US Senate Subcommittee Holds Hearings On Role of Correspondent Banking In Money Laundering

Mike Godfrey, Tax-News.com, Washington

01 March 2001

Last month, we reported on the publication of a report by the US Senate Committee which accused US banks of deep and routine involvement in money laundering through the business they do using the correspondent banking system. The report, entitled "Correspondent Banking: A Gateway to Money Laundering", concluded with the recommendation that US banks should be barred from opening correspondent accounts with shell banks, and pointed an accusing finger at a number of offshore jurisdictions. Now, one month after the report's first airing, the US Senate Permanent Subcommittee on Investigations is to hold three days of hearings in the coming week to further probe the findings of the report.

The hearings will be held today (March 1), March 2 and March 6 and, according to the subcommitte, will focus on correspondent banking as a practice, the role of offshore banks in international money laundering and the efforts of US banks, regulators, and law enforcement to fight the problem. Witnesses at the hearings will include officials of Bank of America, JP Morgan Chase, Citibank, a former chief executive of an offshore bank, money laundering experts and US government officials.

The report outlined activities at a number of offshore banks, including the Bahamas-based Federal Bank Ltd and the British Bank of Latin America, which have both since had suspension orders slapped on them by Bahamas Central Bank Governor Julian Francis.

The report also pointed to the involvement of the Federal Bank Ltd in the collapse of Argentina's Banco Republica, and highlighted the dealings of another Argentine financial house, Mercado Abierto, based in the Cayman Islands. The committee said the hearings would further discuss the activities of the two offshore banks and 'describe how they used major US banks to launder millions of dollars obtained through drug trafficking, financial fraud, bribes, Internet gambling and tax evasion.'

The full 384 page report is available in Tax-news.com resources section - Click here to go there

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