Receiving funds which may have been associated with criminal activities exposes companies and individuals to legal risks. Holding, managing or hiding such funds, including funneling suspicious funds into legitimate financial channels, may result in prosecution and lawsuits.
Case 3.1 United States of America v. Riggs Bank
In 2005, Riggs Bank pled guilty in a US court and paid a $16 million fine to clear up criminal charges laid in relation to hiding and laundering the assets of Chilean dictator Augusto Pinochet.
The case against Riggs bank proceeded in both U.S. and Spanish criminal courts focused on the bank’s role in hiding and laundering Pinochet’s assets. The bank also faced allegations of similar practices with respect to the assets of government officials from the oil rich West Africa state of Equatorial Guinea (United States of America v. Riggs Bank N.A., Cr. 05-35(RMU).
Specifically, Riggs was accused of violating the Bank Secrecy Act (BSA), under which it was required to file a Suspicious Activity Report (SAR) with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) whenever it detected suspicious financial transactions. The bank was initially assessed a $25 million civil money penalty in 2004 for violations of US anti-money laundering laws by FinCEN.
In March 2005, a U.S. federal court accepted the Riggs Bank guilty plea for a failure to report suspicious transactions worth hundreds of millions of dollars. Under the plea agreement, money laundering charges were dropped and the bank agreed to pay $16 million in fines and a five-year period of corporate probation.
In Spain, the case against the bank proceeded on the grounds that Riggs violated a freeze on Pinochet’s assets while he was under investigation in connection with charges of genocide, terrorism and torture relating to his time in power, by transferring at least $8 million from Pinochet’s frozen accounts, to a new Washington, D.C. account.
Riggs and its principal owners undertook negotiations with the Spanish Court and agreed to pay $8 million to a foundation established for victims of the former Chilean dictator Augusto Pinochet. In return, a Spanish court dismissed the criminal charges against bank officials..
The case against Riggs Bank closed under agreements entered into described above. Subsequently, Riggs was sold to a financial services group in the same year.
More recently, a civil case has been brought in the U.S. against Banco de Chile for its role in laundering Pinochet’s assets. The suit alleged fraudulent conveyance of assets in violation of the Spanish court’s 1998 freeze order and RICO violations based on allegations of money laundering and wire fraud. The lawsuit was dismissed on May 29, 2006. In October 2007, Pinochet’s widow and other members of the family were arrested in Chile on charges of money laundering in connection with the Riggs case.
On October 12, 2005, Banco de Chile entered into a Consent to the Assessment of Civil Money Penalty agreement with the U.S. Department of the Treasury, paying a $3 million fine without admitting to wrongdoing. Previously, the Federal Reserve had issued cease and desist orders against Banco de Chile, relating to the bank’s association with former Chilean dictator Augusto Pinochet.
Sources for this summary
Department of JusticeU.S. Press Release announcing Riggs Guilty Plea, Thursday, January 27, 2005
Professor Anita Ramasastry’s FindLaw aricle on the Riggs case, “Stopping Banks from Hiding Human Rights Abusers Money”
Links to additional documentation , including U.S. Congressional Reports, and documents from the Spanish investigation into Riggs Bank, including English translations of the proceedings in Spain in the Riggs case in 2004 and in 2005.
For new coverage see, e.g.,The Washington Post
Other Relevant Cases
Ossaily and Nassour in Sierra Leone
Samih Ossaily and Aziz Nassour were sentenced to 3 and six years respectivley in Belgium for laundering money raised through selling illegal diamonds he bought in Sierra Leone.
Samih Ossaily and Aziz Nassour and others in their network were accused of numerous offences under Belgian criminal law relating to allegations that they smuggled diamonds out of Sierra Leone and illicit weapons into Liberia, in contravention of UN sanctions. They were also accused of laundering the proceeds of their alleged crimes. Evidence was proffered of Nassour’s close association with Charles Taylor, that Ossaily purchased diamonds directly from the Revolutionary United Front (RUF), and that two shipments of weapons were delivered to Liberia. The court in Antwerp convicted Nassour on eight counts and Ossaily on four counts of money-laundering, arms trafficking, dealing in conflict diamonds and belonging to a criminal organization, all of which are offences under the Belgian criminal code.
The Antwerp case number was AN.27.97.1393/01. The news report of the decision is available online but court documents are not made public in criminal cases in Belgium. Samih Ossaily’s web site includes a discussion of the case and links to some Belgium government reports relevant to the terrorist financing aspects of the case.