<http://www.nytimes.com/2004/05/14/business/14bank.html?th=&pagewanted=print&position=> The New York Times May 14, 2004 Regulators Fine Riggs $25 Million By TIMOTHY L. O'BRIEN ederal regulators fined the Riggs National Corporation, the parent company of Riggs Bank, $25 million yesterday for failing to report suspicious activity, the largest penalty ever assessed against a domestic bank in connection with money laundering. The fine stems from Riggs's failure over at least the last two years to actively monitor suspect financial transfers through Saudi Arabian and Equatorial Guinean accounts held by the bank. The accounts are still being scrutinized as possible conduits for terrorist funds or for the proceeds of graft. Riggs, based in Washington, "did not collect or maintain sufficient information about its foreign private banking customers," regulators noted in a consent order signed by the bank. "As a result, the bank failed to identify approximately one-third of the accounts related to the country of Saudi Arabia and an unacceptably high number of accounts related to the country of Equatorial Guinea." "The bank omitted disclosure of several bank accounts in response to requests" from regulators, the consent order also noted. A spokesman for the Saudi Arabian Embassy has denied any involvement by Saudi officials in terrorist financing activities through Riggs. The Equatorial Guinean Embassy has not returned calls seeking comment. It is possible that additional fines may be levied against individual executives or directors at Riggs, as well as two former directors, according to two people briefed on the matter. The moves are the latest troubles for a storied institution that manages bank accounts for most of Washington's foreign embassies as well as American embassies and consulates overseas. Riggs agreed to pay the penalty without admitting or denying any wrongdoing, according to the consent order. A spokesman said last night that the regulatory environment since the Sept. 11, 2001, attacks has required all banks to act much more diligently in monitoring accounts. Regulators cited the bank for failure to comply with the Bank Secrecy Act, a law governing anti-money-laundering requirements. "The bank's management was ineffective in overseeing the bank's day-to-day compliance with the B.S.A. laws and its regulations, as evidenced by the numerous and substantial deficiencies in the program," the consent order said. A severe penalty had been expected against Riggs after it first disclosed in a securities filing in March that regulators were considering fining the bank for lax practices in combating money laundering. Federal regulators and investigators, as well as two Congressional committees, are investigating the bank's accounts. "Riggs Bank deserves every penny of this huge fine," said Senator Charles E. Grassley of Iowa, chairman of the Senate Finance Committee, which is examining the Riggs accounts. "When banks look the other way, they put our national security at risk. Whether it's through incompetence, negligence or greed, they are allowing terrorists to funnel their blood money through the system." "This fine is a shot across the bow for the board of directors, who should have taken more care to find out what was wrong with Riggs and get it fixed," Mr. Grassley added. "I'm not satisfied they've been held to account." The Financial Crimes Enforcement Network, an investigative arm of the Treasury Department, and the Office of the Comptroller of the Currency, a regulatory arm of the same agency, each imposed $25 million penalties against Riggs, but the bank will be allowed to pay them concurrently. The consent order stated that Riggs failed to report suspect transactions involving the withdrawal of tens of millions of dollars in cash and international drafts from accounts controlled by the Saudi Arabian Embassy and by Saudi Arabian officials. Accounts controlled by Prince Bandar bin Sultan, Saudi Arabia's ambassador to the United States, have been scrutinized in the investigation, according to federal investigators involved in the inquiry. The consent order also stated that Riggs had similar monitoring lapses involving the Equatorial Guinean accounts, including "millions of dollars deposited into a private investment company owned" by an official of that country. The order also cited "hundreds of thousands of dollars transferred from an account of the country of Equatorial Guinea to the personal account of a government official of the country" and more than $1 million transferred from an Equatorial Guinean account to a private investment company owned by Simon P. Kareri, a former senior Riggs manager. Mr. Kareri is the subject of a federal grand jury hearing examining possible criminal fraud. Mr. Kareri's lawyer has previously declined to comment on the hearing. He could not be reached for comment yesterday evening. Another major banking regulator, the Federal Reserve, is expected to designate Riggs and one of its Miami banking subsidiaries as being in "troubled condition," a move that will severely curtail the bank's autonomy, according to three people briefed on the matter. Among other things, the designation means that the bank must secure regulatory approval before naming new executives or directors. The Comptroller of the Currency already formally designated Riggs as a troubled institution last month. Riggs said last month that it planned to exit most of its embassy and international banking operations. Riggs also indicated in a securities filing last month that Joe L. Allbritton, its former chief executive and its biggest shareholder, would not stand for re-election to the board. Mr. Allbritton, who took control of the bank in 1981, is a vice chairman. Neither Mr. Allbritton nor Riggs has been charged with wrongdoing by federal law enforcement officials who are scrutinizing the bank's accounts. -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'