February 5, 2001
Some of the largest banks in the US have been named in a report by Congress for lax policies on money laundering. The lack of enforcement policies means billions of dollars acquired through illegal activities such as drug trafficking, internet gambling and investment scams, make their way into the US each year.
The report, to be released on Monday by the Democratic staff of the Senate investigations subcommittee, names four of the nation's six largest banks, including JP Morgan Chase, Citigroup's Citibank, First Union and Bank of America.
The report blames so-called correspondent banking, a legitimate practice that allows foreign banks to establish US accounts, which then permits access to the domestic banking network.
The banks, according to the report, have operated these accounts "in an atmosphere of complacency, with lax due diligence, weak controls and inadequate responses to troubling information".
Offshore operations
The report goes on to say: "US correspondent banking provides a significant gateway for rogue foreign banks and their criminal clients to carry on money laundering and other criminal activity in the US."
The Senate document follows a report issued on Thursday by the Financial Action Task Force (FATF), which issued a progress report on the efforts of 15 countries it had threatened with sanctions for making money laundering easy.
Most US banks do not have adequate anti-money-laundering safeguards in place.
US Senate report on money laundering
In issuing its report, the organisation, set up by the G7 group of major industrialised nations, said seven countries had made substantial progress in countering money-laundering schemes, among them Israel and the Bahamas.
Many US banks have so-called offshore banking operations, operated in countries like the Bahamas where regulations are not as strict as in the US. The banks in turn can then offer better rates of return or lower taxes.
Tackling money laundering, which involves disguising the origins of illegally obtained cash and then transforming it into apparently legitimate investments, became a priority in the US by the Clinton administration following the 1999 scandal that allowed $7m worth of suspicious Russian funds to move through three Bank of New York accounts.
It is not clear whether the new Bush regime will continue the previous administration's effort.
Republicans criticised legislation put forth by the Clinton administration as discriminatory against foreign banks operating in the US.
