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Financial Exposure pp 291–331Cite as

Palgrave Macmillan

Combating Money Laundering: Round Two

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Abstract

This chapter presents a second set of Levin-led anti-money laundering investigations. One inquiry, in 2004, examines how Riggs Bank, specializing in serving embassies, handled suspect funds for foreign officials, including Teodoro Obiang, president of Equatorial Guinea, and Augusto Pinochet, former president of Chile. Another inquiry, in 2010, exposes how Mr. Obiang, as well as leaders from Gabon, Nigeria, and Angola, used shell companies, lawyers, a lobbyist, and university officials to infiltrate U.S. banks and move suspect funds. A 2012 inquiry discloses how a global bank, HSBC, helped Mexican drug traffickers, Russian fraudsters, and rogue regimes like Iran move dubious funds through its U.S. branch. This chapter also describes law enforcement actions and regulatory reforms to curb the abuses.

“Wrongdoers can use U.S. dollars and U.S. wire transfers to commit crimes, arm terror groups, produce and transport illegal drugs, loot government coffers, even pursue weapons of mass destruction. That’s why our country has made combating money laundering and terrorist financing a national security imperative.”

Senator Carl Levin, HSBC hearing (July 17, 2012)

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Notes

  1. 1.

    “Oil Boom Enriches African Ruler,” Los Angeles Times, Ken Silverstein (1/20/2003), http://lat.ms/2zORsWm.

  2. 2.

    See, for example, “A Washington Bank in a Global Mess,” New York Times, Timothy O’Brien (4/11/2004), http://nyti.ms/2isIEMg.

  3. 3.

    The information in this section is based on “Money Laundering & Foreign Corruption: Enforcement and Effectiveness of the Patriot Act,” S. Hrg. 108-633 (7/15/2004) (hereinafter “2004 Riggs Hearing”), https://www.gpo.gov/fdsys/pkg/CHRG-108shrg95501/pdf/CHRG-108shrg95501.pdf; and “Supplemental Staff Report on U.S. Accounts Used by Augusto Pinochet,” S. Prt. 109-25 (3/16/2005) (hereinafter “Supplemental Pinochet Report”), https://www.gpo.gov/fdsys/pkg/CPRT-109SPRT20278/pdf/CPRT-109SPRT20278.pdf.

  4. 4.

    In re Riggs Bank National Association, OCC No. 2003-79, Consent Order (7/16/2003), http://www.occ.gov/static/enforcement-actions/ea2003-79.pdf.

  5. 5.

    “Terrorism Financing: Origination, Organization, and Prevention,” Senate Governmental Affairs Committee, S. Hrg. 108-245 (7/31/2003), https://www.gpo.gov/fdsys/pkg/CHRG-108shrg89039/pdf/CHRG-108shrg89039.pdf.

  6. 6.

    As part of that effort, the committee tried unsuccessfully to declassify 28 blanked-out pages in a 9/11 report related to Saudi Arabia. Those pages were finally declassified in 2016.

  7. 7.

    Information about the EG and Pinochet accounts is based on the 2004 Riggs Hearing, including the report entitled, “Money Laundering & Foreign Corruption: Enforcement and Effectiveness of the Patriot Act, Case Study Involving Riggs Bank,” at 126–210.

  8. 8.

    See United States v. Kareri, Criminal Case No. 1:05-CR-00212-RMU (USDC DC), http://www.plainsite.org/dockets/1fvltqsr/district-of-columbia-district-court/usa-v-kareri-et-al/; “Former Riggs Executive, Wife, Charged with Fraud and Conspiracy,” Washington Post, Terence O’Hara (5/28/2005), http://wapo.st/2hLe2bF.

  9. 9.

    Id., at 40. For the list of dictators, see “Who Would You Say is the World’s Worst Dictator?” Parade Magazine, Washington Post (2/22/2004), reprinted at id., at 493.

  10. 10.

    The Levin-Coleman bill, S. 2814, was added through Senate Amendment No. 3867 to S. 2845, the National Intelligence Reform Act of 2004, and enacted into law on December 17, 2004 as Section 6303(b) of the Intelligence Reform and Terrorism Prevention Act, P.L. 108-458.

  11. 11.

    See, for example, the Extractive Industries Transparency Initiative, https://eiti.org/.

  12. 12.

    See, for example, “U.S. Bank Helped Dictator Hide Millions,” (7/16/2004) (citing AP report),http://bit.ly/2j4rp3u.

  13. 13.

    See Supplemental Pinochet Report, at 127–228.

  14. 14.

    Id., at 228, Appendix #4—FN 75.

  15. 15.

    See United States v. Riggs Bank, Criminal Case No. 1:05-CR-00035-RMU-1 (USDC DC), Judgment (3/31/2005), http://lib.law.virginia.edu/Garrett/plea_agreements/dockets/RiggsBank.htm; In re Riggs Bank, FinCEN Case No. 2004-01 (5/13/2004), Assessment of Civil Money Penalty, https://www.fincen.gov/news_room/ea/files/riggsassessment3.pdf. See also “Riggs Bank Agrees to Guilty Plea and Fine,” Washington Post, Terence O’Hara (1/28/2005), http://wapo.st/2yVmJDy.

  16. 16.

    See Spanish court order, English translation, Supplemental Pinochet Report, at 96–101, Appendix #4—FN 5; “Allbrittons, Riggs to Pay Victims of Pinochet,” Washington Post, Terence O’Hara (2/26/2005),http://wapo.st/2zeTaBl.

  17. 17.

    See “Order Approving the Merger of Bank Holding Companies,” Federal Reserve System (4/26/2005), http://www.federalreserve.gov/boarddocs/press/orders/2005/200504262/attachment.pdf; “Riggs, PNC Reach New Merger Agreement,” Washington Post, Terence O’Hara (2/11/2005), http://wapo.st/2zTAbt3.

  18. 18.

    See, for example, 31 U.S.C. §5318(i)(3)(B) requiring financial institutions to conduct “enhanced scrutiny of any [private banking] account that is requested or maintained by, or on behalf of, a senior foreign political figure, or any immediate family member or close associate of a senior foreign political figure, that is reasonably designed to detect and report transactions that may involve the proceeds of foreign corruption.”

  19. 19.

    The information in this section is based on “Keeping Foreign Corruption Out of the United States: Four Case Histories,” S. Hrg. 111-540, Volumes 1–2 (2/4/2010) (hereinafter “2010 Foreign Corruption Hearing”), https://www.gpo.gov/fdsys/pkg/CHRG-111shrg56840/pdf/CHRG-111shrg56840.pdf (Volume 1), and https://www.gpo.gov/fdsys/pkg/CHRG-111shrg57734/pdf/CHRG-111shrg57734.pdf (Volume 2).

  20. 20.

    The information in this section is based on the 2010 Foreign Corruption Hearing, Volume 1, at 141–250.

  21. 21.

    Id., at 510, Hearing Exhibit 1a.

  22. 22.

    See “Exempted Anti-money Laundering Programs for Certain Financial Institutions,” 31 CFR 103.170.

  23. 23.

    The information in this section is based on the 2010 Foreign Corruption Hearing, Volume 1, at 251–329.

  24. 24.

    The information in this section is based on id., at 412–509.

  25. 25.

    The information in this section is based on id., at 330–411.

  26. 26.

    SEC v. Siemens, (USDC DC), Case No. 1:08-cv-02167-RJL, Complaint (12/12/2008), at paragraph 50.

  27. 27.

    “Voluntary Good Practices Guidance for Lawyers to Detect and Combat Money Laundering and Terrorist Financing,” American Bar Association (8/2010), http://bit.ly/1i19Wza.

  28. 28.

    “A Lawyer’s Guide to Detecting and Preventing Money Laundering,” American Bar Association and Others (10/2014), http://bit.ly/2AdbwCK.

  29. 29.

    See EU Third Money Laundering Directive, ¶¶ 19–23, 45 and Article 2(1)(3)(b) (10/26/2005), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:309:0015:0036:en:PDF.

  30. 30.

    See “Anonymous Inc.,” 60 Minutes (1/31/2016), http://cbsn.ws/1UBarEW. For another example of lawyers involved with potential corruption schemes, see “Mossack Fonseca: Inside the Firm That Helps the Super-Rich Hide Their Money,” The Guardian, Luke Harding (4/8/2016), http://bit.ly/22hAFiq.

  31. 31.

    See, for example, “FinCEN Takes Aim at Real Estate Secrecy in Manhattan and Miami,” FinCen Press Release (1/13/2016), https://www.fincen.gov/news_room/nr/html/20160113.html; “FinCEN Expands Reach of Real Estate ‘Geographic Targeting Orders’ Beyond Manhattan and Miami,” FinCen Press Release (7/27/2016), https://www.fincen.gov/news_room/nr/pdf/20160727.pdf.

  32. 32.

    “Anti-Money Laundering Guidelines for Real Estate Professionals,” National Association of Realtors (11/15/2012), http://bit.ly/2aanJaZ.

  33. 33.

    The American League of Lobbyists issued a code of ethics for its members in November 2010, nine months after the PSI hearing in February 2010, but it made no mention of AML issues. See “Code of Ethics,” American League of Lobbyists (11/2010), http://bit.ly/2zOXoP0.

  34. 34.

    For an example of a university that has issued its own AML guidance, see “University of Nottingham Anti-Money Laundering Policy and Procedures,” University of Nottingham, http://bit.ly/2zQc8h8.

  35. 35.

    See, for example, “State Business Incorporation—2008,” two hearings before the Senate Committee on Homeland Security and Governmental Affairs, S. Hrg. 111-953 (6/18 and 11/5/2009), https://www.gpo.gov/fdsys/pkg/CHRG-111shrg51788/pdf/CHRG-111shrg51788.pdf.

  36. 36.

    Incorporation Transparency and Law Enforcement Assistance Act, S. 2956, introduced on May 1, 2008.

  37. 37.

    “Tougher Rules on Money Laundering to Fight Tax Evasion and Terrorist Financing,” European Parliament Press Release (5/20/2015), http://www.europarl.europa.eu/news/en/news-room/20150513IPR55319/tougher-rules-on-money-laundering-to-fight-tax-evasion-and-terrorist-financing.

  38. 38.

    The information in this section is based on “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History,” S.Hrg. 112-597, Volumes 1 and 2 (7/17/2012), (hereinafter “HSBC Hearing”), https://www.gpo.gov/fdsys/pkg/CHRG-112shrg76061/pdf/CHRG-112shrg76061.pdf (Volume 1) and https://www.gpo.gov/fdsys/pkg/CHRG-112shrg76646/pdf/CHRG-112shrg76646.pdf (Volume 2).

  39. 39.

    See 31 U.S.C. 5318(i)(1), enacted as Section 312 of the Patriot Act of 2001.

  40. 40.

    See “HSBC Holdings Plc. And HSBC Bank USA N.A. Admit to Anti-Money Laundering and Sanctions Violations, Forfeit $1.256 Billion in Deferred Prosecution Agreement,” Department of Justice Press Release (12/11/2012), https://www.justice.gov/opa/pr/hsbc-holdings-plc-and-hsbc-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations.

  41. 41.

    Id.

  42. 42.

    See “Too Big to Jail, Inside the Obama Justice Department’s Decision Not to Hold Wall Street Accountable,” Republican Staff Report, House Committee on Financial Services (7/11/2016), http://financialservices.house.gov/uploadedfiles/07072016_oi_tbtj_sr.pdf.

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  1. Levin Center at Wayne Law, Wayne State University Law School, Detroit, MI, USA

    Elise J. Bean

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Bean, E.J. (2018). Combating Money Laundering: Round Two. In: Financial Exposure. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-94388-6_10

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  • DOI: https://doi.org/10.1007/978-3-319-94388-6_10

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