Arab Bank Told by U.S. to Restrict Wire Transfers (Update5)

[R.A. Hettinga]

<http://www.bloomberg.com/apps/news?pid=10000103&sid=atzqhwfJoPgc&refer=us>

Bloomberg



 Arab Bank Told by U.S. to Restrict Wire Transfers (Update5)

 Feb. 25 (Bloomberg) -- Arab Bank Plc, the target of lawsuits by relatives
of victims of terrorist attacks in the Middle East, was ordered by a U.S.
regulator to restrict wire transfers and stop taking deposits at its New
York branch.

 Amman, Jordan-based Arab Bank, the third-largest Arab lender, failed to
monitor fund transfers at the branch for suspicious activity and to obtain
enough information about them, the Office of the Comptroller of the
Currency said in a consent order released in Washington today. The bank
neither admitted nor denied wrongdoing.

 ``The inadequacy of the branch's controls over its funds transfer business
is especially serious in light of the high-risk characteristics of many of
the transactions,'' the OCC said.

 The order, which didn't mention the lawsuits, requires Arab Bank to pay
off or transfer all deposit accounts and wind down money transfers at the
New York branch, all but ending the branch's ability to do business as a
traditional bank. The 75- year-old bank, which will now focus its New York
business on trade and corporate finance, must also provide a daily report
to the OCC of assets and keep all records in English.

 Bank spokeswoman Heather Geisler said transfers were a small part of the
branch's operations. She said the branch dealt mostly with trade and
corporate finance.

 U.S. regulators have intensified their surveillance of money transfers
since the terrorist attacks of September 11, 2001. Families of victims of
the attacks have used courts to target Arab individuals, banks and
governments, including Saudi Arabia. The families that sued Arab Bank are
seeking $2 billion in damages.

 Suits

 The suits, filed July 2 and Jan. 21 in a U.S. District Court in Brooklyn,
say that the Saudi Committee in Support of the Intifada Al-Quds used Arab
Bank to make at least six payments of 20,000 Saudi riyals ($5,332) each to
relatives of bombers and gunmen. The charity has raised more than $100
million to aid Palestinians injured in the conflict with Israel.

 Chief Banking Officer Shukry Bishara said in an interview this month that
Arab Bank didn't know the payments were going to families linked to the
attacks.

 ``Nothing in the consent agreement asserts that transactions happened that
were not supposed to,'' Geisler said in an e-mail. ``But rather it talks
about weaknesses in Arab Bank's ability to report potentially suspicious
activity.''

 Nofal Barbar, regional manager for Arab Bank, wasn't available for
comment, his office said. The bank's New York branch, its only one in the
U.S, is on the second floor of an office building on Madison Avenue in
midtown Manhattan. The bank has 22 branches in the West Bank and Gaza Strip
and $2 billion in deposits.

 ``Arab Bank is committed to achieving and implementing best practices in
the rapidly evolving area of transactional reporting,'' Bishara said in a
statement today. ``This agreement builds on and will help strengthen our
internal controls and will give our customers and regulators even more
confidence in the safety and security of Arab Bank.''

 Bishara said in a Feb. 7 interview that the bank might close the New York
branch. Under the consent order, the bank can operate on a restricted basis
in the U.S. provided it maintains ``quality'' assets to cover debits and
protect the U.S. deposit insurance fund.

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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
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