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Until recently Riggs held approximately $750 million dollars worth of accounts connected to Equatorial Guinea. A State Department report on Equatorial Guinea identified poor fiscal management, a lack of transparency, and little evidence that the country’s oil wealth has been used for the public good. In fact, most of the oil wealth appears to be concentrated in the hands of top government officials. Despite these concerns, Riggs serviced these accounts with little attention to the bank’s anti-money laundering obligations. This resulted in the withdrawal of $35 million from the Equatorial Guinea oil account to various companies, some believed to be owned by the Equatorial Guinea President. Furthermore, Riggs failed to record effective account opening information, a requisite for accurate anti-money laundering reporting. As a result, currency transaction reports for cash deposits of $11.5 million over a two-year period failed to identify the owner as a high-ranking Equatorial Guinea government official.
In 1994 Riggs began a significant banking relationship with the former dictator of Chile, Augusto Pinochet. For eight years, Riggs officials did not verify the source of his wealth, nor did they disclose the existence of these accounts to the OCC despite an OCC request for a list of accounts held by politically exposed persons. Verification of a legitimate source of wealth is fundamental to ensure that the U.S. banking system is not used to facilitate the movement of funds stemming from illegal activity.
Poor internal controls apparently made it easy for Simon Kareri, the Account Manager for Equatorial Guinea to embezzle $1.2 million from that account.
Since, 1997, Riggs has been cited by the OCC for failure to ensure sound internal controls, inadequate training to identify and monitor suspicious activity, and a lack of independent audits to ensure Bank Secrecy Act Compliance. In fact, ten different examinations between 1997 and 2002 raised these issues over and over again. I am concerned whether bank managers understand the importance of anti-money laundering compliance.
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http://www.senate.gov/~gov_affairs/index.cfm?Fuseaction=Hearings.Testimony&TestimonyID=641&HearingID=189