Levin-Coleman Staff Report Discloses Web of Secret Accounts Used by Pinochet

Subcommittee Report [PDF]

WASHINGTON – An investigation led by Sen. Carl Levin, D-Mich., and Norm Coleman, R-Minn., senior Democrat and Chairman, respectively, of the Permanent Subcommittee on Investigations of the Committee on Governmental Affairs, has uncovered a secret web of at least 125 U.S. bank and securities accounts at Riggs and other financial institutions operating in the United States, that were used by former Chilean President Augusto Pinochet and his associates to move millions of dollars.

“New information shows that the web of Pinochet accounts in the U.S. was far more extensive, went on far longer, and involved more banks than was previously disclosed,” said Levin. “Some banks actively helped him hide his funds; others failed to comply with U.S. regulations requiring banks to know their customers. Through lax due diligence or worse, too many banks allowed a notorious public figure, Augusto Pinochet, to build a secret web of U.S. accounts using offshore corporations, deceptive account names, and third party conduits to hide his role in moving millions of dollars across international lines.”

"This is a sad, sordid tale of money laundering involving Pinochet accounts at multiple financial institutions using alias names, offshore accounts, and close associates,” said Coleman. “As a former General and President of Chile, Pinochet was a well-known human rights violator and violent dictator. Even the most rudimentary compliance with federal "know your customer" rules would suggest that these accounts should have scrutinized and closed long ago. Congress spoke with the enactment of the Patriot Act, we need to make sure that the banks listened because banks are our first line of defense. Now more than ever, proper bank compliance is crucial to root out proceeds of illicit conduct and financing of activities that makes our world unsafe.”

Senators Levin and Coleman are releasing a bipartisan staff report today that augments a year-long Subcommittee investigation that, in 2004, unearthed the relationship between Riggs Bank and Pinochet. Following that hearing, Riggs identified additional documents and accounts that should have been, but were not, provided in response to Subcommittee subpoenas. The Subcommittee also used Riggs bank records to identify other financial institutions that helped Pinochet gain access to the U.S. financial system, including Citigroup, Banco de Chile-United States, Espirito Santo Bank in Miami, and others.

The staff report lays out four key findings:

• More Extensive Pinochet Relationship. 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.
  
• Military Officer Accounts. From 1981 to 2004, eight Riggs accounts, opened in the names of Chilean military officers, served as conduits for Pinochet funds and transmitted more than $1.7 million to Pinochet-related accounts.
  
• Web of 125 U.S. Accounts. Over the past 25 years, multiple financial institutions operating in the United States, including Riggs Bank, Citigroup, Banco de Chile-United States, Espirito Santo Bank in Miami, and others enabled Pinochet to construct a web of at least 125 U.S. bank and securities accounts – often using aliases, offshore corporations, or names of third parties – which he used to move millions of dollars in funds and conduct business.
  
• Transferring Suspect Funds. After U.S. bank regulators raised money laundering concerns about the Pinochet funds at Riggs Bank, the bank closed the accounts and transferred the funds to another financial institution operating in the United States, without notice that the funds were suspect. The U.S. regulators failed to follow the suspect funds when they left Riggs to determine whether they went to another U.S. financial institution.

To address these findings, the Subcommittee staff recommends that:

• Financial institutions that close an account due to money laundering concerns should, before transferring the suspect funds to another financial institution, warn that financial institution under Section 314(b) of the Patriot Act that the transfer is the result of an account closure due to suspect funds;
  
• U.S. regulators should take steps to prevent suspect funds from being transferred to another U.S. financial institution and should identify and dismantle any network of related U.S. accounts;
  
• U.S. regulators should clarify Section 314(b) to make clear that its legal protections permit financial institutions to respond to requests for information, including by offering information that may help to expose or prevent money laundering or terrorist activities; and
  
• The United States should work with the European Union to enable financial institutions with U.S. and E.U. affiliates to exchange information about clients and accounts across international lines to guard against money laundering and terrorist financing.

Since 1999, the Subcommittee, under Levin’s leadership, has conducted a series of investigations, held hearings, and issued reports related to money laundering activities in the U.S. financial services sector. This investigative work provided the foundation of many of the anti-money laundering provisions included in the USA Patriot Act enacted in October 2001.