Author: By Hugh O’Shaughnessy and Paul Lashmar
Banco Santander Central Hispano, which is bidding for Abbey National, and HSBC, the UK’s largest bank, have been slammed for lax money-laundering procedures in a report by a US Senate subcommittee.
The Spanish bank and the UK-based multinational stand accused of laxity in the fight against money laundering, drug trafficking, corruption and terrorism, notably in the oil-rich African state of Equatorial Guinea.
The flow of dirty money from the former Spanish colony has become a particular interest of the Senate’s permanent subcommittee on investigations. It issued a fierce warning to the banks after concluding an inquiry into money laundering and corruption in the banking sector, focusing on the Washington DC-based Riggs Bank.
In one of the few occasions when Riggs seems to have properly followed US anti-money-laundering legislation, it formally asked Santander and HSBC Bank USA under section 314 of the Patriot Act to divulge the identities of the owners of two companies that kept accounts with them and that were receiving suspicious wire transfers totalling in excess of $35m (£20m). The banks refused to say who the owners were.
Between June and December 2000, the Madrid branch of Santander alone received more than $26.5m in 16 wire transfers from Equatorial Guinea’s government oil account at the Riggs Bank in Washington for the account of Kalunga Company. Kalunga is thought to be wholly or partially owned by Teodoro Obiang Nguema, the Equatorial Guinean President.
Banco Santander in the US told the Senate investigators that its parent bank in Madrid had interpreted Spanish law to mean that it was barred from disclosing information on Kalunga not only to any third party, but also to its own subsidiary banks outside Spain. HSBC Bank USA took a similar position over money transfers to an account at HSBC Luxembourg in the name of another company believed to be linked to Mr Obiang.
“This bar on disclosure across international lines, even within the same financial institution, presents a significant obstacle to effective anti-money-laundering due diligence for banks operating in the United States, and a huge impediment to international efforts to stop money laundering, drug trafficking, and terrorism,” the subcommittee declared.
Santander has denied any wrongdoing.
HSBC Bank USA says it has co-operated fully with the Senate investigation. “However, we are unable to provide information that our non-US affiliates solely possess. These affiliates, which are neither our branches or subsidiaries, are subject to the laws of the countries in which they operate.”
The subcommittee called for rapid action in the US and EU to force banks to reveal more about their deposits.
Santander said last week that it was speeding up the timetable of its £8.1bn agreed offer for Abbey so it would be completed by the end of November. HBOS has said it is looking at a rival bid but has yet to make one.
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