Inner City Press
Finance Watch Report - January 8, 2006
Royal Bank of Scotland Has Repeatedly Been Linked to
Terrorist Finance and Money Laundering, Not Only in the Current Brooklyn
Case
Royal Bank of Scotland, which is moving to dismiss litigation against it
for allegedly providing financial services to terrorist organizations, has
something of a history of doing business with groups designated as
terrorists. In the wake of the 9/11/01 attacks, it emerged that RBS’
Citizens Bank unit had transferred money for Al-Barakaat, which even RBS
later acknowledged to the Federal Reserve “appears to have provided funds to
Al-Qaeda.” RBS’ defense was that its wire transfers had been to the United
Arab Emirates which “was not at the time of the wire (or today) in the
high-risk for anti-money laundering category.”
It also emerged that up to and after 9/11/01, Royal Bank of
Scotland’s NatWest unit was a correspondent bank for Banke Millie Afghan
Kabul, a nationalized company of the Islamic State of Afghanistan. Banke
Millie was among seven corporations blacklisted by the United Nations in
April 2000 as part of a sanctions regime against the Taliban. RBS’ NatWest,
however, continued to be listed as a correspondent for Banke Millie long
after the UN designation. While RBS’ chairman Sir Fred Goodwin characterized
the issue, then raised by Inner City Press, as “nonsense,” even the Federal
Reserve grilled RBS about it. A Federal Reserve memo obtained by Inner City
Press reflects that
“Reserve Bank and Board staff called Greg Lyons, counsel for
Citizens, to ask him to provide the following information in writing to the
Reserve Bank: (1) an explanation of RBS's relationship with Afghan
organizations, (2) a description of RBS's due diligence process regarding
banks for which RBS offers correspondent services, and (3) a list of RBS's
correspondent banks. Mr. Lyons agreed to provide a written response to our
request. Staff also requested that a copy of the written response be
provided to Inner City Press.”
RBS withheld its list of correspondent banks. RBS was subsequently hit
with the highest fine issued by the UK Financial Services Authority, for
lack of anti-money laundering controls. The FSA's December 17, 2002, press
release stated that its
“investigation revealed weaknesses in RBS's anti-money
laundering controls across its retail network. The investigation found that
RBS failed either to obtain sufficient 'know your customer' ("KYC")
documentation adequately to establish customer identity, or to retain such
documentation, in an unacceptable number of new accounts opened across its
retail network.”
Despite this history, RBS spokesman Mike Keohane has stated that that
the issues raised against RBS have “no merit,” and RBS is arguing that it
cannot be sued in the United States, despite its ownership of Citizens Bank
in the Northeast, Charter One Bank in the Midwest, and RBS Greenwich Capital
Markets, which does business nation- (and world-) wide, including with
high-cost mortgage lenders. The current case is 05-CV- 4622, before Judge
Charles Sifton of in the U.S. District Court for the Eastern District of New
York in Brooklyn, brought by plaintiffs including Tzvi Weiss, regarding RBS
NatWest Account Number 140-00-08537933, for Interpal. RBS has told Judge
Sifton it will file a motion on January 26 seeking dismissal of the case, in
which the plaintiffs are seeking treble damages.
A separate case is pending in New Jersey against Credit Agricole’s Credit
Lyonnais unit, which claims that it closed the account at issue in September
2003. RBS, on the other hand, will not confirm or deny with whom it
currently banks – just as it would not disclose after 9/11/01 its
correspondent banking relationship, even in Afghanistan. Similarly, after
the fall of Saddam Hussein’s regime in Iraq, U.S. currency transferred to
Iraq in violation of the sanctions and rules of the U.S. Office of Foreign
Asset Control was traced to a Royal Bank of Scotland vault in London. When
the issue was raised to the U.S. Federal Reserve, the Fed deferred to
vaguely-defined (and not yet disclosed) “confidential compliance
examinations.” Seeing the now-ubiquitous RBS “less talk, more action”
advertisements around New York City, including in the corridors of LaGuardia
Airport, one wag suggested a modification: “RBS means less standards, more
profits.”
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