House panel probes deals between 2 foreign banks SO, ASSOCIATED PRESS

March 30, 1991

WASHINGTON (AP) -- The House Banking Committee is investigating transactions between an Italian bank that lent billions of dollars to Iraq and another foreign bank that has secretly acquired part ownership of the capital area's largest financial institution.

The inquiry, launched by the committee chairman, Representative Henry B. Gonzalez, D-Texas, is the first examination into possible ties between two controversies involving foreign bank dealings in the United States.

In one, two former executives of the Atlanta branch of Banca Nazionale del Lavoro (BNL) were indicted last month on charges they illegally arranged more than $4 billion in unauthorized loans to Iraq.

In the second, the Luxembourg-based Bank of Credit and Commerce International (BCCI), acknowledged early this month that it had acquired at least a 25 percent share in First American Bankshares Inc. without permission from U.S. regulators at the Federal Reserve.

Mr. Gonzalez, in a March 14 letter to Federal Reserve Chairman Alan Greenspan, said, "Evidence has been uncovered revealing millions of dollars of money transfers between BNL and BCCI."

He said a Federal Reserve Bank of New York analysis of BNL-Atlanta's account at Morgan Guaranty Trust Co. reveals large transfers between BNL and BCCI from July 27 to July 29, 1989, the week before FBI agents raided BNL's office in Atlanta.

A committee source cautioned that the transactions could be legitimate.

BNL borrowed from other banks to lend to clients and to meet U.S. reserve requirements.

But, the source said, neither BCCI nor First American appear on a list of banks BNL normally used as sources of funds during the period.

Committee investigators are trying to determine whether the transactions had anything to do with BNL's lending to Iraq or with money laundering, the source said.

"BNL had a lot of deals with a lot of criminal activity. BCCI had a lot of criminal activity. It's awfully intriguing," the source said.

Mr. Gonzalez maintains Iraq diverted some of the BNL loans, ostensibly made so Iraq could purchase U.S. farm products, to help Saddam Hussein build his military.

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