WASHINGTON, July 16 (UPI) -- Riggs Bank was sold to PNC Financial Services Group Inc. Friday, following the release of a Senate report charging that Riggs account managers helped former Chilean President Augusto Pinochet hide millions of dollars from British investigators and evade U.S. anti-money laundering laws.
PNC signed an agreement to acquire the bank for $779 million in stock and cash, according to a PNC statement.
"The acquisition shows our intent is to stay independent," a PNC official told United Press International. The official said, however, that "behind the scenes it also make us more attractive to larger banks" who might be interested in acquiring one of the nation's larger regional banks.
The Senate report issued Thursday alleged that managers at Riggs Bank not only failed to comply with anti-money laundering laws, but actively aided Pinochet launder millions of dollars through off-shore accounts, altered names on the accounts to hide his ownership, and moved $1.6 million dollars from Britain while Pinochet was under investigation and house arrest during the late 1990s.
At the time, Spanish Judge Baltazar Garzon was trying to extradite Pinochet to Spain to prosecute him for torture and killings during his rule in Chile. Baltazar had also requested Switzerland and Luxembourg freeze Pinochet's account.
Riggs, headquartered in Washington, is one of the nation's most respected institutions. President Abraham Lincoln banked with Riggs, as do a number of diplomats today.
Pinochet held at least six accounts with Riggs Bank, the subcommittee found, and several certificates of deposit between 1994 and 2002, while he was under house arrest in Britain.
According to the Senate report, Riggs employees said that senior Riggs officials visited Chile to solicit Pinochet's business.
In written testimony before the Senate subcommittee Thursday, Riggs Bank Chief Executive Officer Lawrence Hebert said that the bank is taking steps to comply with changes made to the 1970 Bank Secrecy Act and the 1986 Money Laundering Control Act and the USA Patriot Act. He also said that Pinochet's accounts were terminated after an investigation by the Office of the Comptroller of the Currency.
The bank's alleged wrongdoing came to light in April 2002 when the Office of the Comptroller of Currency investigated Riggs' International Private Banking Department.
The office found that Riggs Bank had established accounts for Pinochet that went undisclosed despite requests for accounts associated with "politically exposed persons," in July 2000, according to the written testimony of Deputy Chief Counsel Daniel P. Stipano of the OCC. Politically exposed persons are not strictly defined, but it is agreed that they include notable current and former world leaders.
The OCC oversees banks with national charters in the United States. It investigates compliance with money-laundering laws among other things.
The office conducted an investigation of Pinochet's dealings with Riggs Bank and found large amounts of money flowed from Pinochet's accounts in London in the form of consecutively numbered cashier's checks. Pinochet held accounts at Riggs Bank London branch and in the United States.
He also held money under the names of Ashburton Company Ltd. and Althorp Investment Ltd. These were shell corporations formed with the help of a Riggs subsidiary in the Bahamas, according to the Senate report.
The office found three major problems with how Riggs Bank dealt with its Pinochet accounts.
Primarily, the bank failed to disclose Pinochet's accounts when asked for a list of customers who are politically exposed persons and that had accounts with the bank. In response, the bank said Pinochet was no longer a political figure because he wasn't involved in the affairs of Chile.
Also, the bank failed to file the required suspicious activity reports when Pinochet moved large amounts of money from Riggs' London accounts to Chilean banks. The bank also failed to disclose that Pinochet moved money out of British and Spanish accounts ahead of those countries' attempts to seize his funds.
Not only did the bank not declare that funds were moved out of Riggs' accounts, but it also failed to document where Pinochet's money came from, according to Stepano's testimony.
Despite finding that Riggs Bank had actively tried to hide Pinochet accounts from OCC investigators, the office took no formal enforcement action, Stipano testified.
According to the Senate report, the examiner in charge of the Riggs investigation instructed his subordinates not to file some documents in the OCC electronic files associated with Riggs Bank. Not only did the report conclude that this was highly unusual, but also that the examiner in charge soon left the OCC and took a job with Riggs Bank.
The Chilean Embassy said Friday in a statement that Chile intends to do everything it can to cooperate with the investigation.
Pinochet, now 88 years old, ruled Chile from 1973 to 1990. Many considered him a brutal dictator, and despite investigations by the British and Spanish governments, ill health has allowed him to escape prosecution for crimes against humanity.
The illicit movement of Pinochet funds was part of a larger trend of misconduct and negligence at Riggs Bank, according to the Senate report.
The bank ignored money-laundering laws in its dealings with Equatorial Guinea, not informing law enforcement of suspicious transactions. And it failed to reform banking procedures to limit money laundering, despite repeated warnings from the OCC.
The Senate report, titled "Money Laundering and Foreign Corruption: Enforcement and Effectiveness of the Patriot Act," was initiated by the Permanent Subcommittee on Investigations and set out to determine the effectiveness of the anti-money laundering provisions of the USA Patriot Act.
Riggs Bank was unavailable for comment on the Pinochet affair.
