- The Washington Times - Friday, January 17, 2003

A Puerto Rico-based bank will forfeit $21.1 million to the U.S. government in an agreement to avoid prosecution in its failure to report suspicious financial activities, including the deposit of millions of dollars in illicit drug profits in gym bags and paper sacks.

According to a criminal information filed yesterday in U.S. District Court in San Juan, Puerto Rico, Banco Popular de Puerto Rico waived indictment in the case, agreed to the filing of the information and acknowledged responsibility for its behavior.

"Banks are our first line of defense against money launderers, drug dealers and even terrorists who would attempt to abuse our financial institutions," said Assistant Attorney General Michael Chertoff in announcing the agreement.

"Banks that disregard their duty to conduct adequate due diligence and report suspicious financial activities allow themselves to be exploited for criminal purposes," he said.

Mr. Chertoff, who heads the Justice Department's criminal division, said the agreement recognizes that "Banco Popular has been forthright in accepting its responsibility."

The bank agreed to forfeit $21.1 million to the United States to settle any civil claims by the government. In return, the Justice Department recommended to the court that any prosecution of Banco Popular on criminal charges be deferred for a year and eventually dismissed if it fully complies with the agreement.

The charges and deferred-prosecution agreement stem from a lengthy undercover investigation by the U.S. Customs Service and the Internal Revenue Service that focused on questionable banking transactions between June 1995 and June 2000.

"The lengthy U.S. Customs/IRS investigation into Banco Popular de Puerto Rico established that millions of dollars worth of drug proceeds were laundered through this bank over a period of several years," said U.S. Customs Commissioner Robert C. Bonner.

"In some cases, gym bags full of cash were literally brought into the bank for deposit by money launderers," he said. "Banco Popular, in some cases, chose not to report these transactions until years after the fact and did so only after learning about the U.S. Customs/IRS investigation."

Under the Bank Secrecy Act, banks are required to have comprehensive anti-money laundering programs that enable them to identify and report suspicious financial transactions of $5,000 or more to the U.S. Treasury Department. The transactions are outlined on mandated forms known as Suspicious Activity Reports (SARs).

In the Banco Popular investigation, authorities outlined one series of transactions in which Roberto Ferrario Pozzi deposited nearly $20 million in cash in his account at the bank, often in paper sacks and gym bags filled with small-denomination bills. Despite the suspicious nature of the deposits, the authorities said the bank did not file the required SARs.

Ferrario Pozzi, a 49-year-old Italian national, was indicted in December 1998 for money laundering in connection with those deposits and was sentenced to eight years in prison. He was part of a Customs Service investigation that netted 30 persons in a massive heroin-smuggling and money-laundering operation.

Two years ago, San Juan, Puerto Rico, was designated as one of four "high-intensity crime areas" nationwide, resulting in the formation of a multiagency task force that investigates financial crimes mainly those dealing with SARs filed by financial institutions in Puerto Rico and the U.S. Virgin Islands.

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