Saudi Embassy Money Reports Scrutinized
Sunday, April 18, 2004-Federal bank regulators are preparing to impose fines on Riggs Bank as soon as this week for not reporting millions of dollars in suspicious transactions at its embassy banking division, and have notified bank officers and directors that they may be sanctioned individually, according to people familiar with the investigation.
Those notified include Chairman Robert L. Allbritton; his mother, Barbara B. Allbritton, a director; and the nine other members of the bank's board, according to the sources.
The penalties would come as the FBI, bank regulators and three congressional committees continue to delve into Riggs's international banking relationships, particularly its two-decade role as chief banker for the Embassy of Saudi Arabia in Washington.
Investigators are looking at the Saudi accounts for evidence of money laundering, which is the use of complex transactions to hide the origin or destination of funds related to illegal activities such as drug smuggling or terrorist acts. The investigators have reached no conclusions about the reasons for the transactions in the embassy accounts, including the personal accounts of the Saudi ambassador, Prince Bandar bin Sultan.
Riggs said in a written statement that it has cooperated fully with the federal investigation. "Neither the investigative agencies nor the regulatory agencies have ever informed Riggs that such accounts were used for illegal purposes," the bank said. Riggs has said it ended its business relationship with the Saudis in March, though the Saudis say they initiated the termination of the accounts.
The Allbritton family, which has controlled Riggs since 1981, through a spokesman declined to comment.
Regulators and congressional investigators say the Saudi accounts at Riggs provide a window into how the Saudi royal family moves millions of dollars around the world each year without sufficient monitoring of where the money ends up. They say the records indicate lax oversight by Riggs and by bank regulators. For example, the officials say, Riggs rarely until last year filed suspicious-activity reports, or SARs, to law enforcement agencies when spotting unusual and unexplained activity in embassy bank accounts.
Copies of more than a dozen SARs were obtained by The Washington Post. The reports detail various transactions by Riggs's embassy customers, but mostly about those involving Saudi officials. Riggs filed about 30 SARs in 2003 for transactions totaling $25 million to $30 million after an internal audit of recent years of activity in Saudi accounts, the sources said.
Information from the reports and the Saudi accounts are being studied by investigators including those in the FBI, which has been looking into Saudi-funded charities for several years for any potential financial links to al Qaeda and other terrorist organizations.
According to one SAR, on Jan. 13, 2003, the Muslim World League, an Islamic charitable organization, wired $461,341.72 into an account at Riggs in the name of the "Ministry of Defense and Aviation-Riyadh, Saudi Arabia." The Muslim World League, which was founded by Osama bin Laden but was taken over by the Saudi government years ago, is largely funded by the Saudi royal family and by most accounts funds a variety of worthy causes around the world. But it is also the subject of scrutiny by congressional investigators and federal law enforcement agencies for possible terrorist connections in some countries, and some of its officials abroad have been linked to al Qaeda. Treasury agents seized files at the league's offices in Falls Church in March 2002.
The SAR contains no explanation for the January 2003 transaction. A source close to the Saudi embassy said the money was reimbursement for expenses related to a summer 2003 visit here by World Muslim League officials from around the world. The travel and lodging for the visit was arranged by the embassy's Office of Islamic Affairs, the source said.
Another SAR concerns a $6 million check drawn on the Saudi embassy's Riggs account and deposited into the personal account of Ahmed A. Kattan, the No. 2 official at the embassy, on Oct. 19, 2001. In transactions on Oct. 22 and Oct. 24, Kattan had $5.5 million wired out of his account to two men operating a private school in Cairo. The transfers triggered an SAR because Egypt at the time of the transfer was viewed by the U.S. government as lacking anti-money-laundering safeguards.
An embassy source said the $6 million transfer was of personal funds for private purposes.
Riggs internal investigators also found a $50,000 payment in October 2001 from the embassy to the American Muslim Council, whose founder, Abdurahman Alamoudi, was charged last September with accepting hundreds of thousands of dollars from Libya, which then was designed by the United States as a sponsor of terrorism. The check was deposited in a Morgan Stanley account after being endorsed by Alamoudi without reference to the council, according to an SAR filed by Riggs. An embassy source said the payment was part of the embassy's long-standing practice of donating money to charities and nonprofit organizations.
Another SAR details more than $17 million in payments last August from the account of the Saudi Arabian Ministry of Defense and Aviation to Ibrahim Shorbatli in Saudi Arabia. Riggs determined that the ministry had been paying Shorbatli $4 million each quarter. Saudi officials told Riggs that the money was for building palaces in Saudi Arabia and that Shorbatli coordinates construction projects for Bandar, but in the SAR Riggs said it could not determine the ultimate use of the funds. The transaction was previously reported in Newsweek.
An embassy source said the money was for a government construction project in Saudi Arabia.
Bandar and his staff were out of the country yesterday and could not be reached, nor could a spokesman for the embassy. An embassy source who asked not to be identified because he is not the official spokesman said diplomats there continue to cooperate with every aspect of the FBI investigation. The source said that as recently as two weeks ago the FBI met with embassy officials and expressed no concern that Saudi officials had done anything wrong or illegal.
But a law enforcement official said that few of the transactions have been adequately explained and that the matter remains under investigation.
Riggs began filing its suspicious-activity reports about the Saudi accounts after examiners from the Office of the Comptroller of the Currency (OCC) -- the Treasury Department unit that oversees banks -- began to crack down a year ago on what it considered to be the bank's weak procedures for catching money laundering. Riggs filed about a dozen SARs in the spring of 2003, and 20 more after November when Riggs began an audit of past Saudi transactions.
Because of its questions about the rigor of the bank's supervision, the OCC recently designated Riggs a "troubled institution," which gives the unit sweeping powers to order changes that could include replacing senior executives.
Riggs also faces a probe into its business with another embassy. A federal grand jury is investigating possible money laundering in accounts held by officials of Equatorial Guinea, and an official at Riggs who managed the West African nation's accounts has been fired and is under investigation for possible embezzlement. The grand jury also is looking into whether bribes were paid by U.S. oil companies through Riggs accounts to the dictator of Equatorial Guinea, according to people who have been briefed on the matter.
A source close to the Equatorial Guinean Embassy said embassy officials have not been notified of any grand jury investigation.
FBI scrutiny of Riggs's international business began soon after the Sept. 11, 2001, terrorist attacks and widened to include parallel probes by the OCC and Riggs itself after a Newsweek report in November 2002 suggesting that the Saudi ambassador's wife, Princess Haifa al-Faisal , may have used a Riggs account to donate money to a charity that then gave some of it to the Sept. 11 terrorists. In the course of the inquiries, bank and federal investigators found tens of millions of dollars in questionable transactions that had not previously been reported by Riggs, as the law requires. That led to the flurry of suspicious-activity reports filed by the bank last November.
Riggs's failure to file suspicious-activity reports had been noted by regulators years ago but no action was taken. In annual bank exam reports for 1999, 2000 and 2001, OCC officials outlined problems in Riggs's procedures to guard against money laundering or other illicit activities by bank customers, sources familiar with the reports say. But the OCC never fined or sanctioned the bank, sources familiar with the examinations said.
http://www.washingtonpost.com/wp-dyn/articles/A20942-2004Apr17.html
