Anti-terror laws take the privacy out of banking

April 14, 2004|By JAY HANCOCK

THE BRICK HOUSE at 10501 Bit and Spur Lane in Potomac is modest for the neighborhood - only six bathrooms and two fireplaces, according to real estate records.

But it has fetched attention beyond its curb appeal because of its owner and manner of financing. The dollars that bought the home, it seems, came from the pockets of American drivers via an impoverished West African country the size of Maryland.

President-for-Life Teodoro Obiang Nguema Mbasogo of oil-rich Equatorial Guinea bought the place in late 1999 for $1.2 million. He worked through Riggs Bank of Washington. Riggs probably wishes it had never seen the house, never heard of Obiang and never gotten so deep into the low-profit, high-status world of "embassy banking."

A federal grand jury, the government's Financial Crimes Enforcement Network and the Office of the Comptroller of the Currency are examining Riggs in connection with money-laundering concerns, according to various news accounts.

And that's just in regard to Equatorial Guinea, which had deposited hundreds of millions in national oil revenue with Riggs. Now Congress and the FBI are investigating Riggs' handling of millions in transactions by Saudi officials, including Saudi Ambassador Prince Bandar bin Sultan, according to news accounts.

This is no routine money-laundering probe. As the most prominent target yet in the post-9/11 search for terrorist dollars, Riggs is an object lesson for financial institutions - pawnshops, even you're not exempt - that are not diligent in spying on questionable customers and reporting them to the feds.

There is no evidence that Riggs-linked money is connected to terror. Nobody has been charged with a crime, although Riggs could face fines and heightened oversight, and was criticized last year for what the government said was lax compliance with money-laundering safeguards. Riggs has ended its relationships with Saudi Arabia and Equatorial Guinea, both huge depositors.

But what's clear is that the rules of the game have changed. The USA Patriot Act of 2001, government reorganization and huge boosts in spending have given teeth, sinew and extra eyes to federal money-flow tracking.

Last month, President Bush created the Office of Terrorism and Financial Intelligence at the Treasury Department. The Financial Crimes Enforcement Network, an obscure office founded in 1990 to fight money-laundering, has been upgraded, expanded and put under that umbrella.

FinCen, as it's known, not only collects information on "suspicious" bank transactions under the Bank Secrecy Act; it also employs intelligence specialists to sift the data and is empowered to share it with other government agencies. And some financial outfits are empowered to share information on suspect customers with each other - in addition to being required to tell the government.

What constitutes a "suspicious" transaction is unclear, but banks are supposed to report everything from apparent false statements and identity theft to credit card fraud and computer hacking. And they're not just watching depositors; accountants, employees, shareholders and appraisers may be reported, too. Banks must disclose the suspects' addresses, phone numbers, Social Security numbers and account numbers.

Political pressure for results is enormous, especially in an election year.

On March 24, members of a House subcommittee grilled Treasury's Juan C. Zarate and other administration officials on the possible connection between terrorist financing and Saudi Arabia.

"Could you comment on how extensively U.S. banks, maybe unwittingly, [are] used to transfer funds between Saudi donors and al-Qaida through corporate, private or other types of account?" asked Ohio Republican Steve Chabot.

Zarate responded with an advertisement for the USA Patriot Act. A week later, somebody leaked word of federal inquiries into the Riggs-Saudi relationship to The Wall Street Journal.

The Riggs accounts undoubtedly bore looking into. Riggs reportedly held more than $300 million in Equatorial Guinean funds controlled by Obiang and millions more in Bandar-controlled Saudi accounts that underwent large withdrawals and deposits for no apparent reason.

We're in a war, and watching dodgy pots of money closely should be part of its prosecution. But as a result, the phrase "private banking" is becoming an oxymoron.

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