January 16, 2000
The government issued new guidelines Tuesday to help steer U.S. banks away from corrupt foreign officials, following allegations of large-scale international money laundering and lapses in controls at Citibank and the Bank of New York. The voluntary guidelines include procedures banks can use to get information on accounts held by foreign officials engaged in corruption, members of their families and close associates. They also list potentially suspicious transactions that could warrant a closer look. The guidelines are part of the outgoing Clinton administration's strategy to combat money laundering, first announced in September 1999 after revelations that the Bank of New York, one of the nation's largest, had served as a conduit for $7 billion in Russian money -- some of it believed to be from criminal activities.
The new guidelines were developed and issued by the Treasury Department, the Federal Reserve, the Federal Deposit Insurance Corp., the State Department and two Treasury agencies, the Office of the Comptroller of the Currency and the Office of Thrift Supervision. ``Foreign official corruption undermines U.S. efforts to promote democratic institutions and economic development around the world,'' Treasury Secretary Lawrence Summers said in a statement. ``This guidance will help keep U.S. financial institutions from providing unintended assistance to corrupt foreign officials seeking to hide their ill-gotten gains.''
Deputy Secretary Stuart Eizenstat told reporters that the guidelines aren't mandatory for banks because they apply to a limited number of wealthy account holders who are not U.S. citizens. Though voluntary, Eizenstat said they are expected to have ``a real impact'' and that federal examiners will closely monitor banks' progress. But John Byrne, senior counsel for the American Bankers Association, said later that the guidelines ``should simply be one of several resources that bankers use'' and not ``an examination standard'' for regulators.
New York-based Citibank, one of the world's largest banks, came under congressional scrutiny in 1999 for alleged abuses by some executives in handling millions of dollars deposited by officials from several countries later accused of corruption and money laundering. The Senate inquiry included a look into Citibank's handling of alleged drug money for Raul Salinas, the eldest brother of Carlos Salinas de Gortari, who was Mexico's president from 1988 to 1994. Other foreign Citibank clients included the president of Gabon, Omar Bongo, who is said to have had more than $50 million in a secret account that came at least partly from ``donations'' from a French oil company operating in his country.
Officials of Citibank, part of financial services giant Citigroup Inc., have acknowledged that bank oversight was lax and said that, as a result of the investigation, key executives in the private banking operation were replaced, rules were tightened and computer systems were improved for monitoring the transactions of wealthy clients.
Newer revelations that surfaced in November in a report by the General Accounting Office, Congress' investigative arm, found that Citibank and the much-smaller Commercial Bank of San Francisco violated control rules and allowed some $1 billion in possibly illicit Eastern European money to move through their accounts.
Money laundering, in which profits from drug trafficking, prostitution, corruption and other criminal activities are moved through a series of bank or brokerage accounts to make them appear to be proceeds of legitimate business activity, is estimated to absorb close to $600 billion a year. That equates to 5 percent of the world's gross domestic product.
