The bank that liked to say yes to the dirty cash of Third World dictators

Paul Lashmar investigates the downfall of Riggs, the venerable US bank whose obligation to fight money laundering did not deter it from seeking the likes of General Pinochet as customers and helping to hide their wealth
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Innovative Solutions", promises the Riggs Bank slogan emblazoned across the home page of its website. "For over 165 years we've been developing innovative, custom-tailored solutions to improve the lives of our customers."

Innovative Solutions", promises the Riggs Bank slogan emblazoned across the home page of its website. "For over 165 years we've been developing innovative, custom-tailored solutions to improve the lives of our customers."

The irony of those words appears lost on the Washington- based Riggs, which now stands guilty of finding "innovative solutions" for dictators and their family members to hide large sums of money.

For this once-proud institution, the fallout from being caught for running an apparent bespoke money-laundering service is nigh catastrophic. Riggs has received the largest-ever fine, $25m (£14m), for failing to comply with anti-money-laundering legislation. Soon it may well cease to exist entirely after being bought by a local rival.

The bank's fall from grace has sent a shudder through the US banking system, but it has been coming for some time.

Last summer, The Independent on Sunday revealed that the London pressure group Global Witness had written to US Senator Carl Levin asking his Permanent Subcommittee on Investigations to probe accounts at Riggs. The subcommittee's report, published last month, is a forensic demolition job, showing that Riggs executives and bank regulators had failed to monitor suspicious transactions at the bank involving hundreds of millions of dollars. Global Witness described the report as a "damning portrait of financial impropriety and sleaze".

The two jaw-dropping examples that are cited in the report concern the multiple Riggs accounts held by the former Chilean dictator General Augusto Pinochet and the President and government of Equatorial Guinea, the tiny, oil-rich nation in West Africa.

The subcommittee says that Riggs solicited General Pino- chet as a customer in 1994 and his family held at least six accounts. The detailed evidence in the report has demolished the carefully nurtured image of General Pinochet as a frugal man. It seems he and his family had between $4m and $8m tucked away in Riggs.

In the face of anti-money- laundering legislation requiring banks to probe the source of an account holder's wealth, Riggs turned a blind eye. But even the bank's own limited checks showed his Chilean government pension was worth just $90,000. The rest, it said, had come from "investments".

But Riggs' crime was not passive: it voluntarily helped its clients to hide their wealth. Through 1999, General Pinochet was held in Britain pending extradition to Spain to face charges of murder and torture during his rule in Chile. Despite a British court order freezing his assets, Riggs secretly moved $1.6m of General Pinochet's money out of London to the US. (In 2000, Home Secretary Jack Straw stopped the extradition process on the grounds of General Pinochet's ill health.)

"Riggs Bank concealed the existence of the Pinochet accounts from the federal bank examiners for two years," says the report. The accounts were closed only in 2002 after persistent targeting by the examiners.

If General Pinochet, now 88, is upset to see his dirty laundry washed in public, then Equatorial Guinea's President Obiang, his family and his ministers (who are largely members of his family) must be livid to see their dealings being laid bare. Reading through the report's analysis of the President's accounts, the term that leaps to mind is "kleptocracy" (where rulers cannot distinguish between their own pockets and the country's treasury).

From 1995 to 2004, Riggs Bank administered more than 60 accounts and certificates of deposit for Equatorial Guinea. Which were government accounts and which were personal ones is not clear. At any one time, Equatorial Guinea's deposits totalled up to $700m, much of it deposited by four American companies that extract oil and gas from the African state. Three of those - Marathon Oil, Amerada Hess and ChevronTexaco - are now being probed by US financial regulators for allegedly bribing foreign government officials.

"Riggs opened multiple personal accounts for the President of Equatorial Guinea, his wife and other relatives. It helped establish offshore corporations for the EG President and his sons," says the report. Riggs loaned one son, who has a hip-hop entertainment business in California, $7.5m to buy a Los Angeles penthouse.

How could a bank so arrogantly ignore the perils of dealing with dirty money from the Third World?

"The idea that an American bank took this money, despite stringent regulations especially when it comes to foreign leaders, is pretty shocking," says Ken Silverstein, the Los Angeles Times reporter who first revealed that Riggs was handling funny money. "And that the bank took cash deposits of millions of dollars in shrink- wrapped notes out of suitcases from Equatorial Guinea is pretty mind boggling."

It is not the first time in recent history that a US bank has been found to have unsavoury accounts. A 1999 Subcommittee on Investigations report attacked Citibank for having taken about $120m in dubious deposits from Raul Salinas de Gortari, the brother of former Mexican President Carlos Salinas.

In 2001, US and Peruvian investigations revealed that former Peruvian intelligence chief Vladimiro Montesinos had up to $38m in Miami's Pacific Credit Corp and several other financial institutions.

But the Riggs Bank fiasco is certainly the most spectacular.

By most standards it is not a big bank, but it has been one of the most prestigious. Set up in Washington in 1835, Riggs has been the personal bank to 21 presidents of the United States, including Abraham Lincoln. It was Davy Crockett's bank of choice. As early as 1909, the magazine The Successful American said: "Riggs is to Washington as the Bank of England is to London."

Its downfall has been placed firmly at the feet of Joe Allbritton, its patron for over 20 years. Being head of the bank - his family owned 41 per cent of the shares - gave him access to the social and political inner circles of elite Georgetown and Maryland. He and his wife, Barbara, often entertained guests at their Washington home. President Obiang lunched with Mr Allbritton in the Riggs dining room overlooking the White House.

Mr Allbritton liked to give off an air of prosperity, flying around the globe in the bank's Gulfstream jet schmoozing world leaders. He invited influential people on to the bank's board, including Sir Christopher Meyer, the former British ambassador to the US and now head of the Press Complaints Commission.

It was Joe Allbritton who directed Riggs to concentrate on "embassy accounts", providing banking for Washington's diplomatic community. He sought heads of state as clients. This was at a time when most US banks were expanding their local operations as a more profitable option.

"I always heard what a great, smart guy this was, but the historical data on the bank was embarrassing," said Henry Coffey, vice-president and senior equity analyst at Ferris Baker Watts in Baltimore.

In fairness, Mr Allbritton, 79, never sought a public profile. His identity was synonymous with that of the bank - discreet and well connected. In 2001 he handed the top job to his son, Robert Allbritton, now 35. He stayed on the board of the bank's holding company until May this year.

Insiders say it was his dictatorial rule that stopped managers raising awkward questions about sleazy accounts, but the Levin subcommittee's findings may also leave others wriggling with embarrassment - the watchdogs, for example. "Federal regulators did a poor job of compelling Riggs Bank to comply with statutory and regulatory anti-money-laundering requirements," says the report.

But problems for Riggs as a legal entity are by no means over: there are outstanding investigations by federal examiners and law enforcement officials, and four congressional committees, for a decade of evasions of anti-money-laundering rules. Prosecutions are likely to follow for senior managers.

Last month, banking corporation PNC Financial announced it was buying Riggs but not keeping the brand name.

"I must confess that I will miss the Riggs name," Joe Allbritton commented. "It has been a big part of my life for more than 20 years, and a big part of Washington for more than 165 years."

The new owners of Riggs do not seem awfully impressed by this heritage. PNC's chief financial Officer, William Demchak, told American reporters: "If you go back in history, Riggs has not been a particularly good earning bank."

He noted that its overheads are high and that Riggs had emphasised international and embassy business - "which were break-even or less". The Pittsburgh-based PNC will exchange stock and cash worth $779m, or $24.25 a share, for the bank's business.

The purchase is mostly for Riggs assets of $6.8bn and not the name, which is "not worth a dime". In fact, the name will now disappear, except for the "Riggs National Bank" sign carved into the marble front of the flagship branch on Pennsylvania Avenue, facing the Treasury Department. That will soon be the only reminder of a once-great bank.

TALES OF THE UNACCOUNTED: THE RIGGS REPORT

The Senate report on the Riggs scandal reads like a novel. Here is a selection of some of the incredible tales.

* When asked if it held accounts for the Pinochet family, the bank simply changed the accounts to General Pinochet and his wife's second surname, Ugarte, so they did not show up on searches.

* The Riggs account manager for Africa, a Kenyan called Simon Keriri, was finally sacked from the bank in January after he was found to have had a financial relationship with the President of Equatorial Guinea. He had even moved the President's money through his own wife's offshore account. Earlier this month, Mr Keriri invoked his Fifth Amendment rights and refused to answer questions from a US Senate panel investigating the scandal.

* On six occasions between 2000 and 2002, Riggs accepted cash deposits for an account controlled by President Obiang. The cash was brought into the bank in suitcases by Mr Keriri. On several occasions, deposits were made of $3m at a time. Since $1m in notes weighs at least 20lb, these deposits would have weighed more than 60lb each.

* The report has its moments of inadvertent dark farce, too.

Take footnote 345: Amerada Hess told the Senate subcommittee that in 2003 it was served with a court order in Equatorial Guinea instructing it to stop paying rent to a relative of President Obiang for some land it was using. It was told to make payments to another person who said they were the legitimate owner.

Hess complied, and two months later a minister of the Equatorial Guinea government asked it why it had stopped making payments on the lease to the original payee. "It's my godson," the minister declared.

When told about the court order, the minister picked up the phone and rang the judge who had made it. While on the phone with the minister, according to Hess, the judge rescinded the court order. The company started paying the relative again.

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