Riggs Bank fined $25 million for handling of accounts probed for terrorism links

Friday, May 14th 2004, 6:04 am

By: News On 6

WASHINGTON (AP) _ Riggs Bank has been fined a record $25 million by federal regulators, who say the bank violated anti-money laundering laws in its handling of millions of dollars in transactions in Saudi-controlled accounts probed for possible links to terrorism financing.

The civil fine against the midsize Washington bank, which has a near-exclusive franchise on business with the capital's diplomatic community, is the largest ever imposed on a financial institution for such violations, experts said. It had been expected.

The Treasury Department's Office of the Comptroller of the Currency issued the fine in an order made public late Thursday, after weeks of negotiations between Riggs officials and banking regulators.

``Riggs failed to properly monitor, and report as suspicious, transactions involving tens of millions of dollars in cash withdrawals, international drafts that were returned to the bank, and numerous sequentially numbered cashiers' checks,'' the office said.

In addition to the now-closed accounts that Saudi diplomats controlled, the order mentioned accounts held by officials of Equatorial Guinea.

The order requires Riggs to make special reviews of its operations and account transactions and give regulators advance notice of any dividend payments to shareholders.

Riggs did not admit to or deny wrongdoing in agreeing to the fine.

Riggs said in a statement it expects to reach an agreement soon with the Federal Reserve on taking corrective actions such as hiring an independent consultant to conduct a review. Its operation in Miami _ which Riggs plans to close _ will be required by a Fed order to retain an outside consultant to review previous account transactions for possible suspicious activity. The Fed has jurisdiction over bank holding companies.

``Riggs is 100-percent committed to fulfilling all of our regulatory responsibilities and to doing our part to protect the financial system, and we will hasten our efforts toward these goals,'' the statement said.

The Senate Finance Committee chairman, Republican Charles Grassley of Iowa, has asked the panel investigating the Sept. 11 attacks to examine Saudi transactions at Riggs and FleetBoston Financial Corp.

``Riggs Bank deserves every penny of this huge fine,'' Grassley said Thursday. ``Banks have a patriotic duty, not to mention legal requirement, to report suspicious activity. When banks look the other way, they put our national security at risk.''

Grassley said members of the bank's board of directors should be held to account.

The FBI and regulators have investigated, for possible connections to terrorism financing, large cash transactions in Riggs accounts controlled by Saudi diplomats.

Treasury regulators had accused Riggs of failing to comply with a law requiring banks to notify the government of suspicious transactions. The bank also had been classified by the comptroller's office as a ``troubled institution'' for not complying fully with a July 2003 consent order under which it agreed to strengthen its anti-money laundering controls.

The designation means the bank must get regulators' approval for changes in top management and for severance payments to executives who leave.

The bank, with some $7 billion in assets, earned $3.9 million in the first quarter, compared with $5.9 million a year earlier. Annual earnings have not exceeded $25 million since 1999.

Riggs said last month it is pulling back from its foreign operations and the head of the family that controls the bank was resigning from the board of its parent company.

The bank has said it is selling or leaving most of its operations in Britain and closing any embassy business that does not meet guidelines for weeding out suspicious account transactions. Applying the guidelines could bring the loss of about two-thirds of its embassy accounts.

Puerto Rico's largest bank, Banco Popular, was fined $21.6 million in 2003 for allegedly allowing millions in drug money to be laundered by failing to report suspicious activity to the government.