USA Department of the Treasury Office of the Comptroller Orders Bank Secrecy Compliance of Riggs Bank
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CONGRESS QUESTIONS TREASURY, FED ON HANDLING OF ABN AMRO
by Glenn R. Simpson
Oct 1, 2004 - Wall Street Journal - The Federal Reserve Board and Treasury Department are under the gun from Congress on their handling of allegations of possible money laundering at the New York branch of ABN Amro Holding NV, which is the subject of three separate federal investigations. In congressional hearings this week and a letter to the Fed, top members of Congress asked why regulators didn't act sooner to force changes at the bank and whether the Dutch banking giant's ties to questionable foreign banks -- which it quietly severed this year amid the multiple probes -- indicate bigger problems with money laundering in the U.S. banking system, including infiltration by suspected criminal groups from Eastern Europe.
ABN Amro is under scrutiny for a no-questions-asked stance toward dozens of dubious small banks in Eastern Europe, the Mediterranean and the Caribbean. In addition to existing inquiries by the Justice Department and the Federal Reserve, the matter is under investigation by Treasury's Financial Crimes Enforcement Network, a top Treasury official told lawmakers yesterday.
The ABN Amro inquiries could spell fresh trouble for federal bank regulators, who earlier this year struggled to explain why they took years to crack down on Riggs National Corp. for overlooking hundreds of millions of dollars in suspicious transactions by several foreign officials. That case, which Treasury's Office of the Comptroller of Currency acknowledges it mishandled, prompted lawmakers to weigh awarding sole oversight of money-laundering compliance to an agency devoted solely to the problem, such as the Financial Crimes Enforcement Network, or FinCEN, a Treasury agency.
Regulators strongly have opposed giving up any turf, contending that they know best how to find out what is going on inside banks. In a letter to Fed Chairman Alan Greenspan, Rep. Sue Kelly (R., N.Y.) requested "a detailed report at your earliest possible convenience of the Fed's actions in identifying and responding to compliance problems at ABN Amro."
Ms. Kelly, who chairs the Financial Services Oversight and Investigations Subcommittee, cited recent reports in The Wall Street Journal as presenting "a disturbing picture involving long-standing signals of potential money-laundering problems at ABN Amro and a slow-footed response from federal regulators." ABN Amro's relationships with questionable foreign banks were first spotted by regulators in 2002. But it wasn't until June of this year, amid a Justice Department criminal inquiry, that the Fed reached an agreement with the bank to overhaul its internal controls.
A spokesman for the Federal Reserve had no immediate comment. A bank spokesman said ABN Amro has acknowledged the problems and is working closely with regulators to address them. At a House Financial Services Committee hearing, Assistant Treasury Secretary Juan Zarate said FinCEN "is reviewing the matter with alacrity," and "working very closely" with both the Fed and the Justice Department.
In the Senate, top lawmakers said they are worried about signs of widespread criminal activity. Banking Committee Chairman Sen. Richard Shelby (R., Ala.) on Wednesday asked a top Treasury official what is being done "to ensure that a potentially systemic problem like this is under control." Stuart Levey, who heads Treasury's Office of Terrorism and Financial Intelligence, said investigators want to determine "whether we're overreacting to something that might be isolated or if it's the tip of the iceberg.