retirement in the Saudi resort city of Taif, the source said.

     This report is largely based on a pair of USA Today articles from 1999, the pertinent portions of which are available here.

     Other pre-September 11 leads not apparently followed through on include Mr. Al Fadl's testimony about Cyprus, and an earlier report regarding Fleet and the Caucasus:


     Agence France Presse of April 8, 2001, reported that "Cypriot authorities are investigating claims that alleged terrorist mastermind Osama Bin Laden has secret bank accounts on the island which he uses to run weapons. 'I have ordered the island's special money laundering unit to investigate,' Attorney General Alecos Markides told state radio, while stressing there was no evidence to back the allegations. Jamal Ahmed al-Fadl, a former Bin Laden associate who became a US informant, testified in February before a federal court in New York that Bin Laden's network had set up accounts in Cyprus, believing it to be a safe base from which to buy and transport weapons and other supplies. But Markides said Fadl may have meant Bin Laden's group deposited money in Turkish northern Cyprus, which has been separated from the Greek-dominated south of the island since Turkey's 1974 invasion. Cyprus has long been alleged as a haven for state funds pilfered by ousted Yugoslav strongman Slobodan Milosevic and in the early 1990s the island was blacklisted by the United States for its initial reluctance to tackle the accusations. Cypriot authorities decided to investigate the Bin Laden negotiations after pressure from Washington, the Cypriot newspaper Alithia said Sunday."

Fleet and the Former (and Near Former) Soviet Republics

    The Russian Business Monitor of October 27, 1999 ("Funding Sources for Separatists in Chechnya") reported that "[s]ome serious money is coming from the West as well. The jihad in Chechnya and Dagestan is sponsored though a bank with the complicated name of ANFO SOF TA VIR Limited, based in London, with subdivisions in Sheffield, Bedford, and Leicester... [Supporters] in the United States... have set up numerous "public" educational, charity, and religious organizations which accumulate considerable sums. The money is then transferred to private banks, the Fleet Bank being the most noticeable of these. All transactions with foreigners are carried out via the SWIFT electronic system, which facilitates operations with Russian correspondents. Some banks channel the revenues of export contracts in the needed direction, thus effectively evading current American law. Most money sent to Russia for "humanitarian aid" to the Caucasus, for example, is involved in alleged fuel deals with the participation of trader mediators."

     We are unaware of any Federal Reserve or Treasury Department inquiry into this report, which came out well before the Federal Reserve approved Fleet's applications to acquire Summit Bank in New Jersey, Connecticut and Pennsylvania.... Our final (for now) country report, an unfolding story from the Caribbean:

The Cayman Islands

    The Miami Herald of September 20, 2001, reported that

Investigators have also focused on the Cayman Islands, the largest offshore banking center in the Caribbean. Representatives from the U.S. embassy in Kingston, Jamaica, spent three days in the Caymans last week on a fact-finding mission regarding the case of three men who claim to be Afghan nationals asking for political asylum. The men, who are now in protective custody in the Caymans, claim they were dropped off by a ship from Turkey in August 2000. However, in a statement Sunday, the Caymans government said, "It appeared likely that the men had arrived here on a flight from Cuba using Pakistani passports." This past Aug. 29 a letter was delivered to Radio Cayman. The letter writer said he was convinced the three Afghans "are agents of Osama bin Laden _ one of the world's greatest terrorists -- operating out of -- you guessed it, Afghanistan. The three agents here are organizing a major terrorist act against the U.S. via an airline or airlines." Radio Cayman did not air the contents of the letter.

    We now return, in more detail, to legislative and administrative bodies in the U.S.:

U.S. Senate

     The Money Laundering Deterrence Act of 1998, H.R. 3886, passed the House of Representatives in October 1998, but died in the Senate. "We didn't even have to see Gramm," recalled one bank lobbyist. "KYC [Know Your Customer] is dead on the Hill so long as Gramm is Chairman." The International Economy, May 1, 2001. As noted above, after the September 11 plane bombings, Senator Gramm said "I was right then and I am right now... The way to deal with terrorists is to hunt them down and kill them."

Treasury Department

  The day after the September 11 plane-bombings, the Treasury Department held a press conference about its Foreign Terrorist Asset Tracking Center, saying it was getting off the ground. But the FTATC had been announced a year previous, and apparently never implemented. For example, in Senate testimony on May 8, 2001, Treasury Secretary Paul O'Neill stated that

"Treasury is establishing a Foreign Terrorist Asset Tracking Center (FTAT) within its Office of Foreign Assets Control (OFAC). The Center will develop government-wide strategies to counter terrorist financing and to incapacitate their financial holdings within the US, and to assist other countries to employ similar strategies. Such strategies will bring to bear the full weight, influence, and authority of the federal government -- regulatory, diplomatic, defense, intelligence, and enforcement communities. The agencies pledged to participate in or work with the Center are Customs, IRS, USSS, FinCEN, FBI, INS, CIA, NSA, as well as the Departments of Justice, State, and Defense. OFAC is now hiring the Center's permanent staff and is working with participating agencies to identify detailees and liaisons."

    Two days later, in testimony to a Senate subcommittee, Richard Newcomb of the Treasury Department recited that

we believe that counter-terrorism activities against foreign terrorists will be greatly enhanced by the establishment of the Foreign Terrorist Asset Tracking Center (the "Center"). Last year, the Report from the National Commission on Terrorism (the "Bremer Report") recognized the potential for more effectively employing the broad sanctions authorities delegated to OFAC and recommended the development of a joint task force of relevant U.S. government agencies to develop strategies to counter terrorist fundraising. The Bremer Report also recommended that the Secretary of the Treasury create a unit within OFAC, dedicated to the issue of terrorist fundraising. The Congress subsequently provided funding to Treasury for FY 2001 to develop the Center, in coordination with the relevant USG agencies.... [We are] currently in the process of establishing the Center and USG agencies with counter-terrorism responsibilities have committed to participate in the Center.

     But at a September 14, 2001, press conference about the plane-bombings, Treasury undersecretary Jimmy Garule said that "[t]his team will ultimately be transformed into a permanent Foreign Terrorist Asset Tracking Center in the Treasury Department's Office of Foreign Asset Control, or OFAC. This is an extraordinary effort that really illustrates the Treasury Department's creativity in developing new ways to combat terrorism." Emphasis added.

     How could the FTATC not have been formed between, at a minimum, May 8, 2001 and September 14, 2001? Why has the Federal Reserve done so little on this issue? And what will happen next? This Inner City Press / Fair Finance Report will be updated: watch this space.... For or with more information, contact us.

ICP has published a (double) book about the Finance Watch-relevant topics of corporate fraud and borderline terrorism charges - click here for sample chapters, here for a map, here for fast ordering and delivery, and here for other ordering information. CBS MarketWatch of April 23, 2004, says the the novel has "some very funny moments," and that the non-fiction mixes "global statistics and first-person accounts."  The Washington Post of March 15, 2004, calls Predatory Bender: America in the Aughts "the first novel about predatory lending;" the London Times of April 15, 2004, "A Novel Approach," said it "has a cast of colorful characters."  See also, "City Lit: Roman a Klepto [Review of ‘Predatory Bender’]," by Matt Pacenza, City Limits, Sept.-Oct. 2004. The Pittsburgh City Paper says the 100-page afterword makes the "indispensable point that predatory lending is now being aggressively exported to the rest of the globe," and opines that the "novel Predatory Bender: A Story of Subprime Finance may, in fact, be the first great American lending malfeasance novel" including "low-level loan sharks, class-action lawyers, corporate bigwigs, hired muscle, corrupt politicians, Iraq War veterans, Wall Street analysts, reporters and one watchdog with a Web site."  And money laundering issues, too!  Click here for that review; click here to Search This Site.   Riggs-a-marole... For or with more information, contact us

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