Investigators Target Offshore Bank

Monday, February 5th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) — A man with no prior banking experience who says he advised an Irish prime minister on public relations operates from his home an offshore bank that has become a conduit for millions of suspect dollars from fraudulent activity, Senate investigators say.

Hanover Bank Ltd., licensed by the government of Antigua in the Caribbean, has no physical office or staff and few internal controls or records, the investigators say. Nor was it ever examined by Antiguan or Irish regulators in eight years of operation.

It is owned and run by Michael Anthony Fitzpatrick, an Irish citizen who describes himself as a journalist and PR man with no university training who was adviser to former Prime Minister Charles Haughey in 1981-82.

Fitzpatrick says the bank has tightened its procedures for screening customers to try to prevent it from being used for laundering money. He also denies the investigators' statement that he operates the bank from his home in Ireland, saying it is based in an attorney's office in Antigua, which he visits frequently.

Hanover Bank's clients have included Terrence S. Wingrove, a British antiques dealer imprisoned in London who has been fighting extradition to South Carolina to stand trial on fraud charges, said a report being released Monday by the Democratic staff of the Senate Permanent Subcommittee on Investigations.

Wingrove allegedly gave access to his account at Hanover to William H. Koop, an American who has pleaded guilty to laundering the proceeds of a financial fraud through the bank. Federal prosecutors in New Jersey say Koop was the key figure in a scheme that bilked hundreds of U.S. investors out of millions by claiming he had a high-yield investment program with little or no risk.

Koop, who allegedly laundered some $13 million, is said to have used correspondent accounts at U.S. banks that did business with Hanover and two other offshore banks.

Fitzpatrick maintains he knew nothing of Koop's activities or his alleged misuse of the bank through Wingrove.

In a telephone interview Sunday, Fitzpatrick said he has ``grave concerns about rogue customers who cause banks like ours considerable difficulties.''

``It's very difficult for any bank to be 100 percent sure of its customers,'' he said. ``We have put in place procedures to try to avoid this situation occurring again.''

Fitzpatrick said he has cooperated with the Senate investigation, and ``We have nothing to hide.''

Telephone calls to Koop's home in Franklin Lakes, N.J., were not answered.

Correspondent banking, a lucrative activity in which banks provide services to each other, allows banks to conduct business in countries in which they have no physical presence.

But American banks that provide correspondent accounts to foreign banks have become conduits for illicit money coming into the U.S. financial system and thereby have unwittingly aided drug trafficking, fraud and other crimes, a yearlong inquiry by the Senate investigators found.

The Hanover Bank is a case history in the Senate staff investigation.

Fitzpatrick ``failed to follow basic banking procedures that would have enhanced his awareness and understanding of the transactions taking place through his bank,'' the report said.

Investigators said Harris gained access to the American banking system by using U.S. correspondent accounts belonging to other foreign banks. Notably, they said, Hanover opened a correspondent account in 1992 at Standard Bank Jersey Ltd., a large offshore bank that in turn had an account with Chicago-based Harris Bank's office in New York City.

Hanover ``is just the kind of high-risk foreign bank that no U.S. bank should be doing business with, either directly or indirectly,'' said Sen. Carl Levin of Michigan, senior Democrat on the investigations subcommittee

Many of the U.S. banks named in the report, ``Correspondent Banking: A Gateway for Money Laundering,'' are large institutions that are household names in this country's banking industry.

The investigators sent questionnaires to 20 big banks that provide correspondent services, including Bank of America, Bank of New York, Bank One, Chase Manhattan, Citibank, First Union, FleetBoston and Wells Fargo.

``Virtually every U.S. bank we examined had opened accounts for offshore banks or banks in suspect jurisdictions, yet few were paying attention or taking the steps needed to make sure these banks weren't misusing their accounts,'' Levin said. ``It's time for U.S. banks to shut that door and put an end to the money laundering that goes on through high-risk foreign banks.''

U.S. banks should be barred from opening correspondent accounts with foreign banks that are shell operations without any physical presence, Levin and the Democratic staffers said.

In addition, they said, American banks should be required to identify a foreign bank's correspondent banking clients and to refuse to open accounts for banks that allow shell foreign banks or dummy corporations to use their U.S. accounts.

Money laundering, in which profits from drug trafficking, prostitution, corruption and other crimes are moved through a series of bank or brokerage accounts to disguise them as proceeds of legitimate business activity, is estimated to absorb close to $600 billion a year. That equates to 5 percent of the world's gross domestic product.

Money laundering has received increased notice and scrutiny since it was revealed in August 1999 that the Bank of New York, one of the nation's largest, had served as a conduit for $7 billion in Russian money, some of it believed to be from criminal activity.

A November 1999 report by the Senate investigators examined the cloistered world of private banking, which discreetly caters to the very wealthy. The investigators found that drug traffickers, corrupt officials and tax evaders around the world were using private banking to launder their illicit profits through the financial system.

The investigation focused closely on Citibank, one of the world's largest banks, and alleged abuses by some executives in handling millions of dollars deposited by foreign officials later accused of corruption and money laundering.


On the Net:

Senate Permanent Subcommittee on Investigations: 7/8 (tilde)gov—affairs/psi.htm

U.S. Financial Crimes Enforcement Network:

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