May 14, 2004
NewsMax Wires

WASHINGTON - Federal regulators fined Riggs Bank a record $25 million on Thursday for allegedly violating anti-money laundering laws in its handling of tens of millions in cash transactions in Saudi-controlled accounts under investigation for possible links to terrorism financing.

The civil fine against the midsize Washington bank with a near-exclusive franchise on business with the capital's diplomatic community is the largest ever imposed on a financial institution for such violations, experts said. It had been expected.

The action by the Treasury Department's Office of the Comptroller of the Currency came in an order made public late Thursday. It followed weeks of negotiations between Riggs officials and the banking regulators.

The order said the bank's internal controls "were, and continue to be, seriously deficient."

"Riggs failed to properly monitor, and report as suspicious, transactions involving tens of millions of dollars in cash withdrawals, international drafts that were returned to the bank, and numerous sequentially numbered cashiers' checks," it said.

In addition to the now-closed accounts that Saudi diplomats controlled, the order mentioned accounts held by officials of Equatorial Guinea.

The order requires Riggs to make special reviews of its operations and account transactions and give regulators advance notice of any dividend payments to shareholders.

Riggs did not admit to or deny wrongdoing in agreeing to the fine.

Bank spokesmen could not immediately be reached Thursday night.

The FBI and regulators have investigated, for possible connections to terrorism financing, large cash transactions in Riggs accounts controlled by Saudi diplomats.


TENS OF MILLIONS

The Senate Finance Committee chairman, Republican Charles Grassley of Iowa, recently asked the commission investigating the Sept. 11 attacks to examine Saudi transactions totaling tens of millions at Riggs and FleetBoston Financial Corp.

"Riggs Bank deserves every penny of this huge fine," Grassley said in a statement Thursday. "Banks have a patriotic duty, not to mention legal requirement, to report suspicious activity. When banks look the other way, they put our national security at risk. Whether it's through incompetence, negligence or greed, they are allowing terrorists to funnel their blood money through the system."

Grassley said members of the bank's board of directors should be held to account for failing to exercise their watchdog role over Riggs's operations.

Riggs previously was accused by Treasury regulators of failing to comply with a law requiring banks to notify the government of suspicious transactions.

The comptroller's office already had classified Riggs as a "troubled institution" for not complying fully with a July 2003 consent order under which it agreed to strengthen its anti-money laundering controls.

That designation means the bank must get regulators' approval for changes in top management and for severance payments to executives who leave.

The bank, with some $7 billion in assets, earned $3.9 million in the first quarter, compared with $5.9 million a year earlier. Annual earnings have not exceeded $25 million since 1999.

Riggs said last month it is reining in its foreign operations and that the head of the family that controls the bank was resigning from the board of its parent company. Investors viewed the moves as steps toward recovery or a possible sale.

Riggs has said it is selling or leaving most of its operations in Britain and closing its operation in Miami as well as any embassy business that does not meet guidelines for weeding out suspicious account transactions. Applying the guidelines could bring the loss of about two-thirds of its embassy accounts.

The bank also indicated that family patriarch Joe Allbritton, Riggs's former chief executive, is resigning as vice chairman of the parent company's board of directors.

Allbritton transferred control to his son, Robert, several years ago. The elder Allbritton will remain the company's largest shareholder and his son will continue as chairman and chief executive officer of the parent.

Timothy Coughlin, president of parent Riggs National Corp., also is resigning from the board.

Puerto Rico's largest bank, Banco Popular, was fined $21.6 million in 2003 for allegedly allowing millions in drug money to be laundered by failing to report suspicious activity to the government.

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