U.S. Department of Justice
Kenneth L. Wainstein.
United States Attorney for the District of Columbia.
Judiciary Center
555 4th street. N.W.
Washington, D.C. 20530
Tuesday March 29, 2005
Channing Phillips (202) 514-6933
Riggs Bank sentenced to pay $16 million fine for criminal violation of the Bank Secrecy Act
Washington, D.C. - United States Attorney Kenneth L. Wainstein, Assistant Attorney General Christopher A. Wray, Criminal Division, Department of Justice, Michael A. Mason, Assistant Director in Charge of the Federal Bureau of Investigation´s Washington Field Office, James B. Burch, Special Agent in Charge of the United States Secret Service´s Washington Field Office, and Special Agent in Charge Charles Pine, Internal Revenue Service, Criminal Investigation, Alexandria Field Office, announced that today Washington, D.C. based Riggs Bank was sentenced to pay a $16 million fine in connection with its January 27, 2005, guilty plea to a federal criminal violation of the Bank Secrecy Act. In the felony plea, Riggs admitted its repeated and systemic failures to report suspicious monetary transactions associated with bank accounts owned and controlled by Augusto Pinochet of Chile and by the government of Equatorial Guinea. Today, United States District Judge Ricardo M. Urbina formally accepted Riggs´ guilty plea and imposed a $16 million fine and placed Riggs on a five-year period of corporate probation.
Riggs is only the third financial institution in the United States to be convicted of a criminal Bank Secrecy Act violation.
United States Attorney Wainstein stated, ”Financial institutions are our first line of defense against those who seek to finance terrorism or launder the proceeds of crime. The sentence in this case -- which is the largest criminal fine ever imposed on a bank of Rigg´s size under the Bank Secrecy Act -- sends the clear message to financial institutions that they ignore their legal obligations at their peril.”
As set forth in the stipulated statement of offense, Riggs was required, pursuant to the BSA, to file a Suspicious Activity Report (”SAR”) with the Department of Treasury´s Financial Crimes Enforcement Network (”FinCEN”) whenever it detected suspicious financial transactions. SARs are to be filed no later than thirty (30) calendar days after the date of initial detection of the suspicious transactions.
In this case, the investigation revealed that Riggs failed to engage in even the most cursory due diligence review of accounts held by two particular customers –- accounts of what are known as ”Politically Exposed Persons” that Riggs knew posed a high risk of money laundering. It allowed those accounts –- belonging to former Chilean president and dictator Augusto Pinochet and the Government of Equatorial Guinea –- to be used to transfer large sums of money in a highly suspicious manner and failed to report such transactions to the proper authorities, as required by law.
Accounts associated with Augusto Pinochet of Chile
Augusto Pinochet was the de facto leader or president of Chile from 1973 to 1990, the Commander-in-Chief of its armed forces from 1990 to 1998, and a Chilean Senator from 1998 to 2002. Numerous countries, including Spain, Switzerland, Belgium and France, issued warrants against Pinochet for human rights crimes. Additionally, in 1998, a Spanish Magistrate issued an attachment Order purporting to freeze all Pinochet assets worldwide.
Between 1994 and 2002, Pinochet and his wife, Lucia Hiriart Rodriguez, maintained multiple bank accounts, investments, and certificates of deposits at Riggs (the ”Pinochet Accounts”). The Pinochet Accounts were located at Riggs in the United States and at its London branch. During this time period, Pinochet deposited more than $10 million into the Pinochet Accounts. However, Riggs failed to conduct sufficient due diligence regarding the source of the funds being deposited into the Pinochet Accounts and failed to report transactions it knew or had reason to know were suspicious. Additionally, Riggs personnel transferred monies in a manner to avoid scrutiny.
For example, in March of 1999, notwithstanding the outstanding attachment order that purported to freeze all of Pinochet´s assets, Pinochet prematurely terminated a certificate of deposit held in a London account at Riggs and transferred the funds, approximately $1.6 million, to a Certificate of Deposit at Riggs in the United States. Between August 2000 and January 2003, in five separate episodes, Riggs also converted $1.9 million from the Pinochet Accounts by breaking them into smaller $50,000 cashiers checks and delivering them to Pinochet in Chile
Riggs knew or had reason to know that these transactions were suspicious, but failed to file any SARs until bank regulators, a subcommittee of the United States Senate, or law enforcement discovered the transactions.
In addition to the Pinochet accounts, the investigation revealed significant mishandling of accounts held by the Government of Equatorial Guinea.
Accounts associated with Equatorial Guinea
Equatorial Guinea (”EG”) has billions of dollars of oil reserves within its territorial waters, resulting in a significant influx of capital from businesses in the United States and elsewhere. Between 1996 and 2004, Riggs maintained numerous accounts for EG. Over the course of this period, Riggs opened over 30 accounts for the EG government, numerous EG senior government officials, and their family members. Riggs also 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´ largest single relationship with balances and outstanding loans that totaled nearly $700 million.
Despite numerous large cash deposits and suspect wire transfers connected to oil revenues, Riggs failed to undertake sufficient due diligence regarding the source of funds being deposited into the EG Accounts. For example, in September 1999, Riggs assisted EG President Obiang in the establishment of Otong S.A., an offshore shell corporation, incorporated in the Bahamas. Riggs also held a money market account for the corporation. Over time, more than $11 million in currency was deposited into the Otang accounts in six different transactions over a two-year period. There was no plausible explanation given for such highly suspicious transactions.
Riggs also failed to file a SAR until after the Office of the Comptroller of the Currency and Congressional investigators brought the transactions to the bank´s attention. These transactions should have raised suspicions and prompted the required SAR filings because of the large amounts of cash involved, the lack of identification of the source or destination of the funds, and the unusual and unlikely nature of these transactions by these account holders.
Additionally, Riggs failed to investigate 16 separate wire transfers, totaling approximately $26.4 million, that were sent between June 2000 and December 2003, from an account at Riggs which held oil royalty payments to the Government of EG to an account held by another entity in Spain. Riggs now acknowledges that these transactions were suspicious, that it failed to conduct adequate due diligence on what it knew or should have known was a high risk account, and failed to report the transactions as called for by law.
Riggs has accepted responsibility for its actions and has cooperated fully with the investigation. As part of the plea agreement, Riggs has agreed to continue to cooperate with law enforcement in the ongoing investigation. Riggs has also voluntarily closed its Embassy Banking and International Private Banking Divisions.
In announcing today´s sentence, United States Attorney Wainstein, Assistant Attorney General Wray, Assistant Director in Charge Mason, Secret Service Special Agent in Charge Burch, and IRS Special Agent in Charge Pine commended the work of the FBI, the United States Secret Service, the Internal Revenue Service, the Department of the Treasury Office of Inspector General, and the banking regulators at the Federal Reserve, the Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network, otherwise known as FinCEN. In addition, they commended the work of Paralegal Specialists Jeanie Latimore-Brown and Thomasenia Manson and Auditor Nicholas Novak of the U.S. Attorney´s Office. Lastly, they commended the efforts of Assistant United States Attorneys Robert R. Chapman, Judith Kidwell, Gerald Balacek and Steven J. Durham, and Senior Trial Attorney Cynthia Stone of the U.S. Department of Justice Asset Forfeiture and Money Laundering Section.
Fuente: U.S. Department of Justice
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