Monday, December 13, 2004

Pinochet's Riggs National Bank Accounts

An exhaustive article in the New York Times (Dec. 12) details accounts maintained by former Chilean dictator General Augusto Pinochet at Riggs National Bank in Washington DC, during the 1980s.  According to the article, Pinochet amassed approximately $15 million in his accounts, although as a life-long military officer his highest annual salary was $40,000.  The extent to which Riggs went to assist General Pinochet in hiding his accounts included the following:

In the United States, federal investigations of Riggs's management of the general's funds suggests that the bank was more interested in masking the existence of his accounts than in producing high-octane financial returns. Riggs, according to American investigators, did not inform regulators, as required, about the existence of the accounts when asked about them four years ago. Moreover, the bank, in a maneuver that it has conceded was improper, changed the names on the accounts of the general and his wife from "Augusto Pinochet Ugarte & Lucia Hiriart de Pinochet" to "L. Hiriart &/or A. Ugarte," ensuring that computer searches for Riggs accounts with the name "Pinochet" would not find them. While banking at Riggs, the general also went by the names Ramon Ugarte and Daniel Lopez, two of the aliases that General Pinochet's financial and legal advisers said he used.

Riggs paid a $25 million fine in May 2004 for what the government termed "willful, systemic violations of the anti-money laundering program and suspicious activity and currency transaction reporting requirements of the [Bank Secrecy Act]." (FinCEN news release here).  In July 2004, Riggs announced that it would be acquired by PNC Financial Services Group, Inc., ending its long history as the bank to Washington D.C.'s elite. 

The government has shown a hightened concern with money laundering by foreign nationals, and the USA PATRIOT Act imposes greater reporting duties on a wide variety of businesses (including lawyers).  After the problems at Riggs came to light, the government tried to reassure banks (and foreign diplomats) that they can continue to bank in the United States.  This past June, the Department of the Treasury issued a press release that stated, "Financial institutions can provide appropriate banking services to the embassies and interests sections of foreign governments and their staffs in a manner that fulfills the needs of those foreign governments while satisfying the provisions of the Bank Secrecy Act."  This is a touchy subject for U.S. banks, and money laundering problems seem to erupt with alarming regularity. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2004/12/pinochets_riggs.html

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