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Caribbean banks shut amid money-laundering concern
(UPDATE: adds details, recasts throughout)
By Jane Sutton
MIAMI, Feb 22 (Reuters) - Regulators in the Bahamas and eastern Caribbean have shut down four offshore banks cited earlier this month in a U.S. Senate report that criticized such ``brass plate'' banks as key conduits for money laundering.
In the Bahamas, which suspended the licenses of two suspect banks last week, Finance Minister Sir William Allen told Bahamian lawmakers on Wednesday that the shutdowns were part of a broader review that will lead to ``the suspension of licenses and indeed the closure of a number of other institutions.''
The shutdowns and sweeping reviews signal that banking regulators in the Atlantic and Caribbean islands are feeling the heat from recent U.S. criticisms and international blacklists of countries that allegedly fail to stem the movement of ill-gotten money.
A U.S. Senate report released on Feb. 5 by Democratic Sen. Carl Levin of Michigan outlined how the banks in question were used to launder criminal proceeds through correspondent accounts with U.S. banks.
Since the report came out, four of the 10 offshore banks it examined have been stripped of their licenses.
In the Bahamas, Central Bank Governor Julian Francis signed a Feb. 13 notice freezing accounts of the Federal Bank and the British Bank of Latin America and ordered their liquidation.
The latter, described by the Levin report as an affiliate of Lloyds TSB Bank of London, accepted clients only from Colombia.
U.S. banking regulators have said it received $1.57 million wired at the instruction of drug traffickers to the bank's correspondent account at a New York bank during Operation Casablanca, a massive money laundering sting conducted by the U.S. Customs Service in the late 1990s.
Federal Bank was singled out by the Levin report as a ``classic shell bank'' that existed only on paper and moved funds of suspicious origin. It serviced Argentine clients and apparently operated from Uruguay, investigators said.
CLOSED BANKS ``THREATENED INTEGRITY'' IN BAHAMAS
``These are institutions which in our view are not adding anything significant to our financial system, but indeed they threaten the integrity of the international financial system. So we will be moving briskly to deal with these,'' Allen told Bahamian lawmakers.
He said the Bahamas also suspended licenses held by five ``international business companies,'' which operate investments such as offshore mutual funds. Those were Chase Bank of Texas National Association, the Bank of Virginia Bahamas Ltd., Apax Banks and Trust Company Bahamas Ltd., United Overseas Bank and Trust Companies Bahamas Ltd and Bank One Oklahoma NA.
In the eastern Caribbean island of Dominica, Finance Minister Ambrose George said the license held by British Trade and Commerce Bank was revoked on Feb. 15 due to ``poor financial status'' and PriceWaterhouse of Grenada had been appointed to liquidate its assets.
The Levin report said that bank moved millions of dollars associated with money laundering, financial fraud and illegal gambling over the Internet.
And the two-island federation of Antigua and Barbuda revoked the license of Hanover Bank as part of an investigation that could lead to its liquidation, the Miami Herald said.
Hanover Bank had no Antigua office and was operated from Ireland by owner Michael Anthony Fitzpatrick. One of its clients allegedly allowed a U.S. citizen, William Koop, to use a Hanover account to launder $13 million of proceeds from fraud in transactions with correspondent banks at U.S. accounts.
Koop pleaded guilty last summer to money laundering and defrauding investors in a bank note scheme. Fitzpatrick has denied knowledge of the illegal transactions.
The suspect banks often have no buildings or staff in the islands where they are licensed and do not offer local checking and saving accounts. Their clients are foreign banks. While some are legitimate operations, others are merely conduits to move money quickly from one bank and one country to another, often to conceal the source of the money.
``These banks that often have imposing names are nothing more than a brass plate tacked onto some lawyer's office,'' said Charles Intriago, a former federal prosecutor who publishes the Money Laundering Alert newsletter in Miami.
The Levin report exposed ``a gaping hole in global money laundering controls,'' Intriago said.
``Everybody dealing with this has been focusing primarily on customers, the bad dudes walking in with drug money. Now it turns out that ingrained in the banking system are relationships bank-to-bank that have been exposed as being the equivalent of an intersection at a high-speed freeway without traffic lights.''
Offshore banking has been a boon for many Caribbean nations seeking to diversify economies dependent on farming and tourism. But the industry came under fire last year from the Organization for Economic Cooperation and Development and the G-7 Financial Action Task Force, which issued blacklists of nations deemed lax on money laundering and tax evasion.
The implied threat of sanctions has spurred many of them to toughen their financial laws and crack down on rogue banks.
(UPDATE: adds details, recasts throughout)
By Jane Sutton
MIAMI, Feb 22 (Reuters) - Regulators in the Bahamas and eastern Caribbean have shut down four offshore banks cited earlier this month in a U.S. Senate report that criticized such ``brass plate'' banks as key conduits for money laundering.
In the Bahamas, which suspended the licenses of two suspect banks last week, Finance Minister Sir William Allen told Bahamian lawmakers on Wednesday that the shutdowns were part of a broader review that will lead to ``the suspension of licenses and indeed the closure of a number of other institutions.''
The shutdowns and sweeping reviews signal that banking regulators in the Atlantic and Caribbean islands are feeling the heat from recent U.S. criticisms and international blacklists of countries that allegedly fail to stem the movement of ill-gotten money.
A U.S. Senate report released on Feb. 5 by Democratic Sen. Carl Levin of Michigan outlined how the banks in question were used to launder criminal proceeds through correspondent accounts with U.S. banks.
Since the report came out, four of the 10 offshore banks it examined have been stripped of their licenses.
In the Bahamas, Central Bank Governor Julian Francis signed a Feb. 13 notice freezing accounts of the Federal Bank and the British Bank of Latin America and ordered their liquidation.
The latter, described by the Levin report as an affiliate of Lloyds TSB Bank of London, accepted clients only from Colombia.
U.S. banking regulators have said it received $1.57 million wired at the instruction of drug traffickers to the bank's correspondent account at a New York bank during Operation Casablanca, a massive money laundering sting conducted by the U.S. Customs Service in the late 1990s.
Federal Bank was singled out by the Levin report as a ``classic shell bank'' that existed only on paper and moved funds of suspicious origin. It serviced Argentine clients and apparently operated from Uruguay, investigators said.
CLOSED BANKS ``THREATENED INTEGRITY'' IN BAHAMAS
``These are institutions which in our view are not adding anything significant to our financial system, but indeed they threaten the integrity of the international financial system. So we will be moving briskly to deal with these,'' Allen told Bahamian lawmakers.
He said the Bahamas also suspended licenses held by five ``international business companies,'' which operate investments such as offshore mutual funds. Those were Chase Bank of Texas National Association, the Bank of Virginia Bahamas Ltd., Apax Banks and Trust Company Bahamas Ltd., United Overseas Bank and Trust Companies Bahamas Ltd and Bank One Oklahoma NA.
In the eastern Caribbean island of Dominica, Finance Minister Ambrose George said the license held by British Trade and Commerce Bank was revoked on Feb. 15 due to ``poor financial status'' and PriceWaterhouse of Grenada had been appointed to liquidate its assets.
The Levin report said that bank moved millions of dollars associated with money laundering, financial fraud and illegal gambling over the Internet.
And the two-island federation of Antigua and Barbuda revoked the license of Hanover Bank as part of an investigation that could lead to its liquidation, the Miami Herald said.
Hanover Bank had no Antigua office and was operated from Ireland by owner Michael Anthony Fitzpatrick. One of its clients allegedly allowed a U.S. citizen, William Koop, to use a Hanover account to launder $13 million of proceeds from fraud in transactions with correspondent banks at U.S. accounts.
Koop pleaded guilty last summer to money laundering and defrauding investors in a bank note scheme. Fitzpatrick has denied knowledge of the illegal transactions.
The suspect banks often have no buildings or staff in the islands where they are licensed and do not offer local checking and saving accounts. Their clients are foreign banks. While some are legitimate operations, others are merely conduits to move money quickly from one bank and one country to another, often to conceal the source of the money.
``These banks that often have imposing names are nothing more than a brass plate tacked onto some lawyer's office,'' said Charles Intriago, a former federal prosecutor who publishes the Money Laundering Alert newsletter in Miami.
The Levin report exposed ``a gaping hole in global money laundering controls,'' Intriago said.
``Everybody dealing with this has been focusing primarily on customers, the bad dudes walking in with drug money. Now it turns out that ingrained in the banking system are relationships bank-to-bank that have been exposed as being the equivalent of an intersection at a high-speed freeway without traffic lights.''
Offshore banking has been a boon for many Caribbean nations seeking to diversify economies dependent on farming and tourism. But the industry came under fire last year from the Organization for Economic Cooperation and Development and the G-7 Financial Action Task Force, which issued blacklists of nations deemed lax on money laundering and tax evasion.
The implied threat of sanctions has spurred many of them to toughen their financial laws and crack down on rogue banks.
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