Permanent Subcommittee on Investigations Holds Hearing on Money Laundering and Foreign Corruption: Enforcement and Effectiveness of the Patriot Act

WASHINGTON – The Senate Permanent Subcommittee on Investigations will convene a hearing on Thursday, July 15, 2004, to release the results of a yearlong investigation conducted at the request of Sen. Carl Levin, D-Mich., ranking minority member of the Subcommittee, into the effectiveness of key anti-money laundering provisions in the Patriot Act. The hearing, Money Laundering and Foreign Corruption: Enforcement and Effectiveness of the Patriot Act, will focus on the dubious operations of Riggs Bank of Washington, D.C. and the lack of adequate oversight by federal regulators of Riggs Bank.

“This bank flaunted the requirements under the federal banking laws to combat money laundering and terrorist financing. While the vast majority of financial institutions follow the law, the ‘Don’t ask, Don’t tell policy’ at Riggs allowed the bank to pursue profits at the expense of proper controls,” said Sen. Norm Coleman, R-Minn., Subcommittee Chairman. “Now more than ever, proper bank compliance with the Bank Secrecy Act and the Patriot Act is required to combat terrorist financing, suspicious activity, and money laundering.”

“Million-dollar cash deposits, offshore shell corporations, suspicious wire transfers, alteration of account names – all the classic signs of money laundering and foreign corruption made their appearance at Riggs Bank,” Levin said. “When a bank such as Riggs operates with such reckless abandon and federal regulators are so ineffectual in their oversight, it does little to inspire confidence in our country’s determination to stop money laundering, especially when that bank is located here in our Nation’s Capital.”

Among other provisions, the Patriot Act obligates U.S. financial institutions to exercise due diligence when opening and administering accounts for foreign political figures, and it deems corrupt financial activities by foreign officials as an allowable basis for U.S. money laundering prosecutions.

The hearing will focus on two sets of Riggs accounts, one involving Augusto Pinochet and the other involving Equatorial Guinea, to illustrate the bank’s disregard for its anti-money laundering (AML) obligations and dysfunctional AML program. These accounts also illustrate the failure of federal bank regulators to exercise meaningful oversight of a bank with numerous high-risk accounts and fundamental, long-standing AML deficiencies.

The evidence shows that the bank’s primary regulator, the Office of the Comptroller of the Currency (OCC) did a poor job of compelling Riggs Bank to comply with statutory and regulatory AML requirements. Regulators tolerated the bank’s weak AML program, were slow in reacting to repeat deficiencies, and failed to use available enforcement tools.

The investigation also examined bank records showing substantial payments by oil companies operating in Equatorial Guinea (E.G.) to E.G. officials, their family members and entities controlled by them.

During the course of this investigation, the Subcommittee issued numerous subpoenas and document requests. The Subcommittee staff also conducted numerous interviews with representatives from financial institutions, the OCC, the Federal Reserve, oil companies, various experts, and other persons with relevant information.

The hearing, Money Laundering and Foreign Corruption: Enforcement and Effectiveness of the Patriot Act, will be held on Thursday, July 15, 2004, at 9:00 a.m. in Room 342 of the Dirksen Senate Office Building. Hearing witnesses will include representatives of Riggs Bank, the OCC, and three oil companies operating in Equatorial Guinea. At the hearing, the Subcommittee will release a minority staff report summarizing the investigation.