- The Washington Times - Tuesday, November 1, 2005

Comptroller of the Currency John C. Dugan yesterday warned banks to avoid the kinds of regulatory lapses that led to $41 million in criminal and civil fines for Riggs Bank.

Riggs pleaded guilty Jan. 27 in federal court to failing to report suspicious transactions of account holders, including former Chilean dictator Augusto Pinochet and leaders of Equatorial Guinea.

The guilty plea came after a Senate Homeland Security and Governmental Affairs Committee investigation into money laundering at the Washington-based bank, which was acquired in May by PNC Financial Services Group of Pittsburgh for $643 million.

“The Riggs hearings and their aftermath were a wake-up call,” Mr. Dugan told 1,200 bankers at the American Bankers Association’s (ABA) annual meeting at the Wardman Park Marriott Hotel in Washington.

The 2001 USA Patriot Act broadened requirements for banks to file “suspicious activity reports” with the Treasury Department on customers suspected of involvement in terrorist or criminal enterprises.

Banks are required to ask for multiple forms of identification from new customers. They also must establish programs to thwart money laundering, including methods to identify money-distribution networks potentially linked to terrorists.

Gen. Pinochet was accused of depositing at least $8 million of illegally obtained funds in Riggs Bank.

Although the Patriot Act was designed primarily to root out funding sources for terrorist groups such as al Qaeda, it also applies to money from other suspicious sources.

“It became clear that in the post-9/11, post-Patriot Act, post-Riggs world, we needed to do more,” Mr. Dugan said.

He offered bankers at the conference suggestions for complying with the new rules, such as developing a list of risks in their operations most likely to be exploited by terrorists.

The Treasury Department plans to extend similar money-laundering regulations to the insurance industry.

Attendance at ABA seminars on money laundering has doubled over the past two years as bankers confront new Patriot Act requirements, said John L. Hall, ABA spokesman.

“They realize what’s really at stake,” Mr. Hall said.

Leonard Steinmetz, a senior manager for Deloitte Financial Advisory Services, described the new regulations as “very tough, very prescriptive.”

His company helps banks develop programs to comply with the money-laundering regulations.

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