-Caveat Lector-
-------- Original Message --------
Subject: US Bankers are Money Launderers
Date: Wed, 7 Feb 2001 21:28:16 -0600 (CST)
From: IGC News Desk <[EMAIL PROTECTED]>
Organization: ?
To: undisclosed-recipients:;
Copyright 2001 InterPress Service, all rights reserved.
Worldwide distribution via the APC networks.
*** 06-Feb-0* ***
Title: FINANCE-US: Bankers, Heal Thyselves
By Jim Lobe
WASHINGTON, Feb 5 (IPS) - While the US government has been pressing
smaller nations to take unprecedented measures against banks which
launder money for drug-dealers and other international criminals,
major US banks have actually made money-laundering easier, according
to a Congressional report released here Monday.
Some of the country's biggest banks, including Chase Manhattan,
Bank of America, Citigroup, and J.P. Morgan Chase & Co. have
routinely set up so-called ''correspondent accounts'' for clients
of foreign banks, some of which are mere shell companies created
for drug-traffickers and other ne'er-do- wells to hide their
ill-gotten gains, according to the report by the Minority Staff of
the Senate's Permanent Subcommittee on Investigations.
''Inattention and disinterest by US banks in screening the foreign
banks they take in as clients have allowed rogue foreign banks and
their criminal clients to carry on money laundering and other
criminal activity in the United States and to benefit from the
services, safety, and soundness of the US banking industry,'' said
Sen. Carl Levin, whose staff wrote the report.
''Taxpayers are spending hundreds of millions of dollars to protect
the US banking, to fight money-laundering,'' he added. ''It's time
for US banks do their share to end the money-laundering carried
out by high-risk foreign banks.''
The report estimates that between 500 billion dollars and one
trillion dollars of ''dirty money'' moves through the world's
banking system each year and that roughly half of that total is
deposited at one time or another in US banks.
The new report, 'Correspondent Banking: A Gateway for Money
Laundering', is one of a series put out by the Minority staff over
the last two years highlighting the laxness of US banks in dealing
with tainted money.
In late 1999, the staff produced a ground-breaking report detailing
the failure of Citigroup, the largest US bank, to exercise ''due
diligence'' over foreign accounts in its ''private banking''
department.
It found that tens of millions of dollars apparently obtained by
foreign leaders and their family members through bribery and other
illegal practices had been held in private bank accounts, which
usually require a minimum deposit of one million dollars and are
managed by special Citigroup officers who act as the client's
''private banker''.
Raul Salinas, the brother of former Mexican President Carlos Salinas;
the sons of former Nigerian dictator Gen. Sani Abacha; Gabonese
President Omar Bongo; and Asif Ali Zardari, the husband of former
Pakistani Prime Minister Benazir Bhutto were among some of Citigroup's
clients who benefited from such services.
Under US regulations, banks must exercise ''due diligence'' over
the accounts of clients to make sure that the money held in them
was not derived from certain kinds of illegal activity and report
any suspicious activity. Laundering money gained from drug-trafficking,
terrorism, or bank fraud - but not bribery by foreign officials -
can be prosecuted as a crime.
The Subcommittee's work, as well as other investigations into
money-laundering by drug-traffickers and Russian mafia interests
led to heightened efforts here on the part of Bill Clinton's
administration to lead a global crackdown against the use of banks
for money-laundering and tax evasion.
Last year, it helped persuade the 29-nation Organisation for Economic
Co-operation and Development (OECD) to list countries whose lax
banking laws make them a haven for hot money, a step that forced
many of those named, including several Caribbean countries to
tighten regulations and pledge to co-operate with foreign investigators.
The Clinton administration also tried to persuade Congress to add
money gained from official corruption by foreign leaders to the
list of crimes under the anti-money-laundering law, but the banks
successfully resisted such a move.
Just before leaving office last month, however, it announced new
voluntary guidelines that would require banks to use ''enhanced
scrutiny'' - a higher standard than due diligence - on all accounts
linked to foreign leaders and their families or business partners,
and report suspicious transactions.
It is not clear yet whether the new administration of President
George W. Bush will back stronger measures. Its more conservative
leanings, however, make it less likely to do so, according to
analysts here.
The new report, based in part on interviews with scores of bank
owners and employees here and abroad, as well as with foreign and
US regulators, found that many off-shore banks which establish
correspondent relationships with big US banks are little more than
shell operations sometimes consisting of a single office or even
a mailbox.
All of the 10 off-shore banks investigated by the staff were based
in the Caribbean - specifically, Antigua and Barbuda, the Bahamas,
Dominica, the Cayman Islands - or Vanuatu in the South Pacific. A
number of these have closed.
In addition to money from drug-trafficking, bribery and tax evasion,
the staff found that these banks also handled earnings from internet
gambling, which is illegal in a number of US states, and illegal
investment schemes.
In one case, the staff found that a Dominica-based bank, British
Trade and Commerce Bank, which began operations only in 1997, was
able to open accounts at several US banks and move more than 85
million dollars in ''dirty money'' through them over a two-year
period.
In another case, a Bahamas-based bank, which acted as an affiliate
of Lloyds TSB Bank in London, provided US dollar accounts to
Colombian clients only.
Its US correspondent, the Bank of New York, according to the report,
never took any steps to detect money laundering by Colombian money
brokers who exchanged pesos for dollars obtained from drug-trafficking.
The bank, the British Bank of Latin America, closed last year after
being named in two US sting operations.
Levin, who said he will hold Congressional hearings on Correspondent
Banking, called for legislation that would bar US banks from opening
correspondent accounts with shell banks.
He also called for US banks to conduct a systematic review of all
correspondent accounts with foreign banks to identify suspicious
activity.
Banks themselves, according to Levin, have acknowledged the problem,
but have called on the government for greater help in identifying
banks which are likely to be engaged in money-laundering.
(END/IPS/IF/jl/da/01)
Origin: Rome/FINANCE-US/ ----
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