[Senate Prints 109-25]
[From the U.S. Government Publishing Office]
109th Congress
1st Session SENATE S. Prt.
109-25
_______________________________________________________________________
MONEY LAUNDERING AND FOREIGN
CORRUPTION: ENFORCEMENT AND
EFFECTIVENESS OF THE PATRIOT ACT
----------
SUPPLEMENTAL STAFF REPORT ON
U.S. ACCOUNTS USED BY AUGUSTO PINOCHET
prepared by the
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
MARCH 16, 2005
MONEY LAUNDERING AND FOREIGN CORRUPTION:
ENFORCEMENT AND EFFECTIVENESS OF THE PATRIOT ACT
SUPPLEMENTAL STAFF REPORT ON U.S. ACCOUNTS USED BY AUGUSTO PINOCHET
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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109th Congress
1st Session SENATE S. Prt.
109-25
_______________________________________________________________________
MONEY LAUNDERING AND FOREIGN
CORRUPTION: ENFORCEMENT AND
EFFECTIVENESS OF THE PATRIOT ACT
__________
SUPPLEMENTAL STAFF REPORT ON
U.S. ACCOUNTS USED BY AUGUSTO PINOCHET
prepared by the
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
MARCH 16, 2005
COMMITTEE ON GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania THOMAS R. CARPER, Delaware
TOM COBURN, Oklahoma MARK DAYTON, Minnesota
LINCOLN D. CHAFEE, Rhode Island FRANK LAUTENBERG, New Jersey
ROBERT F. BENNETT, Utah MARK PRYOR, Arkansas
PETE V. DOMENICI, New Mexico
JOHN W. WARNER, Virginia
Michael D. Bopp, Staff Director and Chief Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Amy B. Newhouse, Chief Clerk
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PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
NORM COLEMAN, Minnesota, Chairman
TED STEVENS, Alaska CARL LEVIN, Michigan
TOM COBURN, Oklahoma DANIEL K. AKAKA, Hawaii
LINCOLN D. CHAFEE, Rhode Island THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia MARK PRYOR, Arkansas
Raymond V. Shepherd, III, Staff Director and Chief Counsel
Leland B. Erickson, Counsel
Elise J. Bean, Minority Staff Director and Chief Counsel
Robert L. Roach, Counsel and Chief Investigator to the Minority
Laura E. Stuber, Counsel to the Minority
Zachary I. Schram, Professional Staff Member to the Minority
Mary D. Robertson, Chief Clerk
C O N T E N T S
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Page
I. INTRODUCTION................................................ 1
II. EXECUTIVE SUMMARY........................................... 3
III. FINDINGS AND RECOMMENDATIONS............................... 7
IV. SUPPLEMENTAL INFORMATION ON RIGGS RELATIONSHIP WITH AUGUSTO
PINOCHET....................................................... 8
A. Additional Riggs Accounts................................ 9
Additional Personal Accounts............................. 10
Pinochet Family Accounts................................. 12
Third Party Accounts..................................... 12
B. Role of Riggs Senior Officials........................... 17
1986-2002 Delegations.................................... 18
V. PINOCHET RELATIONSHIPS AT OTHER FINANCIAL INSTITUTIONS
OPERATING IN THE UNITED STATES................................. 26
A. Citigroup................................................ 27
Personal Accounts........................................ 28
Pinochet Family Accounts................................. 29
Third Party Accounts..................................... 31
Account Secrecy.......................................... 33
Due Diligence............................................ 34
Transactions of Interest................................. 39
Regulatory Oversight..................................... 40
B. Banco de Chile........................................... 41
Personal Accounts........................................ 43
Pinochet Family Accounts................................. 43
Third Party Accounts..................................... 44
Brokerage Accounts....................................... 45
Account Secrecy and Due Diligence........................ 45
Transactions of Interest................................. 46
Pinochet Foundation...................................... 53
Regulatory Oversight..................................... 55
C. Espirito Santo Bank...................................... 57
Pinochet Accounts........................................ 58
Account Secrecy.......................................... 59
Due Diligence............................................ 60
Transactions of Interest................................. 60
Regulatory Oversight..................................... 62
D. Other Financial Institutions............................. 62
Banco Atlantico.......................................... 63
Bank of America.......................................... 65
Coutts & Co. (USA) International......................... 66
Ocean Bank............................................... 69
PineBank................................................. 69
Other Financial Institutions............................. 70
E. A Secret Web of Accounts................................. 70
Moving Money from Gibraltar to Washington to Santiago... 71
Moving Money from New York, the Bahamas and Gibraltar to
Washington............................................. 72
Uncovering the Web....................................... 73
Section 314(b) Inquiries................................. 75
APPENDIX
1. Pinochet Accounts and U.S. Anti-Money Laundering Laws, chart
prepared by the Permanent Subcommittee on Investigations....... 79
2. Disguised Pinochet Account Names, chart prepared by the
Permanent Subcommittee on Investigations....................... 80
3. Pinochet Account Identification: Riggs Bank Miami; Riggs Bank
London; Citibank New York, compiled by the Permanent
Subcommittee on Investigations................................. 81
4. Documents relating to Footnotes found in Money Laundering and
Foreign Corruption: Enforcement and Effectiveness of the
Patriot Act--Supplemental Staff Report on U.S. Accounts Used By
Augusto Pinochet:
[Note: Footnotes not listed are explanative, reference
Subcommittee interviews for which records are not available to
the public, or reference a widely available public document.]
Footnote No. 4, See Attachments (2)..........................82, 87
Footnote No. 5, See Attachment............................... 96
Footnote No. 6, See Attachment............................... 102
Footnote No. 8, See Attachment............................... 103
Footnote No. 19, See Attachment.............................. 104
Footnote No. 22, See Footnote No. 19 (above)................. 104
Footnote No. 25, See Attachments (2).......................108, 109
Footnote No. 26, See Attachment.............................. 111
Footnote No. 28, See Attachments (2).......................112, 113
Footnote No. 29, See Attachment.............................. 114
Footnote No. 30, See Attachment.............................. 119
Footnote No. 31, See Footnote No. 6 (above).................. 102
Footnote No. 32, See Attachment.............................. 123
Footnote No. 33, See Attachment.............................. 124
Footnote No. 34, See Attachments (2).......................125, 126
Footnote No. 36, See Attachment.............................. 127
Footnote No. 37, See Footnote No. 36 (above) and See
Attachment...............................................127, 165
Footnote No. 38, See Attachment.............................. 182
Footnote No. 39, See Footnote No. 38 (above)................. 182
Footnote Nos. 40-43, See Footnote Nos. 37 and 38 (abov127, 165, 182
Footnote No. 44, See Attachment.............................. 187
Footnote No. 45, See Attachment.............................. 188
Footnote No. 46, See Attachment.............................. 191
Footnote No. 47, See Attachment.............................. 192
Footnote No. 48, See Attachment.............................. 193
Footnote No. 49, See Footnote No. 48 (above)................. 193
Footnote No. 50, See Attachment.............................. 200
Footnote No. 51, See Attachment.............................. 203
Footnote No. 52, See Attachment.............................. 209
Footnote No. 53, See Attachment.............................. 211
Footnote No. 54, See Footnote No. 53 (above)................. 211
Footnote No. 55, See Attachments (2).......................212, 213
Footnote No. 56, See Attachment.............................. 217
Footnote No. 57, See Attachment.............................. 218
Footnote No. 58, See Attachment.............................. 219
Footnote No. 59, See Attachment.............................. 220
Footnote No. 61, See Attachment.............................. 221
Footnote No. 62, See Attachment.............................. 226
Footnote No. 70, See Attachment.............................. 227
Footnote No. 75, See Attachment.............................. 228
Footnote No. 76, See Footnote No. 4 (above)..................82, 87
Footnote No. 78, See Attachment.............................. 229
Footnote No. 79-80, See Footnote No. 78 (above).............. 229
Footnote No. 83, See Attachment.............................. 231
Footnote No. 84, See Footnote No. 36 (above)................. 127
Footnote No. 87, See Attachments (2).......................249, 250
Footnote No. 93, See Attachment.............................. 251
Footnote No. 94, See Attachments (2).......................252, 257
Footnote No. 95, See Attachments (2).......................258, 259
Footnote No. 96, See Attachments (2).......................260, 261
Footnote No. 97, See Attachment.............................. 262
Footnote No. 98, See Attachment.............................. 263
Footnote No. 99, See Attachments (3)..................267, 279, 282
Footnote No. 100, See Footnote No. 99 (above).........267, 279, 282
Footnote No. 101, See Footnote No. 99 (above) and See
Attachments (2)...........................267, 279, 282, 285, 295
Footnote No. 102, See Attachment............................. 296
Footnote No. 105, See Attachment............................. 301
Footnote No. 106, See Attachment............................. 303
Footnote No. 112, See Attachments (2)......................305, 306
Footnote No. 114, See Footnote No. 83 (above)................ 231
Footnote No. 115, See Attachment............................. 307
Footnote No. 117, See Attachment............................. 308
Footnote No. 118, See Attachment............................. 313
Footnote No. 119, See Attachment............................. 314
Footnote No. 120, See Attachment............................. 317
Footnote No. 125, See Attachment............................. 318
Footnote No. 127, See Attachment............................. 319
Footnote No. 128, See Attachments (3).................321, 322, 323
Footnote No. 130, See Attachment............................. 325
Footnote No. 131, See Footnote No. 128 (above) and See
Attachment.....................................321, 322, 323, 326
Footnote No. 133, See Attachment............................. 329
Footnote No. 134, See Attachment............................. 330
Footnote No. 135, See Footnote No. 128 (above) and See
Attachment.....................................321, 322, 323, 331
Footnote No. 141, See Footnote No. 83 (above)................ 231
Footnote No. 148, See Attachment............................. 336
Footnote No. 149, See Attachment............................. 337
Footnote No. 150, See Attachment............................. 338
Footnote No. 151, See Attachment............................. 339
Footnote No. 152, See Footnote No. 151 (above)............... 339
Footnote No. 153, See Attachment............................. 340
Footnote No. 156, See Footnote No. 83 (above)................ 231
Footnote No. 157, See Attachment............................. 341
Footnote No. 158, See Attachment............................. 342
Footnote No. 159, See Attachment............................. 343
Footnote No. 160, See Attachment............................. 348
Footnote No. 161, See Attachment............................. 349
Footnote No. 162-163, See Footnote No. 161 (above)........... 349
Footnote No. 164, See Attachment............................. 350
Footnote No. 165, See Footnote No. 164 (above)............... 350
5. Miscellaneous documents......................................351-398
MONEY LAUNDERING AND FOREIGN
CORRUPTION: ENFORCEMENT AND
EFFECTIVENESS OF THE PATRIOT ACT
Supplemental Staff Report On
U.S. Accounts Used By Augusto Pinochet
----------
March 16, 2005
I. INTRODUCTION
From 1999 to 2001, the U.S. Senate Permanent Subcommittee
on Investigations of the Committee on Governmental Affairs, at
the request of Senator Carl Levin, Ranking Minority Member,
conducted a detailed investigation into money laundering
activities in the U.S. financial services sector, including in-
depth examinations of money laundering activities in private
banking, correspondent banking, and the securities industry.
Two Minority Staff Reports were issued, and Subcommittee
hearings were held in November 1999 and March 2001.\1\ This
investigative work provided the foundation for many of the
anti-money laundering provisions in Title III of the USA
Patriot Act enacted in October 2001. Among other key
provisions, the Patriot Act obligated U.S. financial
institutions to exercise due diligence when opening and
administering accounts for foreign political figures, and
established corrupt acts by foreign officials as an allowable
basis for U.S. money laundering prosecutions.
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\1\ See ``Private Banking and Money Laundering: A Case Study of
Opportunities and Vulnerabilities,'' S. Hrg.106-428 (November 9 and 10,
1999), and Minority Staff Report reprinted in the hearing record
beginning at 872 (hereinafter ``1999 Subcommittee Private Banking
Hearings''); ``Role of U.S. Correspondent Banking in International
Money Laundering,'' S. Hrg.107-84 (March 1, 2, and 6, 2001), and
Minority Staff Report reprinted in the hearing record beginning at 273.
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In February 2003, at Senator Levin's request and with the
support of Subcommittee Chairman Norm Coleman, the Subcommittee
initiated a bipartisan follow-up investigation to evaluate the
enforcement and effectiveness of key anti-money laundering
provisions in the Patriot Act, using Riggs Bank as a case
history. During the course of this investigation, the
Subcommittee issued numerous subpoenas and document requests.
The Subcommittee staff reviewed over 100 boxes, folders, and
electronic compact disks containing hundreds of thousands of
pages of documents, including bank statements, account opening
materials, wire transfers, correspondence, electronic mail,
contracts, board minutes, materials related to specific bank
accounts and transactions, bank examination materials, audit
reports, legislative materials, and legal pleadings. The
Subcommittee staff also conducted numerous interviews with
representatives from financial institutions, the Office of the
Comptroller of the Currency (OCC), the Federal Reserve, oil
companies, various experts, and other persons with relevant
information.
The investigation culminated in a Subcommittee hearing on
July 15, 2004, and the issuance of a Minority Staff Report in
conjunction with the hearing.\2\ The hearing and report
presented evidence showing systematic failures by Riggs Bank to
uphold its anti-money laundering (AML) obligations and by
federal regulators charged with ensuring bank compliance. To
illustrate the problems, the 2004 hearing and report focused in
detail on two sets of Riggs accounts, one involving former
Chilean President Augusto Pinochet and the other involving the
West African nation Equatorial Guinea.
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\2\ See ``Money Laundering and Foreign Corruption: Enforcement and
Effectiveness of the Patriot Act, Case Study Involving Riggs Bank,'' S.
Hrg.108-633 (July 15, 2004) (hereinafter ``2004 Hearing Record'') and
Minority Staff Report which is reprinted in the 2004 Hearing Record
beginning at 126.
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Among other matters, the Subcommittee investigation
determined that Riggs had served as a long-standing personal
banker for Mr. Pinochet and deliberately assisted him in the
concealment and movement of his funds while he was under
investigation and the subject of a Spanish court order
directing a worldwide freeze of his assets. Riggs opened
multiple accounts for Mr. Pinochet with the knowledge and
support of the Bank's leadership; accepted millions of dollars
in deposits from him with no serious inquiry into the source of
his wealth; set up offshore shell corporations and opened
accounts in the names of those corporations to disguise Mr.
Pinochet's ownership of the account funds; altered the names of
his personal account to disguise his ownership; transferred
$1.6 million from London to the United States while Mr.
Pinochet was in detention in the United Kingdom and under a
Spanish court order freezing his assets; conducted transactions
through Riggs's own administrative accounts to hide Mr.
Pinochet's involvement in some cash transactions; and delivered
over $1.9 million in four batches of cashiers checks to Mr.
Pinochet in Chile to enable him to obtain substantial cash
payments in that country. The Subcommittee investigation also
determined that Riggs Bank had concealed the existence of the
Pinochet accounts from OCC bank examiners for 2 years, resisted
OCC requests for information, failed to identify or report
suspicious account activity, and closed the Pinochet accounts
only after a detailed OCC examination in 2002.\3\
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\3\ See 2004 Hearing Record at 140.
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Shortly after the July 2004 Subcommittee hearing,
representatives of Riggs Bank informed the Subcommittee that an
internal inquiry by its Security & Investigations Group, which
the bank first established in the summer of 2003, was beginning
to identify additional Pinochet-related accounts in Washington,
Miami, and London that should have been, but were not,
identified in response to Subcommittee subpoenas. These
additional accounts were controlled by Mr. Pinochet, members of
his immediate family, or third parties whose accounts served as
conduits for Pinochet funds. In addition, the Riggs office had
located documents that should have been, but were not, produced
in response to earlier Subcommittee subpoenas. Over the ensuing
months, the Riggs Security & Investigations Group conducted a
detailed review of these accounts and documents. The
Subcommittee reviewed the new documentation, analyzed the
information, and met with bank representatives.
In addition, the Subcommittee's ongoing investigation
determined that Riggs Bank was not alone in the United States
in helping Mr. Pinochet gain access to the U.S. financial
system. Beginning with transactions detailed in Riggs account
records, the Subcommittee identified numerous accounts and
transactions at other financial institutions involving Pinochet
funds. The Subcommittee obtained and reviewed about 15
additional boxes of documents from other financial
institutions, including bank statements, account opening
materials, wire transfers, correspondence, checks, electronic
mail, contracts, and other materials. The Subcommittee met with
numerous representatives of financial institutions about the
materials. This new information produced substantial evidence
of additional, hidden bank and securities accounts that had
been used by Mr. Pinochet in the United States.
During this phase of the Subcommittee's investigation,
additional civil and criminal proceedings related to the
Pinochet accounts were initiated. In January 2005, Riggs Bank
pled guilty to one U.S. felony count for failing to report
suspicious activity to law enforcement, and paid a criminal
fine of $16 million.\4\ In February 2005, to settle civil and
criminal charges filed by Spanish authorities for the alleged
violation of the 1998 Spanish court order directing financial
institutions to freeze Pinochet assets, Riggs Bank, Joseph
Allbritton, and Robert Allbritton paid about $1 million in
court costs and legal expenses and another $8 million to a
foundation established to assist victims of the Pinochet
regime. In return, the Spanish court dismissed the pending
criminal and civil actions against officers and directors of
Riggs Bank.\5\
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\4\ See United States of America v. Riggs Bank N.A., Case No. Cr.
05-35 (RMU) (D. D.C., filed 2005), Plea Agreement and Statement of
Offense (1/27/05).
\5\ See court order issued by Magistrate-Judge Baltasar Garzon
Real, Investigating Court No. 5 (Madrid), Case No. 28079-27-2-1996-
0007036-78300 (2/25/05), with a translation provided by the Court;
``Allbrittons, Riggs to Pay Victims of Pinochet,'' The Washington Post,
2/26/05.
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II. EXECUTIVE SUMMARY
This supplemental Report describes the additional
information obtained by the Subcommittee related to Pinochet
accounts administered by Riggs and other financial institutions
operating in the United States.
Newly identified Riggs documents and accounts establish
that the relationship between Riggs Bank and Augusto Pinochet
was more extensive than had been described to the Subcommittee
prior to its 2004 hearing and Minority Staff Report. Instead of
maintaining nine accounts and certificates of deposit (CDs), as
indicated to the Subcommittee earlier, Riggs actually had 28
Pinochet-related accounts and CDs. And instead of an 8-year
relationship from 1994 to 2002, as earlier indicated, Riggs
actually had a 25-year relationship with Mr. Pinochet and his
family, from 1979 to 2004.
The newly identified Riggs accounts include seven personal
accounts for Mr. Pinochet, four of which were opened under a
disguised variant of his name, and three of which were opened
under an alias. Three additional accounts had been opened for
members of Mr. Pinochet's immediate family. Nine accounts had
been opened in the name of third parties, all but one of whom
were Chilean military officers. Bank records show that these
military officer accounts were used at times as conduits to
transfer Pinochet funds. One 1996 Riggs trip report described a
Chilean military officer account holder as ``one of several
front-men of General Pinochet.'' \6\
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\6\ Riggs document, ``Extract From Trip Report,'' undated, Bates
RNB033416, describing a Riggs business trip to Chile from 8/24/96 to 9/
1/96.
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The newly identified documents also demonstrate that Riggs
senior officials played a more significant role in the Pinochet
relationship than was made known to the Subcommittee prior to
its 2004 hearing. For example, prior to the hearing, Riggs
personnel disagreed over how many times Riggs personnel had
traveled to Chile, who went on specific trips, who met with Mr.
Pinochet, and who actually asked him to open a Riggs account in
Washington.\7\ In interviews, Riggs personnel consistently
downplayed or could not recall the extent of personal
interactions that took place between Riggs senior officials and
Mr. Pinochet. The newly produced documents, which are
contemporaneous with the events described, provide more
information. They show, for example, that Riggs senior
officials began visiting Chile as early as 1986, and met with
Chilean military and government leaders on at least seven
occasions in 1986, 1994, 1996, 1997, 1999, 2000, and 2002. On
at least five of these trips, Riggs senior officials met with
Mr. Pinochet in Chile, participated with him in social as well
as business events, corresponded with him from Washington, and
presented him with gifts on behalf of Riggs Bank.
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\7\ See, e.g., 2004 Hearing Record at 142.
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Riggs documents also show that the efforts of Riggs senior
officials to solicit business from Mr. Pinochet were part of a
wider bank strategy to develop and strengthen the bank's
relationship with the Chilean military during the 1990s. Riggs
had enjoyed a profitable relationship with the Chilean military
during the 1960s and 1970s. In 1979, however, according to a
memorandum written by Mr. Pinochet's private banker at Riggs,
the Chilean Military Mission closed most of its official
accounts at Riggs and moved them to the Bank of Nova Scotia in
Canada, in response to the 1976 assassination of Chilean
Ambassador Orlando Letelier in Washington, D.C.\8\ During the
1990s, Riggs officials decided to try to restore the earlier
relationship. In 1994, Riggs senior officials traveled to
Chile, met with senior military and government officials,
including Mr. Pinochet who was then Commander-in- Chief of the
Army, and were successful in convincing the Chilean military to
return many of their accounts to Riggs Bank in Washington,
where they remained until 2004.
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\8\ Riggs ``Call Memorandum'' from Carol Thompson to File, 11/3/94,
Bates RNB035426. See also ``Documents Link Chile's Pinochet to Letelier
Murder,'' The Washington Post (11/14/2000).
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Recently obtained material shows that Riggs was not the
only U.S. financial institution that gave Mr. Pinochet access
to the U.S. financial system. The evidence shows that, over the
past 25 years, due to inadequate due diligence and, at times,
actual facilitation of unusual transactions, U.S. financial
institutions enabled Mr. Pinochet to construct an extensive and
largely hidden network of U.S. bank and securities accounts,
involving millions of dollars, which he used to move funds and
transact business. Three financial institutions examined by the
Subcommittee, Citigroup, Banco de Chile-United States, \9\ and
Espirito Santo Bank in Florida, maintained years-long U.S.
relationships with and provided multiple financial accounts and
services to Mr. Pinochet. Other financial institutions also
helped Mr. Pinochet and his family move funds and transact
business in the United States, including Banco Atlantico which
is now part of Banco de Sabadell; Bank of America; Coutts & Co.
(USA) International which is now part of Banco Santander; Ocean
Bank in Miami; and PineBank N.A. in Miami. Evidence exists of
still additional U.S. accounts related to Mr. Pinochet, but
limited Subcommittee resources prevent an exhaustive analysis
of all of the U.S. accounts used to assist Mr. Pinochet.
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\9\ Banco de Chile is headquartered in Santiago, Chile and operates
primarily in that country, although it also has offices in other
countries. It is the Subcommittee's understanding that the only country
outside of Chile in which Banco de Chile accepts deposits is the United
States. To make clear that this Report examines only Banco de Chile's
operations in the United States, the Report refers to ``Banco de Chile-
United States.''
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In addition to the 28 Riggs accounts and CDs, the
Subcommittee has now identified nearly 100 U.S. financial
accounts and CDs benefiting Mr. Pinochet or his immediate
family over the past 25 years, several of which were only
recently closed. For example, in response to Subcommittee
inquiries, Citigroup has identified 63 U.S. accounts and CDs
that it maintained for Mr. Pinochet and his family at various
times from 1981 to 2005. All of the Citigroup personal accounts
for Mr. Pinochet were opened under disguised variants of his
name, such as Jose P. Ugarte or J. Ramon Ugarte, and were
closed during the mid-1990s. Accounts and CDs were also opened
in the name of Mr. Pinochet's son, Marco Antonio Pinochet
Hiriart; his daughters, Ines Lucia and Maria Veronica Pinochet;
and offshore entities that Marco or Ines Lucia Pinochet
controlled, including Meritor Investments, Trust MT-4964, and
Redwing Holdings. While most of these accounts were closed in
2000 or 2001, a few closed in 2003 or 2004, and one is frozen
but still open. Altogether these accounts handled millions of
dollars.
The Subcommittee has also identified 24 U.S. accounts and
CDs at Banco de Chile-United States benefiting Mr. Pinochet and
his family from 1995 to 2004. These accounts were opened in the
name of Mr. Pinochet, an immediate family member, or one of six
offshore corporations controlled by Oscar Custodio Aitken
Lavanchy, a Chilean attorney with ties to Mr. Pinochet.\10\
These offshore corporations, each of which served at times as a
conduit for Pinochet funds, maintained accounts at both Banco
de Chile-United States and U.S. securities firms. Altogether,
over a 9-year period, these Pinochet-related accounts received
deposits totaling more than $7 million, including $6 million
which had been transferred in 2002 from Riggs Bank, after Riggs
closed its Pinochet accounts, and another $1.1 million
transferred over time from accounts in Chile.
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\10\ The six offshore corporations are Abanda Finance, Belview
International, Sociedad de Inversiones Belview, Eastview Finance,
G.L.P. Ltd., and Tasker Investments, Ltd.
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In addition, the Subcommittee has identified at least six
U.S. accounts and CDs at Espirito Santo Bank in Florida that
benefited Mr. Pinochet and his family from 1991 to 2000. These
accounts were opened in the name of Mr. Pinochet and his wife;
an offshore corporation controlled by Mr. Pinochet called
Trilateral International Trading Ltd.; an offshore trust
controlled by Mr. Pinochet called the Santa Lucia Trust; and
Mr. Pinochet's daughter, Jacqueline Pinochet, who allowed her
account to be used to send funds to Mr. Pinochet's assistant,
Monica Ananias Kuncar. Over an 8-year period, these Pinochet-
related accounts received deposits totaling about $3.9 million.
Due to the many transactions, accounts, and financial
institutions that the Subcommittee has identified, the
Subcommittee investigation has been unable to calculate the
total amount of Pinochet funds that were deposited into or
moved through U.S. accounts, except to say that it involves
millions of dollars. At a minimum, the total exceeds the $8
million found in Riggs accounts as of September 2001, \11\ and
the total is likely much higher. At Banco de Chile-United
States, for example, records show that the Pinochet-related
accounts received about $1.1 million in deposits over time from
various sources in Chile. At Espirito Santo Bank, records show
another $3.9 million in Pinochet funds deposited over time. At
Citigroup, due to the many transactions and accounts involved
and repeated transfers to and from other financial
institutions, the Subcommittee was unable to determine the
total amount of Pinochet funds held by that bank; Citigroup
representatives were able to offer only a very rough estimate
that at least $5 million and perhaps millions more flowed
through the accounts during the years they remained open.
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\11\ See Riggs document, ``Resumen,'' (9/20/01), Bates RNB029982-
85; 2004 Hearing Record at 147. The Subcommittee investigation
determined that, from 1981 to 2000, overseas Banco Atlantico affiliates
sent more than $5.4 million to Pinochet-related accounts at Riggs,
thereby contributing to the nearly $8 million total identified in
September 2001. Virtually all of that $8 million was subsequently
disbursed either to Mr. Pinochet in the form of cashiers checks or to
Banco de Chile-United States by wire transfer after Riggs closed its
Pinochet accounts in July 2002. The cashiers checks were issued by
Riggs from August 2000 until April 2002, were cashed in Chile, and
provided Mr. Pinochet with $1.9 million from his Riggs accounts. For
more information about these cashiers checks, see 2004 Hearing Record
at 151-52.
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This Report focuses on the 28 Pinochet-related accounts and
CDs at Riggs and the nearly 100 accounts and CDs at other
financial institutions in the United States. It is important to
note, however, that many of the financial institutions examined
by the Subcommittee also maintained one or more accounts for
Mr. Pinochet and his family in countries other than the United
States. These accounts were located in Argentina, the Bahamas,
Cayman Islands, Chile, Gibraltar, Spain, Switzerland, and the
United Kingdom. An examination of these non-U.S. accounts is
beyond the scope of this Report.
Prior to 2004, it appears that U.S. regulators and law
enforcement were generally unaware that Augusto Pinochet had
constructed a web of largely hidden accounts in the United
States and was using these accounts on a regular basis to move
funds and transact business. His secretive opening of multiple
accounts at multiple U.S. financial institutions over the years
presents a cautionary tale about the ease with which a
determined individual can manipulate the U.S. financial system,
and the importance of transparency, due diligence, and
information sharing by financial institutions, regulators, and
law enforcement to guard against possible money laundering and
foreign corruption.
III. FINDINGS AND RECOMMENDATIONS
Based upon its investigation, the Subcommittee staff makes
the following findings of fact.
(1) More Extensive Pinochet Relationship. The relationship
between Riggs Bank and Augusto Pinochet was more extensive than
previously disclosed, encompassing 28 accounts instead of 9,
spanning 25 years instead of 8, including secret accounts
opened under misleading names, and involving more personal,
high-level contact between Riggs officials and Mr. Pinochet
than previously described.
(2) Military Officer Accounts. From 1981 to 2004, eight
Riggs accounts, opened in the names of Chilean military
officers, served as occasional conduits for Pinochet funds and,
over time, transmitted more than $1.7 million to Pinochet-
related accounts.
(3) Web of 125 U.S. Accounts. Over the past 25 years,
multiple financial institutions operating in the United States,
including Riggs Bank, Citigroup, Banco de Chile-United States,
Espirito Santo Bank in Miami, and others, enabled Augusto
Pinochet to construct a web of at least 125 U.S. bank and
securities accounts, involving millions of dollars, which he
used to move funds and transact business. In many cases, these
accounts were disguised by using a variant of the Pinochet
name, an alias, the name of an offshore entity, or the name of
a third party willing to serve as a conduit for Pinochet funds.
(4) Transferring Suspect Funds. After U.S. bank regulators
raised money laundering concerns about the Pinochet funds at
Riggs Bank, the bank closed the accounts and transferred the
funds to another financial institution operating in the United
States, without notice that the funds were suspect. The U.S.
regulators failed to follow the suspect funds when they left
Riggs to determine whether they went to another U.S. financial
institution.
Based upon its investigation, the Subcommittee staff makes
the following recommendations.
(1) Section 314(b) Warning. A financial institution that
closes or asks a client to close an account due to money
laundering concerns, including a concern the account may
contain the proceeds of foreign corruption, should, before
transferring the funds to another financial institution, warn
that financial institution under Section 314(b) of the Patriot
Act that the transfer is the result of an account closure due
to possible money laundering or foreign corruption concerns.
(2) Stopping Suspect Funds. Once U.S. financial regulators
identify a suspect account, they should take reasonable steps
to prevent suspect funds from being sent to another U.S.
financial institution without an appropriate warning, identify
related accounts at other financial institutions operating in
the United States, and, if necessary, dismantle any network of
suspect U.S. accounts.
(3) Section 314(b) Guidance. To increase the usefulness of
Section 314(b), U.S. financial regulators should consider
issuing guidance clarifying that the legal protections afforded
by that section permit financial institutions to respond to
requests for information, including by offering information
about accounts and transactions that may help expose or prevent
money laundering or terrorist activities.
(4) Intrabank Disclosures. The United States should work
with the European Union to enable financial institutions with
U.S. and E.U. affiliates to exchange client information across
international lines to safeguard against money laundering and
terrorist financing.
IV. SUPPLEMENTAL INFORMATION ON RIGGS RELATIONSHIP WITH AUGUSTO
PINOCHET
As explained in the 2004 report, Augusto Jose Ramon
Pinochet Ugarte, former President of Chile, is a controversial
political figure whose name is known world wide. After taking
power in a 1973 coup, he served as President of Chile until
1990, and as Commander-in-Chief of the Chilean Army until 1998.
After stepping down from the army, he became a ``Senator for
life.'' \12\ In court filings, press accounts, and other
reports, Mr. Pinochet has been accused of involvement with
human rights abuses, torture, assassinations, death squads,
drug trafficking, arms sales, and corruption, but never
convicted in a court of law.\13\ Since 1996, he has been the
subject of repeated litigation in Spain, \14\ the United
Kingdom, \15\ Chile, \16\ and other countries \17\ by persons
seeking to hold him accountable for crimes committed during his
presidency. In each case prior to the Subcommittee's 2004
hearing, Mr. Pinochet had been found by the presiding court to
be unavailable, unfit, or immune to prosecution.\18\
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\12\ See ``Pinochet Extradition Case: Selected Legal Issues,''
Congressional Research Service (CRS Report No. RL-30117, 3/3/00), at 1-
2, reprinted in 2004 Hearing Record at 907.
\13\ See, e.g., ``Chile: Political and Economic Conditions and U.S.
Relations,'' Congressional Research Service (CRS Report No. RL-300035,
8/5/03) at 2, reprinted in 2004 Hearing Record at 923; ``Crime Without
Punishment: Impunity in Latin America,'' Amnesty International (AMR 01/
08/96) at http://web.amnesty.org/library/index/ENGAMR010081996 (as of
1/26/05).
\14\ See, e.g., complaint filed by the Union of Progressive
Prosecutors before Spain's highest criminal court (7/4/96), http://
www.derechos.org/nizkor/chile/juicio/denu.html (as of 1/26/05).
\15\ See, e.g., Regina v. Bartle, (Lords of Appeal, 3/24/99),
http://www.parliament.the-stationery-office.co.uk/pa/ld199899/ldjudgmt/
jd990324/pino1.htm (as of 1/26/05); CRS Report on ``Pinochet
Extradition Case,'' at 2-12.
\16\ For a list of the 66 criminal complaints filed against Mr.
Pinochet between January 1998 and March 2000 in the Santiago Court of
Appeals, see http://www.memoriayjusticia.cl/english/en--home.html (as
of 1/26/05).
\17\ Litigation against Mr. Pinochet has also been filed, for
example, in Argentina, Belgium, France, and Switzerland. See CRS Report
on ``Pinochet Extradition Case,'' at footnote 2.
\18\ See, e.g., CRS Report on ``Pinochet Extradition Case,'' at
footnote 2 and page 11; ``Chilean Supreme Court Upholds Suspension of
Legal Proceedings Against Pinochet,'' http://www.elmostrador.cl/c--
pais/pino--casacion.htm (as of 1/26/05).
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On August 26, 2004, the Chilean Supreme Court held that Mr.
Pinochet was not immune to prosecution in the ``Operation
Condor'' case, involving the disappearance of certain political
figures during the mid-1970s.\19\ On December 13, 2004, the
relevant trial court found Mr. Pinochet fit for trial in that
case. In addition, a Chilean Judge ordered an investigation of
the funds in Mr. Pinochet's accounts at Riggs, located some of
those funds, and froze them. On October 1, 2004, the Chilean
Internal Tax Service filed a complaint against Mr. Pinochet for
allegedly filing false tax returns.\20\ In November 2004, the
Chilean Judge located and froze another $4 million in Pinochet
assets.\21\ Mr. Pinochet apparently offered to pay $5 million
in back taxes to free his assets, but on February 7, 2005,
Chilean officials rejected the offer, apparently in part
because some of the frozen assets were attached pursuant to
criminal proceedings.\22\
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\19\ See, e.g., ``Pinochet: Latest Developments in Prosecutions for
Human Rights Crimes,'' report prepared by the Law Library of Congress,
LL File No. 2005-01585 (3/15/05) at 1. On January 4, 2005, the Chilean
Supreme Court upheld Mr. Pinochet's indictment in this case. Id. at 2-
3.
\20\ See, e.g., ``Pinochet Faces Tax Evasion Charge,'' BBC News
(10/1/04).
\21\ See, e.g., ``Asset Freeze As Pinochet Turns 89,'' BBC News
(11/24/04).
\22\ See, e.g., ``Pinochet: Latest Developments in Prosecutions for
Human Rights Crimes,'' report prepared by the Law Library of Congress,
LL File No. 2005-01585 (3/15/05) at 4.
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Information obtained after the Subcommittee's 2004 hearing
shows that the relationship between Riggs Bank and Augusto
Pinochet was more extensive than was previously indicated,
encompassing a total of 28 accounts rather than nine accounts,
and spanning a total of 25 years rather than 8 years.\23\ In
addition to the nine accounts described in the 2004 Minority
Staff report, \24\ Riggs has identified 19 more Pinochet
related accounts located in its Washington, Miami, and London
offices and affiliates. The oldest account was opened in
Washington in July 1979, and the most recent accounts remained
active in London until July 2004, when they were frozen by the
bank.\25\ Riggs senior officials also had more extensive
business and personal interactions with Mr. Pinochet and his
family than previously disclosed.
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\23\ The additional information about Riggs Bank is taken from
public filings, subpoenaed documents, interviews with bank
representatives, employees, and former employees, and information
supplied by other financial institutions. The relevant documents are
maintained in Subcommittee files.
\24\ The 2004 Minority Staff Report identified three personal
accounts, three corporate accounts, and three sets of certificates of
deposit at Riggs relative to Mr. Pinochet. See 2004 Hearing Record at
145-151.
\25\ Riggs located the London accounts, both held by Mr. Pinochet's
daughter, Ines Lucia Hiriart, soon after the Subcommittee hearing in
July 2004. See, e.g., account statements for Account Nos. 75256032 and
75256035 (7/30/2004), Bates RNB033047 and RNB033050-51.
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Riggs Bank has fully cooperated with all Subcommittee
inquiries and produced all requested documentation, including
documentation related to the extensive internal review of the
Pinochet-related accounts conducted by the Riggs Security &
Investigations Group. The Riggs Security & Investigations Group
is to be commended for its thorough work and willingness to
share its analysis with this Subcommittee. The information it
provided was of great assistance in the Subcommittee's
supplemental investigation.
A. Additional Riggs Accounts
The newly identified Riggs accounts include seven personal
accounts and CDs for Mr. Pinochet, four of which were opened
under a disguised variant of his name, and three of which were
opened under an alias. Riggs also maintained three accounts for
members of Mr. Pinochet's immediate family. Nine additional
accounts were opened in Miami in the name of ostensibly
unrelated third parties, all but one of whom has been
identified as a Chilean military officer. Bank records show
that, at times, these accounts served as conduits for Pinochet
funds.
When asked why these accounts were not disclosed earlier,
Riggs identified a number of factors that had contributed to
the delay in identifying them. Riggs first explained that it
had given the Subcommittee the same records it had provided the
OCC in 2002, without realizing they were incomplete. Riggs
explained that the Miami and Washington accounts were more than
10 years old, some were in the name of an alias or a third
party, relevant documents had been lost or destroyed, most of
the individuals familiar with the accounts had left the bank,
and the various Riggs affiliates that opened the accounts had
not fully communicated with each other. Riggs indicated that
another important factor was that a senior Riggs official who
was aware of many of the accounts did not identify them when
asked. Peter Fowler, who was President and Chief Operating
Officer of Riggs Bank International Corporation in Miami from
October 1994 to July 2000, and then Senior Vice President of
the Latin American Embassy Banking Division in Washington, had
failed to disclose the military officer accounts when the bank
was collecting information in response to OCC inquiries in
2002, and in response to regulatory and Subcommittee inquiries
in 2003 and 2004. After the Subcommittee hearing in July 2004,
the Riggs Security & Investigations Group discovered the
additional accounts when researching a check that had been sent
from one of the military officer accounts to a Pinochet
account. In August 2004, the bank fired Mr. Fowler.
Additional Personal Accounts. Of the seven newly identified
Riggs accounts that were opened for Mr. Pinochet, four were
opened under a disguised variant of Mr. Pinochet's name and
three under the alias, Daniel Lopez.\26\ The accounts are the
following.
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\26\ Mr. Pinochet's son, Marco Pinochet, sent an email to Riggs
Bank on November 5, 2004, confirming that ``Daniel Lopez'' is an alias
and refers to his father, Augusto Pinochet, Bates RNB040496.
(1) Account No. 413799878 was opened in the name of Jose
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Ugarte in Washington on July 20, 1979, and closed in July 1981.
(2) Account No. 350082 was opened in the name of Jose
Ramon Ugarte in Miami on July 13, 1981, and closed on June 8,
1984.
(3) Account No. 76077573 was opened in the name of Daniel
Lopez in Washington on January 8, 1985 and closed on an unknown
date sometime after August 1993.\27\
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\27\ Riggs was able to locate only some of the account statements
for this account. The latest account statement was for August 1993.
(4) Account No. 450858 was opened in the name of Jose R.
Ugarte in Miami on January 14, 1985, and closed on March 15,
---------------------------------------------------------------------------
1990.
(5) Account No. 707547 was opened in the name of Augusto
P. Ugarte or Lucia Hiriart P. in trust for Maria Veronica
Pinochet, Maria Jose Martinez P. and Lucia Amunategui P., in
Miami on April 4, 1990, and closed on October 10, 1991.
(6) Account No. 710053 was opened in the name of Daniel
Lopez, in trust for Augusto J. Pinochet, in Miami on August 5,
1993, and closed on March 14, 1996.
(7) Account No. 808691, a CD, was opened in the name of
Daniel Lopez in Miami on an unknown opening and closing date,
but which includes at least the period from August 1994 until
January 1996.
Because these accounts were opened under a disguised
variant of Mr. Pinochet's name or under his Daniel Lopez alias,
the extent to which they were known to Riggs senior officials
in Washington is unclear. Several Riggs officials in Miami,
however, were well aware of them, and even a cursory review of
the account statements shows that they were carrying Pinochet
funds.
The Lopez accounts are instructive. On March 22, 1990, for
example, a $410,000 check made payable to ``Augusto P. Ugarte''
was drawn on the Daniel Lopez account in Washington, and used
on April 4, 1990, to open Miami Account No. 707547 for
``Augusto P. Ugarte'' and ``Lucia Hiriart P.'' in trust for the
Pinochet children (hereinafter ``Ugarte/Hiriart Miami
account'').\28\ On July 31, 1990, a $302,000 check made payable
to Augusto P. Ugarte was drawn on the same Lopez account and
deposited into the same Ugarte/Hiriart Miami account.\29\ In
December 1990, a $11,520 check withdrew funds from the Lopez
account and deposited them into the Ugarte/Hiriart Miami
account. In December 1991, two checks totaling $79,626 withdrew
funds from the Washington Lopez account and deposited them into
the third party account of Jose Maguel LaTorre Pinochet.
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\28\ Riggs National Bank check and Riggs Bank Miami account opening
information, 3/22/90, Bates RNB033809 and RNB033773.
\29\ Riggs National Bank check, 7/17/90, Bates RNB034279-83 at 80.
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Additional transactions involving the Daniel Lopez account
in Miami, Account No. 710053, shows that this account also
served as a conduit for Pinochet funds. For example, the Miami
Lopez account was initially funded in August 1993, with a
$22,696.23 check drawn on the Lopez account in Washington.
Additional deposits into the Miami Lopez account came from
accounts at Chilean banks, including a $303,000 transfer in
December 1993, and two transfers of $15,000 and $40,000 in
January 1994. Two more deposits were sent by ``M. Hiriart,''
from accounts at Banco Atlantico, including a transfer of
$250,000 in July 1994, and $627,000 in November 1994. Over the
next 2 years, the Miami Lopez account sent significant sums to
the Augusto Pinochet's primary account in Washington, Account
No. 76750393, including $300,000 in April 1995, $627,000 in
January 1996, and $374,629.72 in March 1996. In addition, on
one day, February 21, 1996, the Miami Lopez account sent three
checks, for $44,000, $75,000 and $82,000, to an account held in
the name of Mr. Pinochet's assistant, Monica Ananias Kuncar. On
September 1, 1994, a $56,000.25 check made payable to ``J.
Ugarte'' withdrew funds from the Lopez account and deposited
them into an account at Banco de Chile.\30\
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\30\ In addition, in January 1995, an account Mr. Pinochet had
opened at Espirito Santo Bank in Miami sent three checks totaling about
$214,000, to accounts at Banco de Chile. Two checks were made payable
to ``D. Lopez.'' The third check appears to have been made payable to a
different name, but the endorsement on all three checks reference the
same Banco de Chile account number.
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The Miami Lopez account also provided funds to purchase
various CDs. The account documentation indicates that funds in
the Lopez Miami account were used to purchase a $483,000 CD in
March 1994. In July 1994, a $250,000 wire transfer sent by ``M.
Hiriart'' from a Banco Atlantico account was used, in part, to
purchase a $150,000 CD. On August 1, 1994, these two CDs were
cashed and the funds combined to purchase a larger CD in the
amount of $640,000, assigned to Lopez Account No. 808691. In
November 1994, a $627,000 wire transfer sent by ``Marco P.
Hiriart'' from Banco Atlantico was deposited into the Lopez
Miami account. On May 1, 1995, the $627,000 was combined with
the funds from the $640,000 CD, which had matured, and the
funds were used to purchase a still larger CD in the amount of
$1.1 million. Over time, this and other CDs associated with the
Lopez account matured, were reconfigured, and used to buy other
CDs. In January 1996, the Lopez Miami account sent a $627,000
wire transfer to the Pinochet account in Washington, Account
No. 76750393.
These and other transactions make it clear that the Lopez
accounts were conduits for Pinochet funds used in multiple,
complex transactions.
Pinochet Family Accounts. The three newly identified Riggs
accounts that were opened in the name of Mr. Pinochet's
immediate family members are the following. None included the
name ``Pinochet'' in the name of the account holder.
(1) Account No. 404276139 was opened in the name of Mr.
Pinochet's son, Marco Antonio Hiriart, in Washington on
September 30, 1981, and closed on June 1, 2001.
(2) Account No. 75256035 was opened in the name of Mr.
Pinochet's daughter, Ines Lucia Hiriart, in London on May 31,
2000, and frozen on July 30, 2004, by Riggs.
(3) Account No. 75256032 was opened in the name of Ines
Lucia Hiriart in London on May 21, 2001, and frozen on July 30,
2004, by Riggs.
Third Party Accounts. The nine newly identified Riggs
accounts that were opened in the name of third parties, but
used at times as conduits for Pinochet funds are the following.
All but one of the account holders was a Chilean military
officer.
(1) Account No. 350413 was opened in the names of Jorge
Ballerino Sanford and/or Ramon Castro Ivanovic in Miami on
November 23, 1981, and closed on July 2, 1984. At the time the
account was open, Mr. Ballerino was a Chilean Army general, and
Mr. Castro was an Army officer. Funds were used to purchase a
CD. The maximum amount of funds in this account at one time was
about $1.8 million.
(2) Account No. 350512 was opened in the name of Jorge
Ballerino Sanford and/or Ramon Castro Ivanovic in Miami on
January 11, 1982, and closed on January 21, 1985. Funds were
used to purchase a CD. The maximum amount of funds in this
account at one time was about $2.3 million.
(3) Account No. 450528 was opened in the name of John Long
in Miami on June 11, 1984, and closed in 1985. Mr. Long was not
a Chilean military officer, and his relationship to Mr.
Pinochet, reasons for opening the account, and current status
are unknown. The account was opened with a $287,381.80 check
drawn on Riggs Miami Account No. 350413 opened for Mr.
Ballerino and Mr. Castro. Funds were used to purchase a CD.
More than $1.7 million passed through this account.
(4) Account No. 450874 was opened in the name of Guillermo
Garin Aguirre in Miami on January 21, 1985, and closed on
January 4, 1988. At the time the account was open, Mr. Garin
was the Army Chief Vice-Commander, the second most senior
command position in the Chilean Army. The account was opened
with a $15,000 check drawn on the Riggs Miami account opened
for John Long. Funds were used to purchase a CD. The maximum
amount of funds in this account at one time was about $547,000.
(5) Account No. 451385 was opened in the name of Gustavo
Collao Mira in Miami on January 4, 1988, and closed on April
10, 1989. At the time the account was open, Mr. Collao was a
Chilean Army colonel. In 2004, Chilean press reports described
him as one of Mr. Pinochet's legal counsel. The account was
opened with $43,715 transferred from the Riggs Miami account
opened for Guillermo Garin Aguirre. Funds were used to purchase
a CD. The maximum amount of funds in this account at one time
was about $200,000.
(6) Account No. 451666 was opened in the name of Jose
Miguel Latorre Pinochet in Miami on April 10, 1989, and closed
on April 3, 1992. At the time of the account, Mr. Latorre was a
Chilean Army lieutenant colonel. The account was opened with
$47,000 transferred from the Riggs Miami account opened for
Gustavo Collao Mira. Two weeks later, on April 29, 1989,
another $116,868.73 was transferred from the Collao account.
Funds were used to purchase two CDs. The maximum amount of
funds in this account at one time was about $330,000.
(7) Account No. 709345 was opened in the name of Gabriel
Vergara Cifuentes in Miami on December 13, 1991, and closed on
May 25, 1995. At the time the account was open, Mr. Vergara was
Director of the Chilean Army. The account was opened with
$55,000 transferred from the Riggs Miami account opened for
Jose Miguel Latorre Pinochet. Funds were used to purchase a CD.
The maximum amount of funds in this account at one time was
about $385,000.
(8) Account No. 710467 was opened in the name of Juan
Ricardo Mac-Lean Vergara in Miami on December 27, 1994, and
closed on February 14, 1997. At the time the account was open,
Mr. Mac-Lean was Director of the Chilean Army Purchasing
Office. The account was opened with a $45,000 check drawn on
the Riggs Miami account opened for Gabriel Vergara Cifuentes.
No funds were used to purchase a CD. The maximum amount of
funds in this account at one time was about $678,000.
(9) Account No. 711762 was opened in the name of Eugenio
F. Castillo Cadiz, in trust for Juan Mac-Lean, in Miami on
February 14, 1997, and closed on April 29, 2004. At the time
the account was open, Mr. Castillo was Director of the Chilean
Army Purchasing Office, having replaced Mr. Mac-Lean. The
account was opened with $41,667.70 transferred from the Riggs
Miami account opened for Juan Ricardo Mac-Lean Vergara. No
funds were used to purchase a CD. The maximum amount of funds
in this account at one time was about $42,000.
These third party accounts were all opened in Miami by
Riggs International Banking Corporation (RIBC) and collectively
extended over more than 23 years, from 1981 until April 2004.
All but one was controlled by a Chilean military official
stationed in Santiago. The former head of RIBC, who held this
position from 1981 to 1990, told the Subcommittee that it was
his understanding that the military officer account was first
established to enable the Chilean government to contract with
U.S. businesses to help build a new Presidential residence in
Chile. He explained that each account holder was a military
officer assigned to work with the Chilean President's staff. He
thought that each account holder held the post for 2 to 3 years
in Chile, was replaced, and Riggs then closed the existing
account and transferred the balance to a new account opened for
the replacement officer. According to the Riggs Security &
Investigations Group, the Miami relationship manager who
established the first few military officer accounts was the
same employee who opened the first Pinochet accounts in Miami.
That relationship manager referred to the military officer
accounts as the ``Casa Militar'' or Military House accounts.
Bank records indicate that these military officer accounts
were used at times as conduits for Pinochet funds, and that
several Riggs officials in Miami were aware of this use. For
example, a 1996 trip report written by a Riggs relationship
manager in Miami described Mr. Mac-Lean, a military officer
account holder, as ``one of several front-men of General
Pinochet.'' \31\ A call report from February 1997, written by
the same relationship manager, stated: ``As per my supervisor's
comment, Mr. Juan Mac Lean is actually a front to General
Pinochet (who holds an account at Riggs). Therefore, I am
accepting Mr. Mac Lean's introduction of Mr. Eugenio Castillo
Cadiz as the continuation of the indirect relationship to
General Pinochet.'' \32\ The head of RIBC wrote in a separate
call report from 1996, that Mr. Mac-Lean ``discreetly said he
represents a third party,'' meaning Augusto Pinochet.\33\ Riggs
told the Subcommittee that Peter Fowler, head of RIBC from 1994
to 2000, was aware of the military officer accounts.
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\31\ Riggs document, ``Extract From Trip Report,'' undated, Bates
RNB033416, describing a Riggs business trip to Chile from 8/24/96 to 9/
1/96.
\32\ Riggs document, ``Call Report,'' (2/14/97), Bates RNB032959.
\33\ Riggs document, ``RIBC-Miami Call Report,'' undated, Bates
RNB033402.
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Based on the records made available to the Subcommittee, at
least $1.774 million was transferred from the military officer
accounts into accounts controlled by Mr. Pinochet, his
immediate family members, or his assistant. In addition, about
$650,000 was deposited into the military officer accounts from
accounts controlled by Mr. Pinochet or his family. Account
records indicate that the largest individual transfers of funds
took place from 1992 through 1996.
Two accounts provide examples of the transactions involving
Mr. Pinochet. The first is Account No. 709345, opened for
Gabril Vergara Cifuentes from December 1991 to May 1995. The
maximum amount of funds in the account at any one time was
about $385,000, but more flowed through the account over the
nearly 4-year period it was open. In total, about $617,000 was
transferred from this account to accounts controlled by Mr.
Pinochet, his family, or his assistant. Examples of
transactions involving Mr. Pinochet include the following.
--On June 24, 1992, the military officer account accepted
a $280,000 wire transfer from an unspecified Citibank account,
believed to be one of the 63 Pinochet-related accounts.
--On August 31, 1992, the military officer account issued
two checks, for $175,420 and $82,325, which were deposited into
Espirito Santo Bank Account No. 115391494 opened for A.P.
Ugarte and M. Lucia Hiriart.
--On November 13, 1992, the military officer account
accepted a $185,000 wire transfer from an unspecified Citibank
account, believed to be one of the 63 Pinochet-related
accounts.
--On November 25, 1992, the military officer account
issued a $142,000 check which was deposited into Espirito Santo
Bank Account No. 115391494 opened for A.P. Ugarte and M. Lucia
Hiriart.
--On March 17, 1993, the military officer account issued a
$43,000 check which was deposited into Espirito Santo Bank
Account No. 115391494 opened for A.P. Ugarte and M. Lucia
Hiriart.
--In September 1993, the military officer account issued
three checks, for $20,000, $5,000 and $5,000, which were made
payable to Mr. Pinochet's assistant, Monica Ananias Kuncar, and
cashed or deposited.
--On December 7, 1993, the military officer account issued
a $2,000 check, which was made payable to Ines Lucia Hiriart,
Mr. Pinochet's daughter, and cashed or deposited.
--On July 25, 1994, the military officer account accepted
a $147,000 wire transfer from a Banco Atlantico account in
Zurich, Switzerland.\34\
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\34\ The originator of this wire transfer is not disclosed on the
wire transfer documentation, but the Zurich account is believed to be a
Pinochet account. See, e.g., account statement for Account No. 70934-5,
7/31/94, Bates RNB034929; Riggs money transfer document, 7/25/94, Bates
RNB034928. See later section of this Report discussing the Pinochet
accounts at Banco Atlantico.
--On August 30, 1994, the military officer account issued
an $82,000 check which was deposited into Espirito Santo Bank
Account No. 115391494 opened for A.P. Ugarte and M. Lucia
---------------------------------------------------------------------------
Hiriart.
--On September 19, 1994, the military officer account
issued a $65,000 check which was deposited into Banco de Chile
Account No. 50006257104 in Chile for Jose Ugarte.
The second illustrative account is Account No. 710467,
opened for Juan Ricardo Mac-Lean Vergara from December 1994
until February 1997. The maximum amount of funds in the account
at any one time was about $678,000, but more flowed through it
over the more than 2-year period it was open. In total, about
$840,000 was transferred from this account to accounts
controlled by Mr. Pinochet, his family, or his assistant.
Examples of transactions involving Mr. Pinochet include the
following.
--On March 2, 1995, the military officer account cleared a
$117,000 check which was made payable to J. Ugarte and
deposited into Banco de Chile Account No. 50006257104 in Chile.
--On March 10, 1995, the military officer account cleared
an $87,000 check which was made payable to J. Ugarte and
deposited into Banco de Chile Account No. 50006257104 in Chile.
--On September 25, 1995, the military officer account
accepted a $417,000 wire transfer from a Banco Atlantico
Gibraltar account. The originator of the transfer is identified
as ``Mario P. Hiriart.''
--On February 22, 1996, the military officer account
accepted a $225,985 wire transfer from a Banco Atlantico
Gibraltar account. The originator of the transfer is identified
as ``Marco P. Hiriart.''
--On March 1, 1996, the military officer account cleared a
$287,000 check which was made payable to Mr. Pinochet's
assistant, Monica Ananias Kuncar, and deposited into Banco de
Chile Account No. 60069158 in Chile. The same day, four Banco
de Chile cashiers checks totaling $287,000 were deposited into
Riggs Account No. 76750393 in Washington D.C. for Augusto
Pinochet Ugarte and Lucia Hiriart Rodriguez.
--On March 1, 1996, the military officer account cleared a
$36,000 check which was made payable to Monica Ananias Kuncar
and deposited into Banco de Chile Account No. 50006257104 in
Chile.
--On March 28, 1996, the military officer account cleared
two checks, for $107,000 and $200,536, which were made payable
to ``M. Hiriart'' and deposited into Riggs Account No. 76750393
in Washington D.C. opened for Augusto Pinochet Ugarte and Lucia
Hiriart Rodriguez.
--On April 2, 1996, the military officer account cleared a
$6,227 check which was made payable to Monica Ananias Kuncar
and deposited into Banco de Chile.
These and other transactions show that, at times, the military
officer accounts served as conduits for Pinochet funds.
The account opened for John Long, who has not otherwise
been identified by Riggs Bank, raises similar issues. This
account was open for about a year. It was initially funded on
June 11, 1984, with a $287,381.80 check from the military
officer account opened for Jorge Ballerino Sanford and Ramon
Castro Ivanovich, Account No. 350413. One month later, on July
2, 1984, the Ballerino-Castro account transferred another
$840,194.29 into the Long account for a total of more than $1.1
million. The Long account used the $1.1 million to purchase a
CD, subsequently renewed on at least four occasions. In January
1985, the Long account sent $15,000 to the military officer
account that had just been opened for Guillermo Garin; $30,000
to a Bank of America account opened for the wife of Mr.
Pinochet's son, Augusto P. Hiriart; and another $30,000 to a
Security Pacific Bank account opened for a Pinochet
administration official, Patricio Madariaga. Account statements
after January 1985 have not been located, including records
related to a $400,000 transaction in December 1984, and
disposition of the $650,000 remaining in the account at the end
of January 1985. Records related to the $1.1 million CD have
also not been located, and the disposition of these funds is
currently unknown.
Most of the newly-disclosed accounts at Riggs, including
the eight military officer accounts, the John Long account, two
of the Daniel Lopez accounts, and two accounts opened for
``Jose'' Pinochet, were opened in Miami by Riggs International
Banking Corporation (RIBC). As an Edge Act Corporation, RIBC
was regulated by the Federal Reserve Bank of Atlanta (``FRB'').
FRB examination reports going back to 2000 do not mention AML
concerns at RIBC, except in passing. In June 2003, however,
after Riggs Bank began attracting negative press attention, the
FRB initiated a targeted examination of RIBC which identified
major AML deficiencies, including poor due diligence
documentation, inadequate monitoring of accounts, and
inadequate procedures to identify and report suspicious
activity. A follow-up FRB examination in April 2004, found
ongoing serious AML deficiencies and criticized RIBC for its
failure to take corrective action on the problems identified a
year earlier. In May, Riggs National Corporation announced
plans to close RIBC which ceased operations in late 2004.
Neither of the FRB examinations identified any of the Pinochet-
related accounts discussed in this Report, even though each of
the accounts was linked to Chile and many experienced multiple,
large transactions. These Pinochet-related accounts were
instead uncovered by the Riggs Security & Investigations Group.
B. Role of Riggs Senior Officials
Documents recently located by the Riggs Security &
Investigations Group demonstrate that Riggs senior officials
were well aware of the Pinochet relationship, and played a more
significant role in maintaining the relationship than was made
known to the Subcommittee prior to its 2004 hearing. For
example, in interviews held prior to the hearing, Riggs
personnel agreed that senior Riggs officials visited Chile, met
with Mr. Pinochet, and explicitly asked Mr. Pinochet to open a
Riggs account in 1994. They disagreed, however, as to exactly
which Riggs officials went on the 1994 trip, who made the
actual account solicitation, who went on other trips to Chile,
and the extent to which the bank's most senior officials
cultivated the Pinochet relationship.\35\ Newly provided
documents indicate that Riggs senior officials, in fact, met
with Mr. Pinochet in Chile on at least five separate occasions,
participated with him in social as well as business events,
corresponded with him from Washington, and presented him with
gifts on behalf of Riggs Bank.
---------------------------------------------------------------------------
\35\ See, e.g., 2004 Minority Staff Report at 15, reprinted in the
2004 Hearing Record at 142.
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Riggs documents show that the efforts of senior Riggs
officials on behalf of Mr. Pinochet were part of a wider bank
strategy to develop and strengthen the bank's relationship with
the Chilean Armed Forces during the 1990s. Riggs documents show
that the bank had longstanding relationships with the Chilean
Navy, Air Force, Astilleros y Maestranzas de la Armada (the
Navy Shipyard), the Direccion Aeronautica Civil (the civil
aviation directorate), and the Military Mission to the United
States, as well as the Chilean Embassy. While many of the
military accounts left Riggs in 1979, Riggs was able to
reestablish a number of those accounts in 1994. By 2002, Riggs
maintained deposits for the Chilean military and embassy
totaling about $100 million.\36\
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\36\ See Riggs memorandum, ``International Business Development
Activities, Mr. Joe Allbritton, 1992-2002,'' Bates RNB035083-120 at
110.
---------------------------------------------------------------------------
Internal Riggs documents show that senior Riggs officials
met with Chilean military and government officials on a regular
basis, including during trips taken by Riggs officials to Chile
in 1994, 1996, 1997, 1999, 2000, and 2002.\37\ In addition, one
trip report was discovered showing a trip by Riggs senior
officials to Chile as early as 1986. At least five of these
trips included meetings between senior Riggs officials and Mr.
Pinochet. Recently provided documents containing information
about these meetings offer additional evidence related to the
relationship between the bank and Mr. Pinochet.
---------------------------------------------------------------------------
\37\ See e.g., Riggs memorandum, ``International Business
Development Activities, Mr. Joe Allbritton, 1992-2002,'' Bates
RNB035083-120; Riggs memorandum, ``Timothy C. Coughlin, Paul Cushman
III and Maria Carol Thompson Business trip to Chile and Argentina
(October 23 through October 28, 1994),'' (``Itinerary'') Bates
RNB035420-59.
1986 Delegation. In August and September 1986, Riggs
International Banking Division officials traveled to Ecuador
and Chile for a series of high level business meetings. Riggs
Chairman Joseph Allbritton joined the Riggs delegation for at
least a week, including during its stay in Santiago, Chile,
from August 19 until August 24.\38\ While in Santiago, the
Riggs delegation met with government and industry leaders,
including Mr. Pinochet who was then President of Chile and
Commander-in-Chief of the Army.\39\ The meeting with Mr.
Pinochet took place at ``la Moneda,'' Chile's Presidential
Palace.
---------------------------------------------------------------------------
\38\ Riggs memorandum, ``Report of Travel Expenses,'' Bates
RNB040513-21 at 17. The documents are unclear as to whether Mr.
Allbritton remained with the delegation after August 24, 1986.
\39\ Riggs memorandum, ``RE: Business Meetings During Trip to Chile
& Ecuador,'' 9/25/86, Bates RNB040520. While in Santiago, the Riggs
delegation also met with Chile's Minister of Finance; the President and
Managing Director of the Central Bank; the U.S. Ambassador; a prominent
Chilean lawyer; a Citicorp manager; representatives of a Chilean
brewery, Compania Cervecerias Unidas; and the Chief Executive Officer
of a prominent weapons manufacturer, Industrias Cardoen.
1994 Delegation. The President of Riggs, Timothy C.
Coughlin, led a Riggs delegation to Chile and Argentina from
October 23 through October 28, 1994. He was accompanied by Paul
Cushman III, then head of the bank's International Banking
Group, and Carol Thompson, then Senior Vice President of Latin
America in the bank's Embassy Banking Division. Their itinerary
included visits with government, military, and banking
officials. On October 25, the Riggs delegation met with Mr.
Pinochet at the Chilean Armed Forces Building in Santiago.\40\
The purpose of the visit was detailed in a November 3, 1994
Riggs memorandum written by Ms. Thompson and recently produced
to the Subcommittee. That memorandum states:
---------------------------------------------------------------------------
\40\ Riggs Memorandum, ``Itinerary,'' Bates RNB035420.
``LOn October 25, 1994, Timothy Coughlin, Paul Cushman and
I called on General Pinochet in order to express our gratitude
for returning the official Chilean Military's accounts from
Bank of Nova Scotia to Riggs. During the late 1970's the
Chilean Military Mission in Washington moved their official
deposits to Canada. This was directly related to the
assassination of Chilean Ambassador Letelier in 1976. In July
1994, the official accounts were brought back to Riggs. . . .
We also offered our personal banking services to General
Pinochet and stated that we would also be pleased to make our
---------------------------------------------------------------------------
services available to officers of the Chilean Military.
L As a follow up, we will send him documentation in order
to open a personal account.'' \41\
---------------------------------------------------------------------------
\41\ Id. at Bates RNB035426. At the time Ms. Thompson wrote this
memorandum, Mr. Pinochet had two accounts in Miami opened under the
Daniel Lopez alias. Neither Ms. Thompson nor other Riggs personnel in
Washington appeared to be aware of these accounts at the time.
The November 3, 1994 memorandum confirms the direct
solicitation of Mr. Pinochet's personal account by Riggs senior
officers.
The next day, on November 4, 1994, the bank President, Mr.
Coughlin, wrote to Mr. Pinochet expressing appreciation for his
interest in the bank and its relationship with the Chilean
Military Mission. Mr. Coughlin repeated the bank's offer to
open a personal account for Mr. Pinochet: ``It would be an
honor for us to open an account for you and to assist you with
any banking services you may require outside of Chile.'' Mr.
Coughlin noted that Ms. Thompson would be sending the relevant
account opening materials.\42\ Mr. Coughlin concluded by
writing: ``I also want you to know that I have prominently
displayed the very handsome medallion you presented me in my
office at Riggs, and I will be pleased to show it to you if you
ever decide to visit Washington D.C. and of course Riggs
Bank.'' \43\
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\42\ Letter from Timothy C. Coughlin to Augusto Pinochet Ugarte,
11/4/94, Bates RNB035443.
\43\ Id.
1996 Delegation. In November 1995, General Ricardo
Izurieta, at the time a military attache stationed in
Washington and subsequently Commander-in-Chief of the Chilean
Army, relayed an invitation from Mr. Pinochet to the Chairman
of Riggs Bank, Joseph Allbritton, to attend the Derby in Vina
del Mar, the most prestigious horse race in Chile.\44\ Mr.
Allbritton accepted the invitation, attended the Derby in
February 1996, and was ``received by General Augusto Pinochet
Ugarte at the Chilean Army Calvary School in Quillota for a
special calvary review followed by a ceremony and luncheon.''
\45\
---------------------------------------------------------------------------
\44\ Riggs memorandum, 11/1/95, Bates RNB035784.
\45\ Riggs memorandum, 3/1/96, Bates RNB035745-47.
---------------------------------------------------------------------------
On February 14, 1996, Mr. Allbritton sent the following
letter to Mr. Pinochet.
``LDear General Pinochet:
I would like to express my profound thanks to you for
according me and my associates such a magnificent reception at
the Calvary School in Quillota on my visit to Chile. As a horse
enthusiast, your fine young calvary officers, their horses and
the superb performance they put on was excellent. It was indeed
a personal pleasure to spend the day with you in Quillota and
to have an opportunity to personally convey our appreciation
for the longstanding relationship between the Chilean Armed
Forces and the Riggs Bank. We attach great importance to our
relationship with you and the Chilean Military and look forward
to expanding our cooperation in the future.
Chile is clearly a very impressive country with an
excellent future thanks to you and the policies and reforms you
instituted. As I expressed to you, I will be only too pleased
to be of assistance to you and your country in anyway I can in
Washington, D.C.
I would like to thank you for the superb cufflinks you
presented to me and please know that you would be most welcome
to visit my wife Barby and me at our house in Middleburg,
Virginia where we raise our thoroughbred race horses.
Sincerely,
[Joe]'' \46\
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\46\ Letter from Joe L. Allbritton to Captain General Augusto
Pinochet Ugarte, 2/14/96, Bates RNB035769.
The following day, Mr. Allbritton sent a letter to General
Izurieta, the Chilean military attache in Washington, thanking
him for arranging the visit. The letter stated that Mr.
Allbritton would brief him about the meetings in Chile, and
that Mr. Pinochet now had a ``standing invitation to visit our
Lazy Lane Farm in Virginia, should he decide to visit the
United States.'' \47\
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\47\ Letter from Joe L. Allbritton to Brigadier General Ricardo
Izurieta, 2/15/96, Bates RNB035775.
1997 Delegation. Documents show that, in the spring of
1997, prior to a visit to Chile, Riggs made a $5,000 donation
to the Augusto Pinochet Ugarte Foundation (hereinafter
``Pinochet Foundation''). A general request for a donation to
this Foundation had been made by General Izurieta, according to
a memorandum dated March 3, 1997, from Ms. Thompson to her
superior, Raymond Lund, then head of the International Banking
Division.\48\ The following day Mr. Lund wrote to Riggs
Chairman recommending a donation in the amount of $5,000.\49\
Both the Chairman and the President of Riggs apparently
approved of the donation. On April 22, 1997, the Pinochet
Foundation President wrote to Mr. Allbritton thanking him for
the donation.\50\
---------------------------------------------------------------------------
\48\ ``General Ricardo Izurieta has asked if Riggs Bank would be so
gracious as to contribute to this worthy cause.'' Riggs Memorandum, 3/
3/97, Bates RNB035735-41 at 37. According to a brochure provided to the
bank, the stated objective of the foundation was to cooperate in the
development of the free society and cultural heritage of Chile. See
brochure for Pinochet Foundation, Bates RNB035735-41 at 39.
\49\ Note from Ray Lund to Joe Allbritton, 3/4/97, Bates RNB035735-
41 at 35.
\50\ Letter from Hernan Briones Gorostiaga to Joe Allbritton, 4/22/
97, Bates RNB035742-44 at 43.
---------------------------------------------------------------------------
On October 27, 1997, a delegation of senior Riggs
officials, including Mr. Allbritton, Mr. Coughlin, and senior
officials from the bank's international private banking and
embassy banking divisions traveled to Chile.\51\ Two weeks
prior to the trip, Ms. Thompson prepared an overview of Riggs
relationship with Chile for Mr. Allbritton. The overview
included a survey of the Chilean agencies then doing business
with Riggs and notes that as of the time of the trip, the Chile
relationship represented more than $65 million in deposits and
$600,000 in annual profit for the bank.\52\
---------------------------------------------------------------------------
\51\ Itinerary, ``Chairman's Trip, South America 1997,'' Bates
RNB035552-57.
\52\ See, e.g., Riggs memorandum, ``Chile Country Overview,'' 10/
14/97, Bates RNB035674-75 at 74.
---------------------------------------------------------------------------
On the morning of October 29, 1997, the Riggs delegation
met with Mr. Pinochet at the Armed Forces building in Santiago.
According to a Riggs call report, ``the purpose of this visit
was to personally greet the Commander-in-Chief and to thank him
for the longstanding and profitable relationship that the
Chilean Army maintains with Riggs Bank.'' \53\ That afternoon,
Mr. Pinochet and his son Marco hosted a tea in honor of Mr. and
Mrs. Joseph Allbritton at the Lo Curo Military Club in
Santiago.\54\ At some point during the visit, the Riggs
delegation presented Mr. Pinochet with a Confederate Bond and
two computer games.\55\
---------------------------------------------------------------------------
\53\ Riggs Call Report, ``Chilean Army Mission,'' 11/6/97, Bates
RNB035567.
\54\ Id.
\55\ See, e.g., Riggs document, ``Gift List, October 1997, South
America,'' Bates RNB035616. The Confederate Bond was apparently a
historic document originally issued by the Confederate Congress in an
attempt to raise money for the Southern forces during the American
Civil war. Riggs had a description of the bond translated into Spanish
for the benefit of Mr. Pinochet. Bates RNB035656-59.
---------------------------------------------------------------------------
Upon returning to Washington, several Riggs senior
officials sent letters to Mr. Pinochet disclosing a deepening
relationship between him and the bank. On November 14, 1997,
for example, the bank Chairman wrote:
``Dear General Pinochet:
Just having returned from South America, Barby and I
wanted to express our sincere appreciation for the warm
reception accorded to us during our recent visit to Santiago.
Please be assured that you and you Government have a strong
advocate in the Riggs Bank and I earnestly share your views
concerning enhanced trade and economic ties between our two
countries.
I am pleased to report the business relationship between
Riggs and the Chilean Military is prospering. I am also
grateful for our thriving personal friendship, which you have
demonstrated through your gracious hospitality and stalwart
support of The Riggs.
As I mentioned to you in our discussions, the long-term
prospects for Chile's adherence to democratic, free market
principles are strong, which is the direct result of your
leadership. You have rid Chile from the threat of totalitarian
government and an archaic economic system based on state-owned
property and centralized planning. We in the United States and
the rest of the Western hemisphere owe you a tremendous debt of
gratitude and I am confident your legacy will have been to
provide a more prosperous and safer world for your children and
grandchildren.
I thank you for the marvelous gifts extended to both Barby
and myself, including the history books, which I have found
fascinating. I ask that you convey our best wishes to Marco
Antonio and the rest of your family. I look forward to
continuing our discussion and would be most pleased to
reciprocate your gracious hospitality the next time you are in
the United States.
Warmest personal regards . . .'' \56\
---------------------------------------------------------------------------
\56\ Unsigned letter from Joe L. Allbritton to Captain General
Augusto Pinochet Ugarte, 11/14/97, Bates RNB037440. Although the letter
is unsigned, Riggs has informed the Subcommittee that the bank has no
reason to believe that the letter was not sent.
On October 31, 1997, the Chairman's wife, Barbara
Allbritton, then a longstanding member of the Riggs board of
---------------------------------------------------------------------------
directors, wrote the following to Mr. Pinochet:
``My dear General Pinochet:
It was a great pleasure and honor to be with you on
Wednesday at tea at the Military Club. You were so very
gracious to allow us this time with you and I was extremely
pleased to have this appointment to meet and be with your son
Marco Antonio.
The elegant lapis lazuli box you so kindly gave to me
shall be used and displayed with a great deal of pride and
pleasure. It shall be a reminder of this special time we spent
with you during our trip to Santiago.
I do hope that you will come to visit us when your
schedule allows. I shall look forward to receiving Mrs.
Pinochet and having the pleasure of knowing her.
I am so appreciative of the book you sent to me that your
daughter Lucia did on your life. After reviewing it I feel I
know you and your family, and now I am excited about the
possibility of meeting more of your family and having our
friendship develop more.
With appreciation and respect for you and all you have
done for our world.
Sincerely. . . .'' \57\
---------------------------------------------------------------------------
\57\ Unsigned letter from a file containing Mrs. Allbritton's
papers, 10/31/97, Bates RNB037212. Riggs Bank has informed the
Subcommittee that the bank has no reason to believe that this letter
was not sent.
On November 10, 1997, the bank President wrote to Mr.
Pinochet a letter expressing appreciation for the hospitality
---------------------------------------------------------------------------
shown during the trip.
``Dear General Pinochet:
Your gracious reception of the delegation from Riggs Bank
during my Chairman's recent visit to Chile is much appreciated.
. . .
Riggs is privileged to serve Chile's banking requirements,
and we will do everything within our power to promote economic
trade and military alliance between our two countries. . . .
The opportunity for all of us including our wives to meet
with you and your son, Marco Antonio, was a particular
pleasure. . . .
Of the books that you have given me, I am just finishing
my reading of `The Crucial Day.' The factual objectivity with
which you tell the story of Chile in the early 1970s is both
fascinating and instructive. History provides for fair and
proper judgement only when the true facts are know[n]. . . .
Sincerely,
[Timothy C. Coughlin]
Timothy C. Coughlin
President'' \58\
---------------------------------------------------------------------------
\58\ Letter from Timothy C. Coughlin to Captain General Augusto
Pinochet Ugarte, 11/10/97, Bates RNB035590.
On November 25, 1997, the bank President sent Mr. Pinochet
a note via the Chilean Military Mission in Washington to
---------------------------------------------------------------------------
commemorate his birthday.
``Dear General Pinochet:
On the occasion of your birthday today, all of your
friends and supporters at Riggs Bank send you our appreciation
and congratulations for all you have done for Chile. Please
accept our best wishes for every success in your continuing
service to Chile in 1998 and many happy returns to the date of
your birth in the years to come.
Sincerely,
[Tim]
Timothy C. Coughlin
President'' \59\
---------------------------------------------------------------------------
\59\ Letter from Timothy C. Coughlin to Captain General Augusto
Pinochet Ugarte, 11/25/97, Bates RNB035602.
1998 Delegation. On March 10, 1998, Mr. Pinochet stepped
down as Commander-in-Chief of the Chilean Army, and the
following day was sworn in as ``Senator for life'' in
Chile.\60\ Mr. Coughlin and Ms. Thompson traveled to Chile less
than 2 weeks later to meet with senior Chilean military
officials, including General Izurieta, the newly promoted
Commander-in-Chief. On March 24, 1998, Mr. Coughlin and Ms.
Thompson attended a luncheon with Mr. Pinochet.\61\ After
returning to Washington, the bank President wrote to Mr.
Pinochet, thanking him for the reception and a gift of Chilean
Army cuff links, ``which my Chairman and I are proud to wear.''
\62\
---------------------------------------------------------------------------
\60\ ``Chile's Pinochet Steps Aside; Symbol of Repression
Relinquishes Command of Army,'' The Washington Post, 3/11/98.
\61\ Riggs itinerary, ``Timothy C. Coughlin, Maria Carol Thompson,
Business Trip to Chile,'' 3/24/98, Bates RNB035124-28 at 26.
\62\ Letter from Timothy C. Coughlin to Captain General Augusto
Pinochet Ugarte, 4/23/98, Bates RNB037225.
---------------------------------------------------------------------------
Later in 1998, as described in the 2004 Minority Staff
Report released by the Subcommittee, \63\ a Spanish magistrate
issued two international arrest warrants for Mr. Pinochet for
murder, torture, hostage-taking, and genocide.\64\ On October
17, 1998, pursuant to those warrants, Mr. Pinochet was arrested
at a London hospital where he was recuperating from back
surgery. On October 19, the Spanish magistrate issued an
attachment order against all bank accounts held directly or
indirectly by Mr. Pinochet, his family members, or third
parties in any country.\65\ On November 5, Spain's highest
criminal court affirmed jurisdiction over Mr. Pinochet, and on
December 10, ratified the attachment order against Pinochet
bank accounts.\66\ In the United Kingdom, on November 25, 1998,
the British Law Lords denied Mr. Pinochet's claim of diplomatic
immunity, and then set aside that determination on December
17.\67\
---------------------------------------------------------------------------
\63\ See 2004 Hearing Record at 145.
\64\ See copies of the two international arrest warrants at
www.derechos.org/nizkor/chile/juicio/dili.html (as of 3/4/05); and
www.derechos.org/nizkor/chile/juicio/recurso6.html (as of 3/4/05).
\65\ See attachment order, Auto del Juzgado Central de Instruccion
No. 5 (10/19/98), reprinted in 2004 Hearing Record at 1044.
\66\ For a copy of the court decisions, see www.derechos.org/
nizkor/chile/juicio/audi.html (as of 3/4/05); and www.derechos.net/doc/
pino/proceso.html (as of 3/4/05). The attachment order does not,
however, seem to have been domesticated in the United States.
\67\ Regina v. Bartle, 37 I.L.M. 1302 (U.K. House of Lords, 11/25/
98); In re Pinochet, 237 N.R. 201 (U.K. House of Lords, 12/17/98).
---------------------------------------------------------------------------
The arrest of Mr. Pinochet in London was widely carried by
the international, Chilean, and United States news media and
was followed by violent demonstrations in Chile.\68\ The
subsequent legal and diplomatic disputes kept the story in
telecasts and newspapers for months.\69\
---------------------------------------------------------------------------
\68\ See, e.g., ``Angry Mob Besieges British Embassy Over Arrest of
Pinochet,'' Evening Standard, 10/19/98.
\69\ A Lexis/Nexis search for news stories containing the word
``Pinochet'' and the word ``trial'' in the same sentence, limited to
the dates between Mr. Pinochet's arrest in London, 10/17/98, and the
date Mr. Allbritton arrived in Chile, 3/13/99, returns 2,822 results.
1999 Delegation. For the first 3 months of 1999, Mr.
Pinochet remained under house arrest in London. On March 13,
1999, a Riggs delegation, including bank Chairman Joseph
Allbritton, traveled to Chile for 3 days of meetings with
senior Chilean military officials.\70\ On March 24, 1999, the
British Law Lords authorized an extradition hearing to
determine whether Mr. Pinochet should be transferred to
Spain.\71\ Two days later, on March 26, Riggs allowed Mr.
Pinochet to terminate a =1 million CD held in the name of his
offshore corporation, Althorp, at the Riggs branch in London,
and transfer the funds, totaling about $1.6 million in U.S.
dollars, to a new CD in the United States. Riggs did not file
any suspicious activity reports that would have alerted
British, Spanish, or U.S. law enforcement to the existence of
the Pinochet funds.\72\
---------------------------------------------------------------------------
\70\ Riggs memorandum, ``Chairman's trip to Latin America, March
1999, Gift Ideas,'' Bates RNB036159.
\71\ Regina v. Bartle, 37 I.L.M. 1302 (U.K. House of Lords, 3/24/
99) at 582.
\72\ See 2004 Hearing Record at 149.
2000 Delegation. On March 2, 2000, the United Kingdom
determined that Mr. Pinochet was unfit to stand trial and
should not be extradited to Spain.\73\ Mr. Pinochet was
released and immediately flew to Chile, arriving on March
3.\74\ A Riggs delegation, which included bank Chairman Joseph
Allbritton, was then visiting Chile on a trip that had begun on
February 25 and ended March 4, 2000, and included multiple
meetings with senior Chilean military and banking officials.
Internal Riggs memoranda addressing this trip do not mention
Mr. Pinochet. A letter dated March 21, 2000, from Mr.
Allbritton to General Izurieta, however, makes clear that Mr.
Allbritton had been aware of Mr. Pinochet's detention in the
United Kingdom and return to Chile. The letter states: ``Where
do I begin to thank you? You graced our suite with the sweet
smell of beautiful flowers and Chilean wine. You gave us your
time on the very eve of the General's return.'' \75\
---------------------------------------------------------------------------
\73\ ``Pinochet Set Free,'' BBC News, 3/2/00.
\74\ According to Riggs' internal investigation, at some point
during Mr. Pinochet's detention, an official with the Chilean Air Force
Mission in London telephoned the head of Riggs' London operations and
asked if the Riggs corporate jet was capable of flying non-stop from
London to Chile and might be made available for General Pinochet's use
upon his release. It is unclear how Riggs responded, but the Riggs jet
was not used to return Mr. Pinochet to Chile.
\75\ Unsigned letter from Joe Allbritton to Lieutenant General
Ricardo Izurieta, 3/21/00, Bates RNB 036517. Riggs has informed the
Subcommittee that the bank has no reason to believe that this letter
was not sent.
---------------------------------------------------------------------------
Legal proceedings against Mr. Pinochet did not abate after
his return to Chile. By March of 2000, ``nearly 60 human rights
cases had been filed in Chile against Pinochet and were under
active investigation.'' \76\ On August 8, 2000, the Chilean
Supreme Court upheld an appeals court ruling that stripped Mr.
Pinochet of his parliamentary immunity in the ``Caravan of
Death'' trial.\77\
---------------------------------------------------------------------------
\76\ See United States v. Riggs Bank N.A., Case No. Cr. 05-35(RMU)
(D. D.C., filed 2005), Plea Agreement and Statement of Offense (1/27/
05).
\77\ http://www.derechos.org/nizkor/chile/juicio/desafuero2.html
(as of 2/3/05).
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A document recently provided by the Riggs Security &
Investigations Group shows that Riggs had been following these
legal proceedings closely. The day after the ruling, on August
9, 2000, Michael Cantacuzene of the Riggs Advisory Services
Group issued a memorandum regarding a ``Prominent International
Private Banking Client.'' The client is plainly Mr. Pinochet,
although the memorandum never names him. The memorandum makes a
series of strategic recommendations regarding the bank's
relationship with Mr. Pinochet in light of his loss of immunity
from prosecution. It states: ``Recent developments in Chile
require Riggs to develop alternative strategies for working
with our prominent client.'' It predicts that Mr. Pinochet will
``increasingly call on his assets outside of Chile,'' and
points out that ``any draft requires the bank to complete payee
information and to arrange delivery. These two requirements are
fraught with potential, but surmountable, challenges. (e.g.,
KYC, BSA and customs).'' \78\
---------------------------------------------------------------------------
\78\ Riggs memorandum to File, by Michael Cantacuzene, 8/9/00,
Bates RNB035297-98 at 97.
---------------------------------------------------------------------------
The memorandum recommends informing Riggs senior
management, public relations officials, and legal counsel of
the potential for Riggs to receive subpoenas, legal and
regulatory requests, and press inquiries, and developing an
approval process for responding to them.\79\ The memorandum
also states:
---------------------------------------------------------------------------
\79\ Id. at 98.
``Reports indicate that very senior Riggs executives might
be considering a trip to Chile and Latin America. A trip by
senior Riggs executives to Chile and Latin America at this time
poses significant risks to Riggs and our client. Riggs
extensive relationships and contact with senior Chilean
Military officials and departments is well known. The arrival
of a senior Riggs executive delegation is a noteworthy event
certain to be noticed. (The media and our client's opponents
are not unaware of the potential for a Riggs relationship with
the client.) The Chilean military (including some Riggs
clients) is actively supporting our client regardless of the
civilian government's strict instructions.'' \80\
---------------------------------------------------------------------------
\80\ Id.
The memorandum accordingly recommends against senior Riggs
officials visiting Chile for 4 to 5 months, suggesting instead
that Mr. Pinochet's personal banker meet with him
``discreetly'' within 30 days.
The report released by the Subcommittee in 2004, details
how Riggs was able to ``surmount'' the ``KYC, BSA and customs''
``challenges'' warned about in the Cantacuzene memorandum. Just
9 days after the memorandum was prepared, Riggs issued eight
cashiers checks, each in the amount of $50,000 and each made
payable to Augusto Pinochet, and flew a Riggs banker to Chile
to personally deliver them to Mr. Pinochet. It was the first of
four deliveries of Riggs cashiers checks to Mr. Pinochet, as
described in the Subcommittee's earlier Minority Staff Report.
These deliveries took place between August 18, 2000 and April
8, 2002, and provided Mr. Pinochet with $1.9 million from his
Riggs accounts.\81\ When asked why the bank had not simply wire
transferred the funds to Chile, which would have been faster,
less expensive, and more secure than physically transporting
the checks, Riggs personnel did not provide a satisfactory
explanation.\82\ According to a Chilean appeals court finding,
the checks ``were cashed at Banco de Chile and Bank Boston by a
third party, despite the fact that they were nominative. Then
various amounts of the cash in dollars were changed to cash in
Chilean pesos on the informal market so that said transaction
would not be reported to the Central Bank.'' \83\
---------------------------------------------------------------------------
\81\ The cashiers checks were cashed in Chile, over time, between
September 2000 and July 2003.
\82\ See 2004 Hearing Record at 152.
\83\ Case No. 1649-2004, Court of Appeals of Santiago, 12/10/04, at
7, with translation provided by CRS.
2002 Delegation. In March 2002, a Riggs delegation, led by
bank Chairman Joseph Allbritton, returned to Chile for a series
of meetings with senior military, government, and financial
officials. As part of that trip, the Chilean Air Force hosted
Mr. Allbritton on a tour of the Antarctic. A Riggs memorandum
prepared for Mr. Allbritton for this trip observed that, when
the Chilean accounts were viewed together, ``average balances
exceed $100 million.'' \84\ The internal Riggs documents do not
mention Mr. Pinochet.
---------------------------------------------------------------------------
\84\ Riggs memorandum, ``International Business Development
Activities, Mr. Joe Allbritton, 1992-2002,'' Bates RNB035083-120 at
110.
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V. PINOCHET RELATIONSHIPS AT OTHER FINANCIAL INSTITUTIONS OPERATING IN
THE UNITED STATES
Information obtained by the Subcommittee indicates that
Riggs Bank was not alone in helping Augusto Pinochet gain
access to the U.S. financial system and, in some cases, conceal
or move funds while he was subject to a 1998 Spanish court
order directing financial institutions to freeze his assets.
Working with Riggs documents that detail Pinochet transactions
involving other financial institutions, the Subcommittee has
been able to identify nearly 100 U.S. financial accounts and
CDs, in addition to the 28 Riggs accounts, that were opened for
Mr. Pinochet, members of his immediate family, offshore
entities controlled by Mr. Pinochet or his immediate family, or
third parties who allowed their accounts to serve as conduits
for Pinochet funds. The evidence shows that the earliest of
these accounts was opened in 1981, and a few are still open in
2005.
The evidence associated with these accounts establishes
that, over the past 25 years, due to inadequate due diligence,
and, at times, the facilitation of unusual transactions, U.S.
financial institutions enabled Augusto Pinochet to establish an
extensive network of U.S. bank and securities accounts,
involving millions of dollars, which he used to move funds and
transact business. In addition to Riggs Bank, the largest
Pinochet relationships identified by the Subcommittee in the
United States were at Citigroup, Banco de Chile-United States,
and Espirito Santo Bank in Florida. Additional Pinochet-related
transactions or accounts were handled by Banco Atlantico which
is now part of Banco de Sabadell; Bank of America; Coutts & Co.
(USA) International which is now part of Banco Santander; Ocean
Bank; and PineBank N.A. Evidence exists of still additional
U.S. accounts related to Mr. Pinochet, but limited Subcommittee
resources prevent an exhaustive analysis of all the U.S.
accounts that have been used to assist Mr. Pinochet.
A. Citigroup
Citigroup is one of the largest financial institutions in
the United States, managing assets in excess of $520 billion
and reporting net income in 2004 of about $17 billion.\85\
Citigroup is a publicly traded corporation which, through
numerous branches and affiliates, offers a wide range of
financial services to its clients, including retail banking,
private banking, brokerage, and investment services. It
maintains branches and affiliates in more than 100 countries.
---------------------------------------------------------------------------
\85\ Information about Citigroup is taken from its website, public
filings, subpoenaed documents, interviews with bank representatives,
and information supplied by other financial institutions. The relevant
documents are maintained in Subcommittee files.
---------------------------------------------------------------------------
The Subcommittee investigation has determined that
Citigroup had a substantial, years-long relationship with
Augusto Pinochet and his family, which began in at least
1981.\86\ In response to Subcommittee requests, Citigroup has
identified 63 U.S. accounts and certificates of deposit (CDs)
that were opened for Mr. Pinochet and his family in New York
and Miami at various points in time from 1981 to 2004.
---------------------------------------------------------------------------
\86\ Some Citigroup employees recall that Mr. Pinochet may have had
a Citibank account as early as the 1960s, but no bank records have been
retained for such old accounts.
---------------------------------------------------------------------------
Of these 63 accounts and CDs, 15 were opened for Mr.
Pinochet personally over a 15-year period, from 1981 to 1996.
Another 19 were opened in the name of other Pinochet family
members, such as Mr. Pinochet's son, Marco Antonio Pinochet
Hiriart; Mr. Pinochet's daughter, Ines Lucia Pinochet Hiriart,
and her husband Hernan Ubaldo Garcia Barzelatto; and Mr.
Pinochet's daughter, Maria Veronica Pinochet. In addition,
Marco and Ines Lucia Pinochet opened 29 accounts and CDs in the
name of offshore entities that Citigroup had established or
arranged at their request, including Meritor Investments, Trust
MT-4964N, and Redwing Holdings.
Over the years, Citigroup has provided individual Pinochet
family members with many types of financial assistance, from
arranging international wire transfers, to establishing
offshore entities, to offering investment advice. Citigroup
also issued credit cards to several family members and provided
several with substantial loans. These loans included a 1993
loan of $2 million to Mr. Pinochet and his son; a 1993 loan of
$195,000 to Redwing Holdings; a 1994 loan of $385,000 to Marco
Pinochet; and 1996 loan of $500,000 to Meritor Investments.
These loans were apparently repaid in full.
Moreover, since at least 1988, Citigroup has provided some
Pinochet family members with financial accounts, CDs, and lines
of credit in other countries, including Argentina, the Bahamas,
Chile, Switzerland and the United Kingdom. Citigroup has
informed the Subcommittee that each of its non-U.S.
relationships with the Pinochet family has now ended, some
within the last 6 months. The services provided and the total
amount of funds involved in these non-U.S. relationships remain
unclear and are outside the scope of this Report.
Overall, Citigroup's relationship with the Pinochet family
in the United States extended over at least 24 years. The first
set of accounts to be closed were the Augusto Pinochet personal
accounts, the last of which closed in 1996, in part due to
requests made by the client and in part due to a Citigroup
initiative, as explained below. In 2000, at the request of
Citigroup, Ines Lucia Pinochet began to close her accounts, the
last of which actually closed in January 2001. In 2000,
Citigroup asked Marco Pinochet to close his accounts, but his
personal accounts did not actually close until 2 years later in
2003, and the final Meritor Investments account closed in 2004.
Several accounts opened for Mr. Pinochet's other daughter,
Maria Veronica Pinochet, also closed in 2004. One family member
account is still in the process of closing.
Citigroup has fully cooperated with Subcommittee inquiries
about these accounts, and produced all requested documentation
and related information in the United States. Citing bank
secrecy laws, however, Citigroup produced very limited
information about accounts and transactions involving its
foreign affiliates in Argentina, the Bahamas, Chile,
Switzerland and the United Kingdom. Information about some
transactions involving these foreign affiliates have been
reconstructed from records produced by other financial
institutions.
The 63 U.S. accounts and CDs provided by Citigroup to the
Pinochet family, from 1981 to 2004, can be summarized as
follows.
Personal Accounts. The 15 Citigroup accounts opened for Mr.
Pinochet in the United States from 1981 to 1996, are the
following. Six of these accounts were in New York, and nine
were in Miami. Each account was opened under a disguised
variant of Augusto Pinochet's name, with ``J. Ramon'' accounts
in New York and ``Jose'' accounts in Miami.
(1) Account No. 10801792 was opened in the name of J.
Ramon Ugarte in New York in on November 15, 1981, and closed on
November 22, 1995. In April 1984, the account was changed to
add Marco P. Hiriart.
(2) Account No. 12032544 was opened in the name of Jose
Pinochet and Lucia P. Hiriart in Miami on February 25, 1985,
and closed around July 1992. In May 1989, the name Jose
Pinochet was changed to Jose P. Ugarte.
(3) Account No. CF11077601 was opened in the name of J.
Ramon Ugarte and Marco P. Hiriart in New York on an unknown
date and closed by no later than September 1994.
(4) Account No. CF11077602 was opened in the name of J.
Ramon Ugarte and Marco P. Hiriart in New York on an unknown
date and closed by no later than September 1994.
(5) Account No. 34000259, a CD, was opened in the name of
J. Ramon Ugarte and Marco P. Hiriart in New York on a date
prior to March 25, 1985, and closed on September 23, 1996.
(6) Account No. 38803825 was opened in the name of Jose
Pinochet in Miami on August 4, 1986, and closed on a date prior
to June 4, 1993. In May 1989, the name Jose Pinochet was
changed to Jose P. Ugarte.
(7) Account No. 37010063, a CD, was opened in the name of
Jose P. Ugarte in Miami on September 13, 1989, and closed on
May 11, 1992.
(8) Account No. 37011621, a CD, was opened in the name of
Jose P. Ugarte in Miami on May 13, 1991, and closed on June 21,
1991.
(9) Account No. 39316662, a CD, was opened in the name of
Jose P. Ugarte in Miami on December 20, 1991, and closed on May
11, 1992.
(10) Account No. 32110270, a CD, was opened in the name of
Jose P. Ugarte in Miami on June 3, 1992 and closed on June 23,
1992.
(11) Account No. 32110294, a CD, was opened in the name of
Jose P. Ugarte in Miami on June 23, 1992 and closed on July 16,
1992.
(12) Account No. 38810821 was opened in the name of Jose
P. Ugarte in Miami on an unknown date and closed on a date
prior to June 4, 1993.
(13) Account No. 38811297 was opened in the name of Jose
P. Ugarte in Miami on an unknown date and closed on a date
prior to June 4, 1993.
(14) Account No. 39293300 was opened in the name of J.
Ramon Ugarte and Marco P. Hiriart in New York on November 17,
1993, and closed on October 7, 1994.
(15) Account No. 40008200 was opened in the name of J.
Ramon Ugarte and Marco P. Hiriart in New York on July 29, 1994,
and closed on December 5, 1995.
Pinochet Family Accounts. The 19 Citigroup accounts opened
in New York and Miami in the name of Mr. Pinochet's immediate
family members are the following.
(1) Account No. 10040217 was opened in the name of Mr.
Pinochet's son, Marco P. Hiriart, in New York on June 7, 1985.
In October 1989, the account name changed to Marco P. Hiriart
in trust for J. Ramon Ugarte. In May 1999, the account name
changed again, to Marco P. Hiriart in trust for his wife Maria
Soledad Olave Gutierrez. The account closed on October 27,
2003.
(2) Account No. CF15597701 was opened in the name of Marco
P. Hiriart in New York on October 2, 1986, and closed by
September 1994.
(3) Account No. CF11077603 was opened in the name of Marco
P. Hiriart in New York on August 11, 1987, and closed by
September 1994.
(4) Account No. 39195900, a custody account, was opened in
the name of Marco P. Hiriart on February 18, 1993. At some
point, the account name changed to Marco P. Hiriart in trust
for J. Ramon Ugarte. The account closed on March 12, 1996.
(5) Account No. 930018138001, a letter of credit, was
opened in the name of Marco P. Hiriart in trust for Maria
Soledad Olave Gutierrez on October 27, 1995, and closed on
October 28, 1996.
(6) Account No. 38517601 was opened in the name of Marco
P. Hiriart in trust for Maria Soledad Olave Gutierrez in Miami
on January 13, 1997, and closed on April 29, 1999.
(7) Account No. 38020732 was opened in the name of Marco
P. Hiriart in trust for Maria Soledad Olave Gutierrez in New
York on February 6, 2001, and closed on May 15, 2003.
(8) Account No. 12015488 was opened in the name of Mr.
Pinochet's daughter, Lucia Pinochet Hiriart, in Miami on May
23, 1983, and closed on June 10, 1996.
(9) Account No. 38800186 was opened in the name of Lucia
Pinochet Hiriart in Miami on May 24, 1983, and closed on
November 6, 1995.
(10) Account No. 3100519634 was opened in the name of Mr.
Pinochet's daughter, Maria Veronica Pinochet, in trust for her
children Francisca Lucia and Daniela Veronica Ponce, in
September 1994, and closed on September 29, 2004.
(11) Account No. 6057055 was opened in the name of Maria
Veronica Pinochet on November 7, 1995, and closed on April 26,
1996.
(12) Account No. 2600157858, a CD, was opened in the name
of Maria Veronica Pinochet prior to July 1997, and closed in
September 1999.
(13) Account No. 2600453426, a CD, was opened in the name
of Maria Veronica Pinochet prior to July 1997, and closed in
July 1999.
(14) Account No. 2605256372, a CD, was opened in the name
of Maria Veronica Pinochet in trust for Francisca and Daniela
Ponce in April 2000, and closed in October 2003.
(15) Account No. 3107620283 was opened in the name of
Maria Veronica Ponce in trust for Daniela Veronica Ponce and
Francesca Lucia Ponce in October 2002, and closed on September
29, 2004.
(16) Account No. 5978 was opened in the name of Mr.
Pinochet's son-in-law, Hernan Garcia B., whose full name is
Hernan Ubaldo Garcia Barzelatto, on June 16, 1988, and closed
on December 14, 1999.
(17) Account No. 77165321 was opened in the name of Mr.
Pinochet's daughter-in-law, Maria Soledad Olave Gutierrez, on
April 3, 2001, and closed on September 27, 2004.
(18) Account No. 54214877, an investment account, was
opened in the name of Marco Pinochet's wife, Maria Soledad
Olave Gutierrez, on April 9, 2001, and closed in September 24,
2004.
(19) A brokerage account, opened for a family member in
October 2002, was frozen by the bank in 2004, and is awaiting
closure.
Third Party Accounts. The 29 Citigroup accounts or CDs
opened in the name of offshore corporations or trusts
associated with Marco and Ines Lucia Pinochet are the
following. They include five opened in the name of Meritor
Investments; seven opened in the name of Trust MT-4964N; and 17
opened in the name of Redwing Holdings.
(1) Account No. 10328149 was opened in the name of Meritor
Investments Ltd. in New York on July 20, 1994, and closed on
April 6, 2004.
(2) Account No. 394116, a custody account, was opened in
the name of Meritor Investments Ltd. in New York on July 21,
1994, and closed on October 28, 2003.
(3) Account No. 25F01376, an investment account, was
opened in the name of Meritor Investments Ltd. in New York on
August 24, 2001, and closed on July 9, 2004.
(4) Account No. 403435, a brokerage account, was opened in
the name of Meritor Investments Ltd. in New York on September
30, 1994, and closed on March 4, 2004.
(5) Account No. CF98307701 was opened in the name of
Meritor Investments Ltd. in New York on an unknown date and
closed by September 1994.
(6) Account No. 39315502, a CD, was opened in the name of
Trust MT-4964N in Miami on May 20, 1991, and closed on February
22, 1993.
(7) Account No. CF97851201 was opened in the name of Trust
MT-4964N in New York on May 21, 1992, and closed by September
1994.
(8) Account No. CF97653601 was opened in the name of Trust
MT-4964N in New York on July 21, 1992, and closed by September
1994.
(9) Account No. 38811628 was opened in the name of Trust
MT-4964N in Miami on November 23, 1992, and closed on February
27, 1995.
(10) Account No. 35007623, a CD, was opened in the name of
Trust MT-4964N on February 22, 1993, and closed on August 27,
1993.
(11) Account No. 12102143 was opened in the name of Trust
MT-4964N in Miami on April 30, 1993, and closed on February 28,
1994.
(12) Account No. 38202470 was opened in the name of Trust
MT-4964 on January 26, 2000, and closed on April 3, 2000.
(13) Account No. 38810860 was opened in the name of
Redwing Holdings Inc. in Miami on October 30, 1991, and closed
on March 1, 1999.
(14) Account No. CF97713301 was opened in the name of
Redwing Holdings Inc. in New York on November 22, 1991, and
closed by September 1994.
(15) Account No. 12094294 was opened in the name of
Redwing Holdings Inc. in Miami on February 18, 1992, and closed
on August 29, 2000.
(16) Account No. 37012132, a CD, was opened in the name of
Redwing Holdings Inc. in Miami on May 26, 1992, and closed on
December 7, 1994.
(17) Account No. 5931310314, a letter of credit, was
opened in the name of Redwing Holdings Inc. on May 6, 1993, and
closed on an unknown date.
(18) Account No. 731105851 was opened in the name of
Redwing Holdings Inc. on August 9, 1993, and closed on
September 7, 1994.
(19) Account No. 39325000, a custody account, was opened
in the name of Redwing Holdings Inc. on December 28, 1993, and
closed on June 25, 1996.
(20) Account No. 40300400, an investment fund, was opened
in the name of Redwing Holdings Inc. on September 20, 1994, and
closed on November 29, 1999.
(21) Account No. 38813416 was opened in the name of
Redwing Holdings Inc. in Miami on June 4, 1996, and closed on
June 13, 1996.
(22) Account No. 35012702, a CD, was opened in the name of
Redwing Holdings Inc. on June 11, 1996, and closed on September
13, 1996.
(23) Account No. 38813509 was opened in the name of
Redwing Holdings Inc. in Miami on September 13, 1996, and
closed on March 11, 1997.
(24) Account No. 37021765, a CD, was opened in the name of
Redwing Holdings Inc. in Miami on September 13, 1996, and
closed on March 28, 1997.
(25) Account No. 38813689 was opened in the name of
Redwing Holdings Inc. in Miami on March 27, 1997, and closed on
April 17, 1997.
(26) Account No. 37025678, a CD, was opened in the name of
Redwing Holdings Inc. in Miami on January 7, 1999, and closed
on May 1, 2000.
(27) Account No. 32004246, a CD, was opened in the name of
Redwing Holdings Inc. in Miami on December 13, 1999, and closed
on April 12, 2000.
(28) Account No. 38814373 was opened in the name of
Redwing Holdings Inc. in Miami on April 7, 2000, and closed on
August 28, 2000.
(29) Account No. 38812080 in the name of Redwing Holdings
Inc. was opened and closed in Miami on unknown dates.
Account Secrecy. Citigroup took a number of steps that
helped to keep the existence of the Pinochet accounts secret.
For example, none of the 15 personal accounts opened for
Augusto Pinochet over a 14-year period ever carried his given
name, in either New York or Miami. Instead, the six New York
accounts used ``J. Ramon Ugarte'' or ``Jose Ramon Ugarte.'' The
nine Miami accounts used ``Jose Ugarte'' or ``Jose Pinochet
Ugarte,'' later shortened to ``Jose P. Ugarte.''
Some Pinochet family member names were also disguised. For
example, all six of the New York accounts opened for Augusto
Pinochet began or were converted to joint accounts with his
son, but none of them used the son's full name, instead
identifying him as ``Marco P. Hiriart.'' The one Citigroup
account opened for Mr. Pinochet and his wife styled his wife's
name as ``Lucia P. Hiriart.'' In contrast, Mr. Pinochet's two
daughters were named on their personal accounts as either
``Lucia Pinochet Hiriart'' or ``Maria Veronica Pinochet.''
Citigroup also opened 29 accounts and CDs in New York or
Miami in the name of offshore entities established or arranged
by Citigroup at the request of Marco or Ines Lucia Pinochet.
For example, Meritor Investments Ltd. is an offshore
corporation which was established in the Bahamas in 1994, by
Cititrust (Bahamas) td. (hereinafter ``Cititrust'') at the
request of Marco Pinochet. Citigroup documents indicate that
Meritor Investments Ltd. is owned by Trust FT-5994N, a numbered
trust which Cititrust had established in the Bahamas at the
same time and for which Cititrust acts as the Trustee.\87\
Citigroup documentation indicates that the sole beneficial
owner of both Trust FT-5994N and Meritor Investments Ltd. is
Marco Pinochet. Cititrust and its affiliates have administered
both the corporation and the trust since their inception.\88\
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\87\ Some account documentation seems to indicate that the numbered
trust was the true owner of the funds in the Meritor accounts and
loaned these funds to the corporation for its use. The purpose of such
an arrangement is unclear, but may have been a tax motivated device to
enable Meritor to claim it had no funds subject to taxation--only
loans. See, e.g., ``Meritor Investments Ltd. Unaudited Schedule of Loan
Payable to Trustee for the Period July 20, 1994 to June 30, 1995,''
undated, Bates C002273; untitled Citigroup document regarding ``Marxx
Hiriaxx--Meritxx,'' undated, Bates C001713 (``PACT is a fiduciary
product we used to sell to clients which is a structure in which a
Trust owns a PIC [Private Investment Company]. . . . [I]t allows
various tax benefits and administration benefits to the client. . .
.'').
\88\ Cititrust established still another offshore trust in the
Bahamas, Trust IT-5978N, to hold insurance assets for the benefit of
Marco Pinochet, but this trust apparently never acquired any assets.
---------------------------------------------------------------------------
Citigroup also arranged for an offshore trust and
corporation for Ines Lucia Pinochet. Trust MT-4964N is a
numbered trust in the Bahamas established by Cititrust in 1991.
Citigroup documentation indicates that Ms. Pinochet is this
trust's beneficial owner, and Cititrust and its affiliates have
managed the affairs of this trust since its inception.
Citigroup also arranged for Ines Lucia Pinochet to acquire
control of an offshore corporation known as Redwing Holdings
Inc., a bearer-share corporation in the British Virgin Islands
(BVI).\89\ According to Citigroup documentation, Ms. Pinochet
is the beneficial owner of this corporation, which has been
managed since her acquisition of it by Torman Ltd., rather than
Citigroup. Although Citigroup does not normally establish
bearer share corporations for its clients or open accounts for
offshore corporations managed by third parties, it made an
exception for Redwing Holdings and agreed to provide financial
services to this bearer share corporation beginning in 1991.
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\89\ A bearer share corporation is a corporation that is owned by
whomever has physical possession of the corporation's shares. Such
corporations are generally viewed as posing increased risks of money
laundering due to the difficulty of determining who has physical
possession of the shares. Cititrust apparently asked a BVI company
formation agent called Torman Ltd. to obtain a BVI corporation for its
client, because Citigroup does not itself have a BVI affiliate that
could perform the work. The incorporation papers indicate that Redwing
Holdings was actually formed in 1989. It is not clear whether this
corporation was active prior to its association with the Pinochet
family.
---------------------------------------------------------------------------
From 1998 until March 2000, Augusto Pinochet was the
subject of numerous civil and criminal proceedings in Spain,
the United Kingdom, and Chile, including issuance of a 1998
Spanish court order directing financial institutions to freeze
Mr. Pinochet's assets on a worldwide basis. These proceedings
and issuance of the freeze order were repeatedly described in
international, Chilean, and U.S. news media reports. Throughout
this period, Citigroup failed to alert any court or law
enforcement entity to the accounts it had held for Mr. Pinochet
personally until 1996, to the account held by Marco Pinochet in
trust for ``Ramon Ugarte'' until 1999, or to the accounts the
bank continued to manage for his children.
Due Diligence. Citigroup began its relationship with the
Pinochet family more than 20 years ago, at a time when anti-
money laundering (AML) aws were relatively new and a due
diligence culture requiring banks to ``know your customer'' had
not yet taken hold. Over time, U.S. banking regulations and
laws increased due diligence and AML requirements, particularly
for private banking accounts and accounts held by public
figures, their immediate family members, and close associates.
Most of the Pinochet accounts at Citigroup were handled by
Citibank Private Bank and treated as public figure accounts
requiring enhanced due diligence.
Over the past 10 years, despite having excellent anti-money
laundering policies and procedures on paper, Citibank Private
Bank has undergone repeated criticism for poor due diligence
practices, lax implementation of its AML controls, and failure
to close accounts for foreign public figures who appear to be
depositing the proceeds of foreign corruption into their
private banking accounts. For example, in 1996, as part of an
industry-wide review of anti-money laundering controls in the
private banking industry, the Federal Reserve Bank of New York
examined Citibank Private Bank and found so many AML
deficiencies that it conducted three major audits, from 1996 to
1998, to compel the bank to correct identified problems. In
1997, the Federal Reserve Bank and the OCC, Citigroup's primary
regulator, informed Citigroup's Board of Directors of the
Private Bank's AML problems and asked for corrective action. In
response, the Board initiated a ``fundamental review'' of the
bank and, in 1998, announced a new strategy to move Citibank
Private Bank away from providing clients with ``secrecy'' and
toward providing them with good investment returns.
In November 1999, this Subcommittee held a hearing and
issued a Minority Staff Report presenting extensive evidence of
Citibank Private Bank's ongoing poor due diligence and AML
practices, using four examples of private banking accounts held
by public figures with millions of dollars in questionable
funds, including nearly $90 million that had been deposited by
Raul Salinas, brother of the then President of Mexico.\90\
Citibank Private Bank committed to further reforms, especially
for public figure accounts. In 2001, after the 9-11 tragedy,
Congress enacted the Patriot Act which, among other provisions,
imposed a statutory requirement on U.S. financial institutions
to conduct enhanced due diligence of private banking accounts
for foreign public figures, their family members, and close
associates. In 2004, however, in an indication of ongoing AML
deficiencies within the Private Bank, the Financial Services
Agency of Japan determined that, due to poor AML practices and
other misconduct, Citibank Private Bank had engaged in improper
transactions and harmed customers, and ordered it to leave the
country. In response, Citigroup closed down its Japanese
private banking operations, apologized to Japan, and fired the
head of Citibank Private Bank.\91\
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\90\ See 1999 Subcommittee Private Banking Hearings and Minority
Staff Report.
\91\ See, e.g., ``Citi's Compliance Collapse,'' Securities Industry
News, 10/25/04; ``A Bad Week in Japan for the Giant American Bank,''
The Economist, 9/25/04.
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Citigroup's due diligence practices regarding the Pinochet
accounts, while they improved over time, were marked by
misinformation and substantial gaps. Citigroup's most
significant due diligence failures occurred with respect to the
accounts opened for Augusto Pinochet.
--Augusto Pinochet Accounts. Citigroup opened its first
account for Augusto Pinochet in New York in 1981, and its first
account for him in Miami in 1985. Citigroup has limited records
regarding the bank employees who opened and managed these
accounts for the first few years, but records show that, from
1987 until the accounts closed in 1996, the New York accounts
were handled by a single relationship manager in the New York
branch. The Miami accounts were handled by a different
relationship manager in the Miami branch from 1984 until the
accounts closed in 1993. Apparently, the two relationship
managers were not aware of their respective sets of Pinochet
accounts. In addition, according to Citigroup, for many years,
neither of these relationship managers realized that she was
handling accounts for Augusto Pinochet, then the President of
Chile; instead, each thought she was handling accounts for
Augusto Pinochet's brother.
Citigroup told the Subcommittee that, during the 9 years
she handled his accounts, the Miami relationship manager never
met her client, and was under the impression that ``Jose
Pinochet'' was the brother of Augusto Pinochet and the uncle of
Ines Lucia and Marco Pinochet. Citigroup told the Subcommittee
that the relationship manager dealt primarily with Ms. Pinochet
when handling the Miami accounts. Citigroup indicated that it
was not until 1992, that the Miami relationship manager learned
from Ms. Pinochet that ``Jose'' was, in fact, her father,
Augusto Pinochet. Citigroup indicated that upon learning this
information, the relationship manager promptly informed the
head of the Citigroup Florida branch who, in turn, decided that
his branch did not want to handle accounts for Augusto
Pinochet. Over the course of about a year, the Florida branch
closed all of its Augusto Pinochet accounts, with the last
three closing sometime before June 1993.
Citigroup told the Subcommittee that the Miami relationship
manager apparently did not communicate her discovery or the
decision to close the Miami accounts to her counterpart in New
York. Citigroup indicated that the Miami relationship manager
may not have been aware of the New York accounts, since, during
the early 1990s, relationship managers did not normally
disclose their clients to each other, Citigroup did not then
track all of the accounts associated with a particular client,
and the New York accounts carried a different name, ``J. Ramon
Ugarte,'' than the ``Jose P. Ugarte'' accounts in Miami.
Citigroup has indicated that the New York relationship
manager handled the Pinochet New York accounts for about 9
years, from about 1987 to 1996, without ever meeting her
client. Citigroup told the Subcommittee that, throughout this
period, the relationship manager thought that ``J. Ramon
Ugarte'' was the brother of Augusto Pinochet. Citigroup
indicated that the relationship manager learned the true
identity of her client for the first time when informed by the
bank earlier this year.
The New York branch gradually closed Mr. Pinochet's six New
York accounts over a 2-year period, from September 1994 to
September 1996, acting each time in response to a request by
Mr. Pinochet to close the relevant account. For 3 more years,
until 1999, Mr. Pinochet was the beneficiary of a New York
checking account opened in the name of ``Marco P. Hiriart in
trust for Ramon Ugarte.'' \92\
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\92\ In May 1999, Marco Pinochet changed the account title,
replacing ``Ramon Ugarte'' with his wife, ``Maria Soledad Olave
Gutierrez.''
---------------------------------------------------------------------------
During the years the Augusto Pinochet accounts were open in
New York and Miami, the account documentation does not contain
any substantive analysis of the source of his wealth or the
source of the funds in his accounts, despite hefty balances
that reached $3.1 million.\93\ The New York account opening
documentation in 1981 consists of a one-page application form
with minimal information, documents showing that ``Jose Ramon
Ugarte'' had accounts with two banks in Chile, and a copy of a
passport for ``Jose Ramon Ugarte,'' bearing the signature, ``J.
Ramon Ugarte.'' \94\ The Miami account opening documentation in
1985, contains even less information.\95\ It describes ``Jose
Pinochet Ugarte'' as a retiree or ``Empleado-Jubilado'' and
waives the requirement for two references. The form incorrectly
describes ``Lucia P. Hiriart'' as his ``niece.'' In April 1990,
a memorandum notes that the client changed the title on his
accounts from ``Jose Pinochet'' to ``Jose P. Ugarte,'' without
providing any explanation.\96\ In 1994, the New York branch
grants a ``Documentation Waiver Request'' for one of the
accounts, relieving the relationship manager of an obligation
to obtain written bank references for the client, since ``J.
Ramon Ugarte'' had been an ``excellent client since 1982.''
\97\
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\93\ See, e.g., memorandum dated 5/12/92, from Emilie O'Neil to
Saraminta Perez, Bates C000277 (``Please confirm . . . you have opened
cash reserve account with $974,791. . . . Also sweep $56,000 more on 5/
15.'').
\94\ See New York account opening documentation, Bates C003069-73;
C000057.
\95\ See Miami account opening documentation, Bates C004523;
C000271.
\96\ Memorandum dated 4/13/90, from Emilie Judd O'Neil to Maria
Cuneo, ``Jose Pinochet/Jose P. Ugarte,'' Bates C004531. Other documents
indicate that this name change actually took place in May 1989. See,
e.g., email dated 4/9/90, from Cristine Sikto to Zoila Doria,
``Pinochet/Ugarte'' Bates C004532.
\97\ Memorandum dated 2/15/94, to Josephine Piazza, Documentation
Control Unit, ``RE: Documentation Waiver Request,'' Bates C002215.
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In short, according to Citigroup, for the bulk of the 14
years Mr. Pinochet's accounts were open in New York and Miami,
the two relationship managers handling his accounts never met
their client and did not know his true identity. In addition,
neither ever evaluated the source of the funds in his accounts.
--Marco Pinochet Accounts. Citigroup's due diligence
analysis of Mr. Pinochet's son, consistently styled as ``Marco
P. Hiriart'' on Citigroup accounts, was also marked by
deficiencies. Marco was closely associated with many of the
accounts opened by his father at Citigroup. For example, all
six of Augusto Pinochet's New York accounts began or were
converted to a joint account with Marco. Marco also held two
New York accounts ``in trust for J. Ramon Ugarte,'' a checking
account opened for 14 years, from 1985 to May 1999, and a
custody account opened for 3 years, from February 1993 until
February 1996. Marco and Augusto took out a joint $2 million
loan from Citigroup in 1993. Marco also opened multiple
Citigroup accounts under his own name, with his wife, or in the
name of his offshore corporation, Meritor Investments.
Citigroup's account opening documentation for the first
account opened under Marco's own name, in June 1985, describes
him as a ``diplomat'' and identifies his ``business'' as the
``Embassy of Chile'' in Washington, D.C.\98\ Account opening
documentation for subsequent accounts during the 1980s and the
first half of the 1990s provide little or no additional
information about his employment or business interests. In
contrast, beginning in 1996 and extending to 2004, Citigroup
prepared increasingly detailed analyses of his business
interests in documentation associated with his personal
accounts and the accounts opened for Meritor Investments. These
analyses appear in a variety of documents over the years,
entitled as client profiles, know-your-customer forms, or
financial questionnaires. Some of these documents provide
estimates of his net worth, estimates which varied from $9.1
million in an undated document, to $15 million in a 1998 client
profile, to $5.3 million in a 2000 profile, which is the figure
generally used in the final 4 years his accounts are open at
Citigroup.\99\ The documents dated 1996 and later describe the
source of his funds as deriving from his ownership of several
Chilean businesses, including a real estate investment company,
a chain of clothing stores, a motorcycle and small boat import
business, and a business that provides aeronautical equipment
advisory services.\100\ The documents also cite earlier bank
loans that were used to generate investment returns and a
portfolio of marketable securities. Several of the account
documents mention confidentiality concerns. For example, a 1998
client profile states that Marco is ``very concerned about
confidentiality,'' while another states that he ``does not want
contact from Chilean Citibank employees.'' \101\
---------------------------------------------------------------------------
\98\ Citigroup document, ``Banking Account Application'' for Marco
P. Hiriart, 6/7/85, Bates C002111-14.
\99\ See, e.g., Citigroup ``Financial Questionnaire'' for Marco P.
Hiriart and his wife, undated, Bates C002396-98; Citigroup ``Client
File [110776 UGARTE 2] Client Profile Form,'' 10/23/98, Bates C001688-
99, at 1693; Citigroup untitled document, 2/11/00, Bates C002614.23-25.
\100\ See, e.g., Citigroup untitled document, 2/11/00, Bates
C002614.23-25 at 24.
\101\ Citigroup ``Client File [983077 MERITOR 1] Client Profile
Form,'' 10/23/98, Bates C001663-72 at 67; Citigroup ``Client File
[110776 UGARTE 2] Client Profile Form,'' 10/23/98, Bates C001688-99 at
95. See also Citigroup memorandum dated 1/26/93, from Maureen Ruggiero,
Marco Pinochet's private banker, to ``PMS/IIS/Banking Products
Documentation Unit,'' Bates C002416.
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In mid-2000, the account documentation indicates that
Citigroup made a decision to exit the relationship with Marco
Pinochet.\102\ This decision may have been part of a larger
bank review of public figure accounts within the Private Bank.
The decision was carried out very slowly over the following 3
years. The account documentation cites various reasons over
time for exiting the relationship, including that Marco was not
within the Private Bank's target market, his accounts did not
present sufficient business opportunities, and, in 2004, that
negative information had surfaced about his father. Marco's
last personal account closed in October 2003. Three accounts
held by Meritor Investments Ltd. and two held by his wife
closed in 2004.\103\
---------------------------------------------------------------------------
\102\ See, e.g., Citigroup ``KYC Individual Report,'' 4/16/01,
Bates C002614.58-62 at 58. (``We plan to terminate this relationship .
. .'').
\103\ Citigroup explained that it had delayed closing one or more
of the accounts, because Marco Pinochet had invested in a proprietary
Citigroup investment account that had lost money and was not
transferable to another bank. After waiting for a period for the fund
to recover, Citigroup closed his accounts.
--Ines Lucia and Maria Veronica Pinochet Accounts.
Beginning in 1983, Ines Lucia Pinochet opened multiple accounts
at Citigroup under her own name; the name of her offshore
corporation, Redwing Holdings; and the name of her offshore
numbered trust, Trust MT-4964N. From 1983 until 1993, she was
also the primary contact for Citibank Private Bank personnel in
Miami on matters involving her father's Miami accounts. Her
sister, Maria Veronica Pinochet, opened her first accounts at
Citigroup 10 years later, beginning in 1995, all under her own
name.
As with the Marco Pinochet accounts, the due diligence
analysis of the Ines Lucia Pinochet accounts is very limited at
first and becomes progressively more detailed. During the 1980s
and early 1990s, virtually no analysis of deposits or
transactions appears in the account documentation; beginning in
1998, increasingly detailed analyses are provided. The account
documents identify the main sources of her wealth as real
estate investments and marital assets. The documentation notes
that her accounts were generally in six figures, and that her
father had not played any apparent role in the banking
relationship. On occasion, Ines Lucia Pinochet also obtained
extensions of credit from Citigroup, which she repaid. In 1998,
Citigroup began negotiations to close her accounts, because her
assets were below the Private Bank's minimum. In late 1999 or
early 2000, the bank formed an exit strategy to end the
relationship. The last of her personal, trust, and Redwing
Holdings accounts closed in January 2001. Account documentation
for Maria Veronica Pinochet is very limited. Several of her
accounts closed in 2004.
For at least the first 13 years that the Marco and Ines
Pinochet accounts were open, from 1983 to 1996, the Citigroup
account documentation contains virtually no due diligence
information on the source of their wealth or the source of the
funds in their accounts, despite the deposit of millions of
dollars into the Marco accounts and hundreds of thousands of
dollars into the Ines accounts. Beginning in 1996, the bank's
due diligence analyses grow increasingly detailed, identifying
specific assets and businesses that support the level of funds
in the accounts. These later records do not attempt, however,
to go back in time to explain how Marco and Ines Lucia Pinochet
acquired their wealth prior to 1996.
Transactions of Interest. Bank records show that the 63
U.S. accounts and CDs opened by Citigroup for Mr. Pinochet and
his immediate family members were used in a variety of ways.
Some of the Pinochet accounts experienced numerous deposits and
withdrawals, and contained substantial sums, at times in the
millions of dollars. A number of the Pinochet accounts
transferred funds to or from other Pinochet accounts at
Citigroup, creating internal funding shifts which make it
difficult to track the flow of funds. For example, in 1992, one
Augusto Pinochet account contained more than $3 million; the
same $3 million later appears to have been shifted to a Meritor
account. At the same time, other Pinochet accounts saw
relatively little activity and contained relatively modest
amounts. In July 1995, based upon available records, it appears
there was a minimum of $3.6 million in the Pinochet-related
accounts in the United States open at that time.
While an exhaustive analysis is beyond the scope of this
Report, a few transactions illuminate how Mr. Pinochet used the
Citigroup accounts to move funds within the United States and
across international lines, transact business, and construct an
international web of secret accounts.
--In March 1990, Mr. Pinochet closed Riggs Bank Account
No. 450858, which had been opened in the name of Jose R.
Ugarte, and withdrew the remaining funds in the account,
totaling $96,378.22, using a Riggs cashiers check. On March 15,
1990, that cashiers check was deposited into Miami Citigroup
Account No. 12032544, which was then open in the name of Jose
P. Ugarte and Lucia P. Hiriart.
--On June 24, 1992, an unidentified Citigroup account,
believed to be one of the 63 Pinochet-related accounts, sent a
$280,000 wire transfer to a military officer account at Riggs,
Account No. 709345 in the name of Gabriel Vergara. A similar
transaction took place on November 13, 1992, with a wire
transfer for $185,000. In less than 6 months, then, these two
transfers had moved a total of $465,000 from Citigroup to the
Vergara account at Riggs.
--On April 25, 1996, Meritor Investments, the offshore
corporation controlled by Marco Pinochet, sent a $403,000 wire
transfer from Citigroup Account No. 10328149 in New York,
through a Bahamas clearing account, to Washington Riggs Account
No. 76750393 which was opened in the name of Augusto Pinochet
Ugarte and Lucia Hiriart Rodriguez. These funds later
contributed to a $1 million wire transfer to a Bahamas Riggs
account opened in the name of Ashburton Co. Ltd., an offshore
corporation controlled by Augusto Pinochet.
--On May 18, 2000, Citigroup closed accounts associated
with Ines Lucia Pinochet and provided her with a $390,000
Citibank cashiers check made payable to Redwing Holdings Inc.
On May 25, 2000, she deposited that check into her newly opened
Riggs Account No. 75256035 in London.
Regulatory Oversight. From 1996 through 1998, U.S. bank
regulators audited a number of aspects of Citibank Private
Bank, but apparently never examined any of the Pinochet
accounts, perhaps because the last Augusto Pinochet personal
account closed in 1996, and the Marco P. Hiriart account held
in trust for ``Ramon Ugarte'' did not carry his father's given
name.
As mentioned earlier, from October 1998 until March 2000,
Augusto Pinochet was the subject of multiple civil and criminal
proceedings and numerous international news media stories,
including the issuance of a 1998 Spanish court order seeking to
freeze his assets on a worldwide basis. Throughout this period,
Citigroup failed to alert its U.S. regulators, or any court or
law enforcement entity, to the accounts it had held for Mr.
Pinochet until 1996, to the account held by Marco Pinochet in
trust for ``Ramon Ugarte'' until 1999, or to the accounts the
bank continued to hold for his children.\104\
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\104\ On several occasions, the news media has reported that Marco
Pinochet denied allegations that his father had bank accounts outside
of Chile. See, e.g., ``Lagos asegura que Pinochet no esta sobre la ley
y pide informe a Congreso de EEUU,'' UPI Chile, 7/15/04; ``Rights-
Chile: Embattled Pinochet Scores Small Victory,'' IPS-Inter Press
Service/Global Information Network, 5/17/01 (``Marco Antonio Pinochet .
. . denied that his father held any accounts abroad.''). Marco Pinochet
apparently made these statements even though, for a 15-year period from
1984 to 1999, he shared eight joint accounts with his father at
Citigroup in New York.
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On June 26, 2002, the OCC contacted Citigroup and asked
whether Citibank Private Bank had any accounts for Mr. Pinochet
or his wife, including accounts opened under a list of
disguised variants of their names.\105\ On June 27, 2002, an
internal OCC email reports that the head of Citigroup's global
anti-money laundering group responded that an earlier global
search had not turned up any Pinochet accounts at the bank.
---------------------------------------------------------------------------
\105\ The OCC made this inquiry to Citigroup in connection with its
then ongoing review of the Pinochet accounts at Riggs Bank. Facsimile
dated 6/26/02, from OCC to Citibank, Bates C010408-09.
---------------------------------------------------------------------------
``Citibank indicates that:
1) After a search of its comprehensive data base, the
Private Banking unit did not identify any accounts relating to
any of the specified names.
2) On the possibility that an account may exist in
Citibank but outside of the Private Banking unit, [the head of
Citigroup's global anti-money laundering group] indicated that
a global search for Pinochet had been conducted when the
adverse publicity first arose = no accounts found. . . . He
stated Citibank would be happy to conduct additional follow-up
if [account numbers or other detailed information] was
available.'' \106\
---------------------------------------------------------------------------
\106\ Email dated 6/27/02, from an OCC examiner to multiple OCC
officials, ``RE: Request for Information on Pinochet,'' Bates
OCC0000045716-17 at 16.
Based upon this information, the OCC did not pursue the matter
further at Citigroup and did not learn of Citigroup's
relationship with the Pinochet family until 2004.
When asked about the 2002 OCC inquiry, Citigroup told the
Subcommittee that, although it had records showing it received
the inquiry, it had no record showing that the bank ever
conducted any search in response to the request or provided the
described information to the agency. The bank said that none of
the bank personnel named in the emails recalled either
conducting a search or responding to the OCC in this matter.
The bank noted that its alleged response was provided less than
24 hours after the request was first made, which would have
been highly unlikely and would not have permitted sufficient
time for an electronic search of the bank's records.
Citigroup also pointed out that, as of June 2002, Mr.
Pinochet and his wife's personal accounts had been closed for 6
years, and the bank was in the process of closing accounts for
other Pinochet family members. Citigroup indicated that, even
so, its normal practice would have been to inform its regulator
of the closed and related accounts. Citigroup could not explain
why this information was not conveyed to the OCC in 2002. It
was not until July 2004, 2 years later, that Citigroup first
alerted the OCC to its years-long relationship with the
Pinochet family.
B. Banco de Chile
Banco de Chile is one of the oldest and largest banks in
Chile.\107\ With total assets in 2004 of $15.8 billion, it
offers a wide range of financial services, including retail
banking, private banking, and investment services. It is a
publicly traded corporation, with headquarters in Santiago,
Chile, and more than 240 branch offices throughout the country.
Banco de Chile also operates in several other countries, but
apparently accepts deposits only in Chile and the United
States. A Chilean subsidiary of the bank, Banchile Corresdores
de Bolsa S.A. (``Banchile''), provides the bank's clients with
brokerage and investment services.
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\107\ Information about Banco de Chile is taken from its website,
public filings, subpoenaed documents, interviews with bank
representatives, and information supplied by other financial
institutions. The relevant documents are maintained in Subcommittee
files.
---------------------------------------------------------------------------
Banco de Chile-United States maintains two offices in the
United States, a branch office in New York first established in
1982, and an agency office in Miami, which was established in
1994 and upgraded to a branch office in early 2004. These U.S.
branches primarily provide international banking services for
the bank's Chilean clients. In addition, Banchile acts as an
introducing broker to help Banco de Chile clients open
brokerage accounts in the United States. For a number of years,
Banchile helped Banco de Chile clients open brokerage accounts
at Lehman Brothers, a U.S. licensed broker-dealer. In 2004,
Banchile began doing business with Pershing Securities, another
U.S. licensed broker-dealer and a subsidiary of The Bank of New
York. Banchile then moved the Banco de Chile client accounts
from Lehman Brothers to Pershing Securities.\108\
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\108\ Lehman Brothers and Pershing Securities acted as clearing
brokers for the brokerage accounts introduced by Banchile. According to
all parties involved, the contracts related to these accounts were
clear that Banchile and Banco de Chile-United States were responsible
for conducting all needed due diligence for clients wishing to open
U.S. brokerage accounts. Banchile and Banco de Chile-United States were
also responsible for initiating all buy and sell orders and monitoring
account activity. At Pershing Securities, clients were not allowed to
circumvent Banchile and the bank and go directly to the securities firm
to conduct transactions for their accounts. At Lehman Brothers, clients
could go directly to the securities firm to conduct transactions for
their accounts, but there is no evidence that Banchile clients relevant
to this Report did so. Lehman Brothers and Pershing Securities fully
cooperated with all Subcommittee inquiries and produced all requested
information.
---------------------------------------------------------------------------
Banco de Chile's relationship with the Pinochet family
began in 1973, when Mr. Pinochet opened his first account at
the bank's headquarters in Santiago, Chile. At the time,
providing banking services to the country's President was
considered a great honor, particularly since Mr. Pinochet had a
reputation for honest dealing. The number of Banco de Chile
accounts opened by Mr. Pinochet and his family in Chile, the
amount of funds, and the source of the funds in these accounts,
have not been disclosed to the Subcommittee due to Chilean bank
secrecy laws and are outside the scope of this Report. What is
known is that the bank continued its relationship with the
Pinochet family for 32 years, until questions arose about the
Pinochet funds at Riggs Bank. In response, Banco de Chile re-
evaluated the relationship and, in 2004, closed all Pinochet
accounts in Chile and the United States. The bank's decision to
close the Pinochet accounts was controversial and has attracted
both support and criticism in Chile.
The Subcommittee investigation has determined that Banco de
Chile-United States maintained a 9-year relationship with
Augusto Pinochet and his family, which began in 1995 and ended
in 2004. Banco de Chile-United States has identified 24 New
York and Miami accounts and CDs that were opened for Mr.
Pinochet, members of his immediate family, and ostensibly
unrelated third parties whose accounts served at times as
conduits for Pinochet funds. These third parties were primarily
offshore corporations controlled by a Chilean attorney, Oscar
Custodio Aitken Lavanchy, who allowed them to serve as conduits
for Pinochet funds. In addition, one account was opened in the
name of a Chilean nonprofit organization, the Fundacion
Presidente Pinochet Ugarte (hereinafter ``Pinochet
Foundation'').\109\
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\109\ In addition to the 24 accounts, the bank identified six U.S.
accounts opened for Mr. Pinochet's assistant, Monica Ananias Kuncar, or
members of her immediate family. At least one of these accounts
contains funds exceeding $250,000. Because the Subcommittee has not
subpoenaed account documentation to determine the extent to which this
and other Kuncar accounts may have served as conduits for Pinochet
funds, this Report does not address them further.
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In addition to opening these accounts, Banco de Chile-
United States has provided individual Pinochet family members
with various types of financial services, from arranging
international wire transfers, to opening investment accounts,
to providing a substantial loan to Mr. Pinochet. This 1997 loan
for $500,000 was repaid in full in 1999, as explained below.
In total, excluding loan proceeds, the U.S. accounts and
CDs benefiting Mr. Pinochet appear to have accumulated funds in
excess of $7 million. The vast bulk of these funds, about $6
million, was transferred into Banco de Chile-United States
accounts by Riggs Bank in 2002, after Riggs ended its
relationship with the Pinochet family. The remaining $1 million
was deposited into the U.S. accounts over several years,
primarily from Pinochet-related accounts in Chile at Banco de
Chile. The source of the funds in the Chilean accounts has not
been disclosed to the Subcommittee due to Chilean bank secrecy
laws.
Banco de Chile fully cooperated with all Subcommittee
inquiries and produced all requested documentation and
information in the United States, including documentation
related to an extensive internal review of the Pinochet-related
accounts conducted at the request of the bank by outside legal
counsel. Citing bank secrecy laws, however, Banco de Chile did
not produce any information about Pinochet-related accounts and
transactions in Chile. Information about accounts and
transactions involving its Chilean operations have been
reconstructed from Banco de Chile's U.S. wire transfer records
and records produced by other financial institutions.
The 24 U.S. accounts and CDs provided by Banco de Chile-
United States to the Pinochet family, from 1995 to 2004, can be
summarized as follows.
Personal Accounts. The three Banco de Chile-United States
accounts opened for Mr. Pinochet in the United States are the
following.
(1) Account No. 442506/321 was opened in the name of Maria
Lucia Hiriart Rodriguez and Augusto Jose Ramon Pinochet Ugarte
in New York on August 29, 1995, and closed on March 18, 1999.
(2) Account No. 401892/321 was opened in the name of Maria
L. Hiriart Rodriguez and Augusto Jose R. Pinochet Ugarte in
Miami on June 24, 1996, and closed on March 23, 1999.
(3) Account No. 401892/331/001/002/01 was opened in the
name of ``Pinochet Joint Miami TD,'' establishing a CD, in
Miami on May 29, 1998, and closed on November 9, 1998.
Pinochet Family Accounts. The five Banco de Chile accounts
opened in the United States for members of the immediate family
of Mr. Pinochet are the following. Several of these accounts
contained modest amounts, and it is unclear whether or the
extent to which each account may have been used as a conduit
for transactions benefiting Mr. Pinochet.
(1) Account No. 401323/321 was opened in the name of Mr.
Pinochet's daughter, Jacqueline Marie Pinochet Hiriart, in
Miami on September 27, 1995, and closed on December 14, 2000.
(2) Account No. 401323/301 was opened in the name of
Jacqueline Marie Pinochet Hiriart in Miami on December 14,
2000, and closed on January 14, 2002.
(3) Account No. 340/204013231 was opened in the name of
Jacqueline Marie Pinochet Hiriart in Miami on December 14,
2000, and closed in early 2005.
(4) Account No. 23000690 was opened in the name of Mr.
Pinochet's grandson, Alejandro Ponce Pinochet, in Miami on
January 2, 2003, and closed in early 2005.
(5) Account No. 21014466 was opened in the name of Mr.
Pinochet's granddaughter, Francisca Lucia Ponce Pinochet, in
Miami on August 30, 2004, and closed in early 2005.
Third Party Accounts. Between November 1997 and July 2003,
Banco de Chile-United States opened 11 U.S. accounts in the
name of third parties which served at times as conduits for
Pinochet funds. All but one of these accounts were opened in
the name of an offshore corporation controlled by Mr. Aitken.
These corporations are Abanda Finance Ltd., which was
incorporated in the British Virgin Islands (``BVI''); Belview
International Inc., another BVI corporation; Sociedad de
Inversiones Belview Int S.A., a Chilean corporation; Eastview
Finance S.A., a BVI corporation; G.L.P. Ltd., a BVI
corporation; and Tasker Investments Ltd., a BVI corporation.
The final account was opened for the Pinochet Foundation.
(1) Account No. 101136/345/001/002/01-04, for four CDs,
was opened in the name of Eastview Finance S.A. in Miami on
November 10, 1997, and closed on March 24, 1999.
(2) Account No. 101136/335/001/002/01-04 was opened in the
name of Eastview Finance S.A. in Miami on November 10, 1997,
and closed on August 9, 1999.
(3) Account No. 101136/335/001/003/01 was opened in the
name of Eastview Finance S.A. in Miami on July 10, 1998, and
closed on August 31, 1998.
(4) Account No. 310/105033261 (503326/325) was opened in
the name of Eastview Finance S.A. in New York on November 5,
1998, and closed on January 8, 2003.
(5) Account No. 503326/335/001/002/01 was opened in the
name of Eastview Finance S.A. in New York on January 7, 1999,
and closed on August 30, 2001.
(6) Account No. 310/105033831 (503383/324) was opened in
the name of the Pinochet Foundation in New York on January 8,
1999, and closed on December 14, 2004.
(7) Account No. 310/102114411 (211441/305) was opened in
the name of Abanda Finance Ltd. in New York on November 15,
1999, and closed on December 31, 2002.\110\
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\110\ Although the Abanda New York account was used on only one
day, November 15, 1999, and had a zero balance thereafter, it
apparently was not closed for several years.
(8) Account No. 310/011001328 was opened in the name of
Sociedad de Inversiones Belview Int S.A. in New York on July
---------------------------------------------------------------------------
17, 2002, and closed on November 8, 2002.
(9) Account No. 310/012002183 was opened in the name of
Belview International Inc. in New York on July 23, 2002, and
closed on September 20, 2004.
(10) Account No. 310/011004478 was opened in the name of
GLP Ltd. in New York on November 19, 2002, and closed on
September 16, 2004.
(11) Account No. 310/021005635 was opened in the name of
Tasker Investment Ltd. in Miami on July 26, 2003, and closed on
September 15, 2004.
Brokerage Accounts. In addition to opening bank accounts,
Banco de Chile, through its affiliate Banchile acting as the
introducing broker, helped Mr. Aitken open five brokerage
accounts at U.S. securities firms for his offshore corporations
Belview International Inc.; Eastview Finance S.A.; G.L.P. Ltd.;
and Tasker Investments Ltd.
(1) Account No. 743-13165-17-765 was opened in the name of
Belview International Inc. at Lehman Brothers in Miami on
August 29, 2002, and closed on November 26, 2002.
(2) Account No. 743-13374-14-765 was opened in the name of
GLP Ltd. at Lehman Brothers in Miami on November 21, 2002, and
closed on May 18, 2004.
(3) Account No. 0AJ 002418 was opened in the name of GLP
Ltd. at Pershing Securities in New York on February 24, 2004,
and closed on February 11, 2005.
(4) Account No. 743-15017 was opened in the name of Tasker
Investments Ltd. S.A. at Lehman Brothers in Miami on July 30,
2003, and closed on April 19, 2004.
(5) Account No. 0AJ 002392 was opened in the name of
Tasker Investments Ltd. S.A. at Pershing Securities in New York
on February 24, 2004, and closed on January 3, 2005.
Account Secrecy and Due Diligence. When opening U.S.
accounts for Mr. Pinochet and his family, Banco de Chile-United
States dealt openly with Mr. Pinochet, a former President and
respected figure in Chile. The bank clearly knew him and his
family members. The first three accounts the bank opened for
Mr. Pinochet in the United States bore his name in an open and
transparent manner. So did the five accounts opened for
Pinochet family members. In general, these eight accounts held
relatively modest amounts, that attracted little concern.
The same cannot be said about the 15 U.S. bank and
securities accounts that the bank opened or helped to open for
offshore corporations controlled by Mr. Aitken. Oscar Aitken
was known to Banco de Chile-United States as a Chilean attorney
with ties to Mr. Pinochet and a principal partner in the law
firm of Aguero, Aitken, Frias, and Henriquez. He was also a
longstanding client of the bank in Chile, having opened his
first account there in 1973.
Mr. Aitken opened his first personal account at Banco de
Chile-United States in 1990. Four years later, in 1994, he
opened his first U.S. account at Banco de Chile-United States
for an offshore corporation. Banco de Chile told the
Subcommittee that it did not help Mr. Aitken establish or
manage any of his offshore corporations. In fact, the bank
indicated that it does not have an offshore affiliate that
routinely establishes or manages offshore entities for its
clients, and only a limited number of its U.S. clients ever use
an offshore corporation as a named account holder. The bank
told the Subcommittee that its internal review discovered that
Mr. Aitken was associated with eight or nine such offshore
corporations and had many more than any other client at Banco
de Chile-United States.\111\
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\111\ Banco de Chile told the Subcommittee that, in 2004, it closed
all Chilean and U.S. accounts associated with Mr. Aitken.
---------------------------------------------------------------------------
The bank's internal review determined that both Mr.
Pinochet and Mr. Aitken were treated as important clients by
Banco de Chile-United States and by the head of the bank's New
York branch, the New York general manager, who often handled
matters for these clients. The New York general manager was a
longterm, well regarded employee of the bank, served as head of
the New York branch from 1987 to 2002, and in November 2002,
was promoted to country manager of U.S. operations. The bank's
internal review determined that he was well acquainted with Mr.
Aitken and knew of Mr. Aitken's ties to Mr. Pinochet whom the
New York general manager greatly respected. The bank's internal
review further determined that, in some cases, the New York
branch had known that bank accounts opened in the name of
Aitken corporations were being used to hold or transfer
Pinochet funds. The branch had also, at times, facilitated
transactions involving these accounts. The bank's internal
review found that, in several instances, the New York general
manager had failed to inform his superiors in Chile of
important matters related to these accounts, as explained
below. In 2004, the bank terminated his employment with the
bank.
From 1998 until March 2000, Augusto Pinochet was the
subject of numerous civil and criminal proceedings in Spain,
the United Kingdom, and Chile, including issuance of a 1998
Spanish court order directing financial institutions to freeze
Mr. Pinochet's assets on a worldwide basis. These proceedings
and issuance of the freeze order were repeatedly described in
international, Chilean, and United States news media reports.
Throughout this period, Banco de Chile-United States failed to
alert any court or law enforcement entity to the accounts it
had held for Mr. Pinochet personally, in the United States,
from 1995 until 1999.
Transactions of Interest. The Subcommittee investigation
has examined four sets of transactions involving Banco de
Chile, Pinochet funds, and the United States. The first
involves cashiers checks issued by Banco de Chile that moved
Pinochet funds from Chile to the United States; the second
involves Riggs cashiers checks that moved Pinochet funds from
the United States to Chile; the third involves funds transfers
that moved Pinochet funds from the military officer accounts at
Riggs Bank in the United States to Banco de Chile accounts in
Chile; and the fourth involves Pinochet-related transactions
that utilized the offshore corporate accounts opened by Mr.
Aitken at Banco de Chile-United States. These transactions
illustrate how Augusto Pinochet took advantage of various
banking services to move funds across international lines,
often leaving a minimal audit trail for investigators to
follow.
--Banco de Chile Cashiers Checks. The first category of
transactions involves Banco de Chile cashiers checks used to
move Pinochet funds from Chile to the United States. Bank
records show that, on at least 13 occasions from 1990 until
1997, cashiers checks issued by Banco de Chile were used to
transfer funds from Chile to Pinochet accounts at Riggs Bank in
the United States. Each of these cashiers checks was issued by
a branch of the bank in Chile, and drew upon the bank's U.S.
dollar account in New York to enable the check amount to be
paid out in U.S. dollars. According to the bank, in every case,
the funds for the cashiers checks were initially provided by
someone in Chile who purchased the cashiers check from the
Chilean branch. The bank told the Subcommittee that it could
not identify any of the persons who provided the underlying
funds for the cashiers checks due to Chilean bank secrecy laws.
The end result is that use of these cashiers checks has, in
effect, enabled the true originators of the funds to hide their
identities from the Subcommittee.
Over 7 years, the 13 Banco de Chile cashiers checks moved
about $1.3 million in Pinochet-related funds from Chile to the
United States. The transactions are as follows.
--On October 17, 1990, a $50,020 Banco de Chile cashiers
check was deposited into Miami Riggs Account No. 707547 opened
in the name of Augusto P. Ugarte and Lucia Hiriart.
--On October 17, 1990, a $29,739 Banco de Chile cashiers
check was deposited into a Miami Riggs account in the name of
J.R. Pinochet.
--On December 9, 1993, a $303,000 Banco de Chile cashiers
check made payable to Daniel Lopez in trust for Augusto J.
Pinochet was deposited into Miami Riggs Account No. 710053
opened in the name of Daniel Lopez in trust for Augusto J.
Pinochet.
--On January 14, 1994, a $15,000 Banco de Chile cashiers
check made payable to Daniel Lopez in trust for Augusto J.
Pinochet was deposited into Miami Riggs Account No. 710053
opened in the name of Daniel Lopez in trust for Augusto J.
Pinochet.
--On March 21, 1995, a $50,800 Banco de Chile cashiers
check was deposited into Washington Riggs Account No. 76750393
opened in the name of Augusto Pinochet Ugarte and Lucia Hiriart
Rodriguez (hereinafter ``Mr. Pinochet and his wife'').
--On February 21, 1996, two Banco de Chile cashiers checks
totaling $232,450 were deposited into Washington Riggs Account
No. 76750393 opened in the name of Mr. Pinochet and his wife.
--On March 1, 1996, four Banco de Chile cashiers checks
totaling $287,000, two made payable to ``J. Pinochet'' and two
made payable to ``M.L. Hiriart,'' were deposited into
Washington Riggs Account No. 76750393 opened in the name of Mr.
Pinochet and his wife.
--On May 20, 1997, a $193,000 Banco de Chile cashiers
check was deposited into Washington Riggs Account No. 76750393
opened in the name of Mr. Pinochet and his wife.
--On August 27, 1997, a $155,000 Banco de Chile cashiers
check was deposited into Washington Riggs Account No. 76750393
opened in the name of Mr. Pinochet and his wife.\112\
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\112\ The same system was also used on one occasion to move
Pinochet funds from Chile to London. This transaction took place on
September 29, 1997, when a Banco de Chile cashiers check for about
=122,000 (about $200,000) was deposited into London Riggs Account No.
74041013 (formerly numbered 25005393) opened in the name of Augusto
Pinochet Ugarte. See Bates RNB032282-83.
In addition, the Subcommittee identified two occasions on
which personal checks written on Banco de Chile accounts were
used to transfer funds to Pinochet accounts at Riggs. These
---------------------------------------------------------------------------
transactions are as follows.
--On March 16, 1998, a $243,000 Banco de Chile personal
check, made payable to M. Lucia Hiriart, was drawn on New York
Banco de Chile Account No. 442506 and deposited into Washington
Riggs Account No. 76750393 opened in the name of Augusto
Pinochet Ugarte and Lucia Hiriart Rodriguez.
--On September 23, 1998, a $147,000 Banco de Chile
personal check, made payable to A. Pinochet, was drawn on New
York Banco de Chile Account No. 442506 and deposited into
London Riggs Account No. 74041013 (formerly numbered 25005393)
opened in the name of Augusto Pinochet Ugarte.
Together, these two personal checks deposited about $390,000
into Pinochet accounts in Washington, D.C. and London.
--Riggs Cashiers Checks. The second category of
transactions involves cashiers checks issued by Riggs Bank
which were used to move Pinochet funds from the United States
to Chile. Bank records show that Riggs Bank issued 38 cashiers
checks, each for $50,000, in four batches from August 2000
until April 2002, as described earlier.\113\ The first batch
was made payable to ``Augusto Pinochet''; the second batch to
``Maria Hiriart and/or Augusto P. Ugarte''; the third batch to
``Augusto Pinochet Ugarte and/or Lucia Hiriart De Pinochet'';
and the fourth batch to ``L. Hiriart and/or A.P. Ugarte.'' Each
batch was paid for by funds from a Pinochet account or CD at
Riggs.
---------------------------------------------------------------------------
\113\ See 2004 Hearing Record at 151-152. Riggs issued the 38
cashiers checks to Mr. Pinochet in the four batches as follows: 8
checks in August 2000; 10 checks in May 2001; 10 checks in October
2001; and 10 checks in April 2002. Two of the 38 checks were cashed by
BankBoston; the rest were cashed by Banco de Chile in Chile.
---------------------------------------------------------------------------
From August 2000 until August 2003, Chilean branches of
Banco de Chile cashed 36 of the Riggs cashiers checks, for a
total of $1.8 million. Due to Chilean bank secrecy laws, Banco
de Chile has told the Subcommittee that it cannot provide
documentation from Chile showing who presented each cashiers
check and whether that person was paid in cash. According to a
Chilean appeals court finding, the checks were cashed at Banco
de Chile ``by a third party, despite the fact that they were
nominative. Then various amounts of the cash in dollars were
changed to cash in Chilean pesos on the informal market so that
said transaction would not be reported to the Central Bank.''
\114\ By cashing these 36 Riggs cashiers checks over 3 years at
its branch offices in Chile, Banco de Chile enabled Mr.
Pinochet to move $1.8 million from the United States to Chile.
---------------------------------------------------------------------------
\114\ Case No. 1649-2004, Court of Appeals of Santiago, 12/10/04,
at 7.
--Military Officer Transfers. The third category of
transactions involves transfers that moved funds from the
military officer accounts at Riggs Bank in Miami to Banco de
Chile accounts in Chile. Bank records show that, on nine
occasions from 1990 until 1996, checks or wire transfers moved
a total of about $650,000 from the military officer accounts at
Riggs Bank in Miami to Pinochet-related accounts in Chile at
Banco de Chile. All but one of the documents transferring these
funds to Chile used a disguised variant of Mr. Pinochet's name
or the name of his personal assistant, Monica Ananias Kuncar,
as the designated recipient of the funds. The transactions are
---------------------------------------------------------------------------
as follows.
--On November 26, 1990, a $17,823 check cleared which had
sent the funds from Miami Riggs Account No. 451666 opened in
the name of Chilean military officer Jose Miguel Latorre
Pinochet to ``J.P. Ugarte'' at Banco de Chile in Chile.
--On November 26, 1990, a $10,261 check cleared which had
sent the funds from Miami Riggs Account No. 451666 opened in
the name of Chilean military officer Jose Miguel Latorre
Pinochet to ``J.P. Ugarte'' at Banco de Chile in Chile.
--On September 19, 1994, a $65,000 wire transfer sent the
funds from Miami Riggs Account No. 709345 opened in the name of
Chilean military officer Gabriel Vergara Cifuentes, to ``Jose
Ugarte'' at Banco de Chile Account No. 500006257104 in Chile.
--On March 2, 1995, a $117,000 check cleared which had
sent the funds from Miami Riggs Account No. 710467 opened in
the name of Chilean military officer Juan Ricardo Mac-Lean
Vergara, to ``J. Ugarte'' at Banco de Chile Account No.
500006257104 in Chile.
--On March 10, 1995, a $87,000 check cleared which had
sent the funds from Miami Riggs Account No. 710467 opened in
the name of Chilean military officer Juan Ricardo Mac-Lean
Vergara, to ``J. Ugarte'' at Banco de Chile Account No.
500006257104 in Chile.
--On November 16, 1995, a $26,056 check cleared which had
sent the funds from Miami Riggs Account No. 710467 opened in
the name of Chilean military officer Juan Ricardo Mac-Lean
Vergara, to an unspecified account at Banco de Chile in Chile.
--On March 1, 1996, a $36,000 wire transfer sent the funds
from Miami Riggs Account No. 710467 opened in the name of
Chilean military officer Juan Ricardo Mac-Lean Vergara, to
``Monica Anania'' at Banco de Chile Account No. 500006257104 in
Chile.
--On March 1, 1996, a $287,000 wire transfer sent the
funds from Miami Riggs Account No. 710467 opened in the name of
Chilean military officer Juan Ricardo Mac-Lean Vergara, to
``Monica Anania'' at Banco de Chile Account No. 60069158 in
Chile.
--On April 2, 1996, a $6,227 wire transfer sent the funds
from Miami Riggs Account No. 710467 opened in the name of
Chilean military officer Juan Ricardo Mac-Lean Vergara, to
``Monica Anania'' at Banco de Chile Account No. 60069158 in
Chile.
--Aitken Offshore Corporations. The fourth and final
category of transactions involves Pinochet-related transactions
that utilized the offshore corporate accounts opened by Mr.
Aitken at Banco de Chile-United States. Three specific
transactions involving these U.S. accounts illuminate how they
were used as conduits for Pinochet funds and how, in some
instances, a Banco de Chile-United States employee facilitated
transactions for Mr. Aitken and Mr. Pinochet.
--2002 Riggs Transfer of $6 Million. The most troubling
incident involving Mr. Aitken, his offshore corporations, and
Banco de Chile-United States took place in July 2002, when
Riggs Bank transferred $6 million to a newly opened account at
the Banco de Chile New York branch for Sociedad de Inversiones
Belview S.A. (hereinafter ``Sociedad de Belview''), a Chilean
corporation controlled by Mr. Aitken.
On July 17, 2002, after an OCC review of its Pinochet
accounts prompted Riggs Bank to end its relationship with Mr.
Pinochet, Riggs Bank sent three wire transfers to Banco de
Chile's New York branch depositing a total of about $6 million
into the new Sociedad de Belview account.\115\ These wire
transfers included about $5 million from Ashburton Co. Ltd.;
about $950,000 from Althorp Investment Co. Ltd.; and $23,666.73
from Maria Lucia Hiriart Rodriguez, Mr. Pinochet's wife. Mr.
Aitken has apparently claimed that he informed Banco de Chile-
United States at the time that these funds were associated with
Mr. Pinochet, but Banco de Chile employees disagree, insisting
that at the time they were unaware of any connection between
these funds and Mr. Pinochet. The bank also indicated to the
Subcommittee that it did not question Mr. Aitken at the time
about the source of the $6 million, even though the funds
represented an amount significantly greater than any other
transaction Mr. Aitken had brought to the bank, significantly
exceeded the bank's estimate of his net worth, and took place
the same month the Patriot Act had required the bank to tighten
its U.S. AML controls.
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\115\ See account statement for Sociedad de Inversiones Belview
Int. S.A., Bates PSI01460. Mr. Aitken had apparently asked for this new
account to be opened on an ``urgent'' basis, making this request on the
day of or the day before the wire transfer. Bank records indicate that
the account was opened and allowed to accept funds on July 17, 2002,
even though the ``Customer Application Form'' for the account is dated
July 23, 2002, and the required Head Office approval to open the
account is dated July 19, 2002.
---------------------------------------------------------------------------
A week after the funds were deposited, Mr. Aitken opened
another new account at the New York branch for Belview
International Inc., a BVI corporation he controlled, and
transferred $5.9 million from the Sociedad de Belview account
to the new Belview International account. About a month later,
Mr. Aitken transferred $5.9 million from the Belview
International account, plus $100,000 from the Sociedad de
Belview account, to a newly established brokerage account at
Lehman Brothers in the name of Belview International.
In November 2002, he transferred most of the funds in the
Belview Lehman account to another Lehman account he had opened
in the name of G.L.P. Ltd., a BVI corporation under his
control. For the next 18 months, Banchile managed the assets in
the G.L.P. account, buying and selling various securities.\116\
On occasion, Mr. Aitken withdrew funds from the G.L.P. Lehman
account, depositing them into a newly opened G.L.P. checking
account at Banco de Chile's New York branch or to other Banco
de Chile accounts he controlled. In December 2002, Mr. Aitken
withdrew $300,000 from the G.L.P. Lehman account and deposited
the funds into a Lehman account he had opened for another BVI
corporation he controlled. Six months later, he transferred
$750,000 from the G.L.P. Lehman account to a related corporate
account at Lehman Brothers. In July 2003, Mr. Aitken
transferred about $1.1 million from these corporate accounts
through a series of accounts he controlled. The funds ended up
at a new Miami Banco de Chile account he had opened for Tasker
Investments Ltd., still another BVI corporation he had formed.
The next day, Mr. Aitken transferred about $1.1 million from
the Tasker Miami account to a new Tasker brokerage account he
had opened at Lehman Brothers. Despite multiple transfers
through multiple accounts, apparently neither the bank nor the
security firm required Mr. Aitken to explain the $1.1 million
transfers.
---------------------------------------------------------------------------
\116\ In February 2004, Banchile switched the G.L.P. securities
account from Lehman Brothers to Pershing Securities, but continued to
manage the account. Information from Banchile, Lehman Brothers, and
Pershing Securities.
---------------------------------------------------------------------------
In 2004, Mr. Aitken was interviewed by a Chilean Judge
investigating the Riggs accounts opened by Mr. Pinochet. When
asked whether he had possession of any Pinochet funds in the
United States, Mr. Aitken apparently identified the funds in
the G.L.P. and Tasker accounts as belonging to Mr. Pinochet. On
August 12, 2004, pursuant to the Judge's direction, Mr. Aitken
transferred these funds, then totaling about $6.8 million, from
the United States to a bank account in Chile under the control
of the Chilean court.\117\
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\117\ At that time, the funds were in accounts at Pershing
Securities, because in February 2004, Banchile switched both the G.L.P.
and Tasker securities accounts from Lehman Brothers to Pershing
Securities. Pursuant to the Judge's direction, Mr. Aitken transferred
about $5.5 million from the G.L.P. account and about $1.3 million from
the Tasker account at Pershing Securities. These amounts apparently
included the funds originally transferred by Riggs Bank plus interest
and stock gains, less various withdrawals since 2002. See Bates
PSI01008, PSI02423, PSI02397, PSI02421, PSI02414.
--1997 Loan for $500,000. In 1997, Augusto Pinochet applied
to Banco de Chile-United States for a $500,000 loan. On
November 10, 1997, the New York branch of Banco de Chile issued
the loan to Mr. Pinochet personally, but accepted loan
collateral from Eastview Finance, S.A., (``Eastview'') an
offshore corporation controlled by Mr. Aitken. This transaction
provided the bank with clear evidence of a Pinochet-Aitken
relationship. The loan transaction also had unusual features
which should have elicited questions by the bank, but did not.
The loan proceeds were deposited into Mr. Pinochet's New
York account at Banco de Chile.\118\ On the same day they were
deposited, the funds were withdrawn from that account, using a
$500,000 personal check made payable to Coutts & Co. (USA)
International (``Coutts'') and signed personally by Mr.
Pinochet. That check was then delivered to the Coutts office in
Miami. On the same day, Mr. Aitken asked Coutts to use the
check to purchase four CDs in the name of Eastview Finance, to
be picked up later by the Miami branch of Banco de Chile.
Coutts declined, however, to complete the transaction before
the personal check had time to clear. Coutts instead delivered
the personal check to the Miami branch. On the same day, the
Miami branch sent Coutts a Banco de Chile cashiers check for
$500,000. Coutts accepted the cashiers check and, in return,
issued a Coutts cashiers check in the same amount. Coutts then
delivered its cashiers check to the Miami branch of Banco de
Chile.\119\
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\118\ Pinochet Joint New York MMA account statement for November
1997, Bates PSI02447.
\119\ See, e.g., Pinochet personal check to Coutts. Bates PSI02448;
Banco de Chile cashiers check, Bates PSI02445; Coutts cashiers check,
Bates PSI02449.
---------------------------------------------------------------------------
Following instructions provided by Mr. Aitken, the Miami
branch used the $500,000 to establish four CDs, each in the
amount of $125,000, and each in the name of Eastview Finance.
Acting on behalf of Eastview, Mr. Aitken then pledged all four
CDs as collateral for the $500,000 loan to Mr. Pinochet.
The odd nature of this transaction derives from the fact
that all of the $500,000 in loan proceeds were immediately
pledged as collateral for the loan itself and not used for any
business purpose. In addition, it is unclear why the loan was
issued in New York, and the collateral held in Miami. It is
also unclear why Mr. Aitken and Eastview Finance became
involved in a loan issued solely to Mr. Pinochet. Some bank
personnel apparently viewed Mr. Aitken's actions as consistent
with his acting as a legal adviser to Mr. Pinochet on the loan,
or as a guarantor of the loan amount. Another speculation was
that the transaction was designed to make it appear that the
funding for the Eastview CDs came from Coutts rather than Banco
de Chile, but it is unclear why that would have been
significant. The reason for Coutts' participation in the
transaction is also unexplained.
In March 1999, Mr. Pinochet repaid the New York loan in
full, with interest. Mr. Pinochet had already made several
payments to reduce the principal. He made the final payment
with $250,000 supplied by Mr. Aitken who, the day before, had
cashed in two of the Eastview CDs in Miami and transferred the
$250,000 plus earned interest to Mr. Pinochet's New York
account.\120\ The day after repaying the loan, Mr. Pinochet
closed his New York account at Banco de Chile.
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\120\ Five months earlier, in November 1998, Mr. Aitken had cashed
the other two Eastview CDs and transferred the funds, totaling
$250,000, to an Eastview account he had opened at the Banco de Chile
branch in New York. Mr. Aitken did not supply the funds from these two
CDs to Mr. Pinochet, instead retaining the funds in the new Eastview
account. See Bates PSI01283.
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The significance of the 1997 loan transaction is threefold.
First, it provided the bank with clear evidence of a
relationship between Mr. Pinochet and Mr. Aitken. This
relationship necessarily came to the attention of bank
officials involved with issuing the 1997 loan to Mr. Pinochet,
arranging its collateral, and monitoring its repayment. Second,
the loan set a precedent for later transactions in which Mr.
Aitken used an offshore corporation he controlled to take
custody of funds belonging to Mr. Pinochet and to transact
business on behalf of Mr. Pinochet. Third, the transaction
succeeded in part because of the bank's willingness to
facilitate the transaction with few or no questions about its
purpose, Mr. Aitken's role, or its unusual features.
--1999 Real Estate Transaction. In 1999, Mr. Pinochet
engaged in another transaction in the United States, that again
involved odd circumstances, the participation of an Aitken
offshore corporation, and reliance on Banco de Chile-United
States to facilitate the transaction.
On November 16, 1999, while Mr. Pinochet was under house
arrest in London and the subject of a Spanish court order
directing financial institutions to freeze his assets, he
purported to transfer real property he owned in Chile, an
apartment in Vina del Mar, to Abanda Finance Ltd., a BVI
company controlled by Mr. Aitken. Documentation indicates that
Mr. Pinochet purported to ``sell'' the property to Abanda
Finance for 214.8 million Chilean pesos, or about $400,000.
Banco de Chile investigators indicate that the actual purpose
of this transfer was to disguise Mr. Pinochet's ownership of
the property while allowing him to continue as the property's
beneficial owner. The apartment is currently subject to a
freeze order issued by a Chilean court.
To complete the ``sale,'' Mr. Aitken opened an account for
Abanda Finance at Banco de Chile in New York on November 15,
1999, the day before the transaction. To give the appearance
that a sale was actually consummated, over the course of 2
days, November 15 and 16, Mr. Aitken initiated a series of
transfers that sent $400,000 on a round trip through multiple
bank accounts he controlled, including New York accounts opened
for Eastview Finance and Abanda Finance. The intended result of
this round trip was to provide Abanda Finance with a bank
statement showing that it had withdrawn $400,000 from its
account on November 15, 1999, presumably to pay for the
apartment. In fact, it appears no funds were ever paid for the
real estate supposedly purchased by Abanda Finance.
Banco de Chile documentation indicates that, to carry out
the round trip transaction, Mr. Aitken provided multiple
letters of instruction to the New York branch. The branch then
issued wire transfers moving the funds through six different
accounts in the United States over 2 days, often in the names
of offshore corporations. The transaction involved a hefty sum,
$400,000, and moved the funds in a pattern that was explained
beforehand to the New York branch so that it would facilitate
the circuit of funds. Again, the bank appears to have asked
few, if any, questions about the nature of this transaction,
the role of Mr. Aitken, or the role of his offshore
corporations.
Together, the 2002 Riggs transfer, 1997 loan, and 1999 wire
transfers, show that Mr. Aitken readily and deliberately
allowed his offshore corporate accounts to be used as conduits
for Pinochet funds.
Pinochet Foundation. Still another U.S. account at Banco de
Chile-United States, which was opened in the name of the
Pinochet Foundation, may have served as a conduit for Pinochet
funds. Banco de Chile closed this account in 2004.
The Pinochet Foundation was first established in Chile in
1995. The Foundation's website states that it is dedicated to
promoting and preserving the values and the historic and
cultural identity of Chile.\121\ News media reports indicate
that the Foundation has also provided substantial financial
assistance to Mr. Pinochet, including by paying his legal bills
in the United Kingdom, paying rent on a luxury mansion during
his detention in London from 1998 until 2000, and paying travel
expenses to and from London for Pinochet aides and
relatives.\122\ The Subcommittee has been told that the
Foundation also provided an office for Mr. Pinochet for a
period of time in Chile, and may have paid his office expenses.
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\121\ See Foundation website at www/fundacionpinochet.cl.
\122\ See, e.g., ``The Pinochet case: now for the bill,'' Agence
France Presse, 1/14/00; ``Pinochet followers scrounge for cash for his
legal bills in Britain,'' Agence France Presse, 7/9/99; ``Friends
establish fund for Pinochet,'' Austin American-Statesman (Texas), 3/14/
99.
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The Pinochet Foundation opened a Banco de Chile account in
New York on January 8, 1999.\123\ Persons with signatory
authority for the New York account and, in some cases, power of
attorney to direct transactions involving the account include
members of Mr. Pinochet's immediate family and former members
of the Pinochet regime. These persons are listed in the account
opening documentation and include: Lucia Hiriart de Pinochet,
Mr. Pinochet's wife and a member of the Foundation's board of
directors; his daughter, Lucia Pinochet Hiriart; Hernan Briones
Gorostiaga, the Foundation Chairman and a Chilean businessman;
Carlos Caceres Contreras, a Foundation board member and former
Minister of Finance during the Pinochet regime; Luis Cortes
Villa, the Foundation's spokesperson and former head of the
Santiago Military Guard during the Pinochet regime; Hernan
Guiloff Izikson, Foundation Vice Chairman and Chilean
businessman; Alberto Kassis Sabag, a Foundation board member
and Chilean businessman; Alfonso Marquez de la Plata
Irarrazabal, a Foundation board member and former Secretary-
General of Government during the Pinochet regime; and Jorge
Prado Aranguiz, a Foundation board member and former Minister
of Agriculture during the Pinochet regime.
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\123\ The Foundation has also had accounts at Banco de Chile in
Chile and at other financial institutions.
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Altogether, deposits to the Foundation's New York account,
from its opening in 1999 until its closing in 2004, exceeded
$2.2 million. These deposits came from multiple sources and
ranged in size from small to large amounts. The largest single
deposit was $811,000, which was deposited into the account in
August 2000, by the law firm, Kingsley Napley, that represented
Mr. Pinochet in the United Kingdom and which was possibly
forwarding U.K. government funds reimbursing Mr. Pinochet for
certain legal expenses. In some cases, substantial deposits to
the Foundation account were made by persons about whom the bank
has little information. Examples include $200,000 in deposits
from ``American Engineering,'' an entity about which nothing
further is known, and a deposit of $250,000 on April 26, 2002,
by ``Ivoryseas Marine Co. Ltd.'' from an account in Germany.
Questions remain about who these entities are, the source of
their funds, and the reasons for their substantial transfers to
the Foundation.
Major transfers of funds out of the Foundation's account
went primarily to two recipients. The first was Kingsley
Napley, Mr. Pinochet's U.K. legal counsel, which received a
total of about $459,000 from the New York account. The second
major recipient of funds was ``Chile Market Investments Ltd.,''
a BVI securities broker affiliated with Chile Markets S.A.
Corredores de Bolsa, a securities broker in Chile. Repeated
outgoing transfers of funds went from the Foundation's New York
account to a Chile Market Investments Ltd. account at Merrill
Lynch. There is no explanation in the account documentation
regarding the purpose of these transfers, or what happened to
the funds after they went into the Chile Market Investments
account. It is possible that funds from this account were used
for some of Mr. Pinochet's living expenses described earlier,
such as rent during his extended detention in London, or for
travel expenses. Due to the lack of information about the
account's outgoing transfers, it is difficult to assess either
the nature of these transfers or the extent to which the
Foundation account may have served as a conduit for Pinochet
funds.
Regulatory Oversight. Banco de Chile-United States is
regulated by both the OCC and the Federal Reserve Bank of
Atlanta. The OCC oversees the bank as a whole and its New York
branch, while the Federal Reserve Bank oversees its Miami
branch.
Until recently, both regulators routinely examined the
bank's AML controls and routinely gave the bank satisfactory
ratings. In 2004, however, after learning of the bank's
Pinochet-related accounts, the OCC initiated an extensive
review of the bank's AML policies and procedures and identified
a host of major deficiencies. In February 2005, Banco de Chile
and its New York branch entered into a 33-page consent decree
with the OCC requiring the bank to revamp and strengthen its
AML policies and procedures, particularly with respect to
identifying and monitoring high risk accounts, reviewing
accounts opened for public figures and offshore corporations,
providing complete information in wire transfers, prohibiting
accounts from being held under the name of someone other than
the true owner, hiring additional compliance personnel, and
improving bank systems for conducting audits, monitoring high
risk accounts, and reporting suspicious activity. The same
month, the Miami branch of Banco de Chile entered into a cease
and desist order with the Federal Reserve Bank of Atlanta
requiring many of the same AML reforms. The U.S. Treasury
Financial Crimes Enforcement Network is currently considering
whether to impose a civil monetary penalty on the bank for
failure to comply with its U.S. AML obligations.
Two incidents related to the Pinochet accounts merit
additional consideration. In late June 2002, as part of its
review of Pinochet accounts at Riggs Bank, the OCC asked Banco
de Chile-United States whether it had any U.S. accounts for Mr.
Pinochet. The bank disclosed that Mr. Pinochet and his wife had
a few U.S. accounts during the late 1990s, and that Mr.
Pinochet had been a longstanding client of the bank in Chile
for more than 30 years.
Banco de Chile-United States did not disclose at that time
that there was any relationship between Mr. Aitken and Mr.
Pinochet or that some accounts controlled by Mr. Aitken had
been used by Mr. Pinochet to hold or transfer funds. About 2
weeks after the OCC inquiry, on July 17, 2002, Banco de Chile-
United States received the $6 million transfer from Riggs, but
did not contact the OCC to alert it to the transfer. Nor did
the bank mention the $6 million transfer when an OCC examiner
arrived at the New York branch on July 19-20 to review records
from the closed Pinochet accounts.
Mr. Aitken has apparently claimed that he orally informed
the New York branch at the time that the $6 million transfer
was associated with Mr. Pinochet, but the bank insists that
none of its personnel was aware of a Pinochet connection to the
$6 million at the time of the transfer. The bank points out
that the funds came primarily from two offshore corporations,
Ashburton and Althorp, that it did not know were associated
with Mr. Pinochet; the funds were directed to the account of
another offshore corporation, Sociedad de Belview, controlled
by Mr. Aitken; and bank officials did not then notice a related
transfer of $23,700 from Mr. Pinochet's wife, Maria Lucia
Hiriart Rodriguez.
Banco de Chile-United States maintains that the OCC never
mentioned Riggs when it made its initial inquiry about Pinochet
accounts or when its examiner researched the Pinochet accounts
in July, and never cautioned the bank to be on the lookout for
a Riggs transfer. The bank also points out that Riggs itself
failed to provide any notice under Section 314(b) of the
Patriot Act that the $6 million transfer was the result of an
account closure, the funds were of interest to regulators, and
the funds were associated with Mr. Pinochet. The bank maintains
that had it received any warning in 2002 about Mr. Pinochet,
from the OCC, the Federal Reserve Bank, or Riggs Bank, it could
have protected the reputation of Banco de Chile by refusing the
funds transfer.
Two years later, on July 15, 2004, this Subcommittee
disclosed its investigation into the Pinochet funds at Riggs
Bank, which was widely reported on the same day by the Chilean
news media. According to Banco de Chile, during the evening of
July 15, 2004, Mr. Aitken contacted his account executive at
Banchile in Chile, and asked whether it would be possible to
move his investments out of the United States ``without a
trace.'' The Banchile account executive informed him that such
a transfer was not possible, and made an appointment to discuss
the matter further in the morning. Mr. Aitken also asked the
account executive if he had seen the articles published that
day about Mr. Pinochet's accounts at Riggs Bank. The next
morning, Mr. Aitken met with his account executive and told him
that he had been managing funds for Mr. Pinochet since 1999,
and had deposited Pinochet funds into accounts he had opened at
Banco de Chile-United States and Pershing Securities in the
name of certain offshore corporations. According to the bank,
the Banchile account executive again indicated that he could
not help Mr. Aitken move the Pinochet funds out of those
accounts without detection.
The same day, Banchile personnel informed senior Banco de
Chile officials in Chile and the United States about the
conversation with Mr. Aitken, including the head of the entire
bank and the head of the bank's U.S. operations (who formerly
served as the New York branch head and helped administer the
Aitken offshore corporate accounts). Over the next 2 weeks, the
head of Banco de Chile held several telephone conversations
with the U.S. operations head about whether the bank was
holding Pinochet funds in Aitken-controlled accounts and
ordered the U.S. operations head to analyze all transfers from
Riggs Bank into the New York branch. According to the bank, it
was not until late in July 2004, that Banco de Chile-United
States identified as possibly suspicious the July 2002 $6
million transfer from Riggs Bank to the Sociedad de Belview
account controlled by Mr. Aitken.
On July 27, 2004, the Federal Reserve Bank of Atlanta made
a routine annual visit to Banco de Chile in Santiago. Near the
end of a meeting with top Banco de Chile officials, the Federal
Reserve Bank asked whether the bank had any Pinochet accounts
at the branches in the United States. The bank indicated that
Mr. Pinochet was no longer a customer in the United States, and
the bank had an ongoing investigation to gather additional
information. The bank also disclosed that Mr. Pinochet was a
longstanding client in Chile. The bank did not then disclose
the $6 million transfer from Riggs Bank in 2002, or the
likelihood that certain Aitken-controlled accounts held
Pinochet funds. The bank has apparently since indicated that it
should have disclosed the Aitken-Pinochet relationship and the
Aitken offshore corporate accounts during that meeting with the
Federal Reserve Bank.
On August 2, 2004, Mr. Aitken apparently contacted Banco de
Chile and informed the bank that Chilean Judge Sergio Munoz had
directed him to transfer all Pinochet-related funds in his U.S.
accounts to an account in Chile under court control. On August
6, Mr. Aitken apparently told the bank that the securities in
the G.L.P. Pershing account and the Tasker Pershing account
were being liquidated and the proceeds would soon be ready for
transfer. In the meantime, the bank requested and received a
written court order to establish a court-controlled account and
deposit the funds being transferred by Mr. Aitken. On August
12, Mr. Aitken transferred about $5.5 million from the G.L.P.
accounts and about $1.3 million from the Tasker accounts to the
bank in Chile, and, on August 13, 2004, the bank deposited
these funds into an account under the control of the Santiago
Court of Appeals.
In September 2004, Banco de Chile conducted a review of the
Pinochet and Aitken accounts and, in mid-September, informed
U.S. regulators about what the bank had found. In late
September, the bank decided to hire outside legal counsel to
conduct a more thorough review of both the accounts and actions
taken by various bank officials. That internal review resulted
in a report in December 2004.
C. Espirito Santo Bank
Espirito Santo Bank is a state-chartered bank with about 85
employees in Miami, Florida.\124\ According to its website,
Espirito Santo Bank offers ``private banking services to
domestic and foreign clients'' and commercial and institutional
banking services to domestic clients. It describes itself as a
member of the ``Espirito Santo Group'' which has worldwide
assets of 45 billion euros. It is a subsidiary of Banco
Espirito Santo, a publicly traded bank headquartered in Lisbon,
Portugal. The Portuguese bank has affiliates in various
countries including Brazil, Panama, Spain, Switzerland, Uruguay
and Venezuela. Another affiliate, Banco Espirito Santo
(International) td. (``BESIL''), is licensed and operates in
the Cayman Islands. Banco Espirito Santo also has a New York
affiliate which, in response to Subcommittee inquiries, has
stated that it has no record of any account related to Mr.
Pinochet or his family.
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\124\ Information about Espirito Santo Bank is taken from its
website, public filings, subpoenaed documents, interviews with bank
representatives and employees, and information supplied by other
financial institutions. The relevant documents are maintained in
Subcommittee files.
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The Subcommittee investigation has determined that Espirito
Santo Bank in Miami maintained an 8-year relationship with
Augusto Pinochet and his family, which began in October 1991
and ended in January 2000. Espirito Santo Bank opened at least
six accounts and CDs in Miami for Mr. Pinochet, members of his
immediate family, or for offshore entities controlled by Mr.
Pinochet.\125\ Based upon available records, from 1991 until
2000, funds totaling at least $3.9 million were deposited into
these U.S. accounts and CDs. The bank ended the relationship at
the request of Mr. Pinochet in 2000, and apparently has not
done any business with the Pinochet family since then.
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\125\ Documentation obtained by the Subcommittee shows that, in
addition to these U.S. accounts, BESIL provided an account in the
Cayman Islands for the offshore trust controlled by Mr. Pinochet, the
Santa Lucia Trust. See, e.g., fax from Linda V. DeBayle to I. Singh re:
Santa Lucia Trust, 12/10/99.
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Mr. Pinochet's accounts at Espirito Santo Bank were opened
by a former Riggs employee who had worked at Riggs
International Banking Corporation (RIBC) in Miami and
administered Mr. Pinochet's Miami accounts from the early 1980s
to the early 1990s. While at RIBC, he also administered some of
the military officer accounts opened there. In September 1991,
he was recruited to join Espirito Santo Bank by the head of the
bank, who was formerly the head of RIBC from 1981 until 1990,
before assuming the top position at Espirito Santo Bank. While
head of RIBC, he had become acquainted with Mr. Pinochet and on
several occasions corresponded with him about his RIBC
accounts.\126\ He also helped to open the first Chilean
military officer account at RIBC.
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\126\ He told the Subcommittee that he does not recall engaging in
any correspondence with Mr. Pinochet.
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Espirito Santo Bank has fully cooperated with all
Subcommittee inquiries, producing all requested documentation
and related information in the United States. Because the
Pinochet accounts were established in 1991 and banks are only
required to retain records for 5 to 7 years, however, the bank
had not retained account statements for the period 1991 to
1993. Other records from that period were also limited. Some of
what the Subcommittee has learned about Espirito Santo accounts
during those years has been reconstructed from documentation
supplied by other financial institutions. In addition, citing
bank secrecy laws, Espirito Santo Bank did not produce any
information regarding Pinochet-related accounts at its Cayman
affiliate, BESIL.
Pinochet Accounts. The Espirito Santo accounts opened for
Mr. Pinochet or his family in the United States are the
following.
(1) Account No. 115391494 was opened in the name of A.P.
Ugarte or M. Lucia Hiriart in Miami on October 8, 1991, and
closed on December 23, 1999.
(2) Account No. 116150253 was opened in the name of
Trilateral International Trading Ltd. in Miami on October 17,
1991, and closed on January 31, 2000.
(3) Multiple accounts issuing CDs in the name of
Trilateral International Trading Ltd. were opened in Miami from
at least April 1993, and with the last CD continuing until
December 1999. Multiple account numbers were assigned to these
CDs, including 5111, 5444, 5521, 5522, 5990, 6332, 8269, 8466,
434104, and 492901. Individual CDs varied in amounts from
$53,500 to $1.8 million. Several were combined, reconfigured,
or partially redeemed upon maturity.
(4) Account No. 116152530 was opened in the name of Banco
Espirito Santo (International) td. as Trustee of the Santa
Lucia Trust, in Miami, on August 24, 1993, and closed on
January 31, 2000.
(5) Account No. 5613, a CD, was opened in the name of the
Santa Lucia Trust in Miami in August 1993 and transferred to a
BESIL account for the trust in the Cayman Islands. This CD was
cashed in December 1999.
(6) Account No. 115399095 was opened in the name of Mr.
Pinochet's daughter, Jacqueline Pinochet, in trust for Maria
Jose Martinez Pinochet, Mr. Pinochet's granddaughter, in Miami
on August 10, 1993, and closed on April 1, 1994.
Account Secrecy. Espirito Santo Bank took a number of steps
that helped to keep the existence of the Pinochet accounts
secret. For example, the account opened for Mr. Pinochet and
his wife used disguised variants of their names, ``A.P.
Ugarte'' and ``M. Lucia Hiriart.'' Most of the accounts and CDs
were opened in the name of offshore entities, Trilateral
International Trading and the Santa Lucia Trust. Only one
account, opened for Mr. Pinochet's daughter, Jacqueline
Pinochet, actually used her given name. When asked about the
names used on the accounts, Espirito Santo Bank officials
stated that persons in South America frequently used disguised
names and opened accounts in the names of offshore entities to
protect their privacy and foil attempts at kidnapping, theft,
or other misconduct.
The two offshore entities holding Espirito Santo Bank
accounts were established at different times and in different
ways. Trilateral International Trading is a Bahamas corporation
that was established on January 11, 1991, at Mr. Pinochet's
request by United Management Services Ltd., a company formation
agent in the Bahamas which also provided Trilateral with
directors, officers, a registered office, and a registered
agent.\127\ The account documentation plainly names Mr.
Pinochet as the beneficial owner, although the official account
opening form is silent as to Trilateral's true owner.\128\
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\127\ See letter dated 3/4/05, from Alexiou, Knowles & Co.
representing United Management Services, Ltd. to the Subcommittee
regarding Trilateral International Trading Ltd.
\128\ See Espirito Santo Bank account opening form for Account No.
116150253 in the name of Trilateral International Trading Ltd. (10/17/
91); letter dated 9/9/98, from Mr. Pinochet to Espirito Santo Bank
(``This is to inform you to please to debit my investments accounts in
the name of Trilateral International Trading Ltd. Acc. no. 116150253
and Santa Lucia Trust Acc. no. 1161525230.''); Espirito Santo Bank
account opening form for Account No. 0115391494 in the name of A. P.
Ugarte or M. Lucia Hiriart, (10/7/91)(``Has Corp A/C N/O Trilateral
Int'l Trading Inc.'').
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Two years later, in 1993, the Santa Lucia Trust was
established in the Cayman Islands by the Cayman International
Bank & Trust Company (``CIBATCO''). CIBATCO had an ongoing
relationship with Banco Espirito Santo International Ltd.
(BESIL), which then functioned as a shell bank in the Cayman
Islands, without any employees. Upon request, CIBATCO routinely
established and administered offshore corporations and trusts
for Espirito Santo clients.\129\ Account documentation shows
that Espirito Santo Bank knew that the Santa Lucia Trust was
associated with Mr. Pinochet. For example, a CIBATCO facsimile
to Espirito Santo regarding the Santa Lucia Trust requests
confirmation of Mr. Pinochet's signature.\130\ In addition, an
Amendment signed by Augusto Pinochet on March 14, 1995,
established his wife as the trust's sole beneficiary.\131\
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\129\ Subcommittee interview with Espirito Santo Bank
representatives. BESIL, which still operates in the Cayman Islands, now
has two full time employees at that location. It still works with the
Cayman International Bank & Trust Co. which has since been acquired and
renamed Ansbacher (Cayman) Bank.
\130\ Telefax from Indy Singh to Espirito Santo Bank of Florida
``RE: Santa Lucia Trust,'' (12/13/99).
\131\ Letter dated 4/13/95, from Edgar W. Tatman of Espirito Santo
Bank, the account manager for the Santa Lucia Trust account in Miami,
to CIBATCO's Managing Director, regarding the Santa Lucia Trust; and
letter dated 9/9/98, from Mr. Pinochet to Espirito Santo Bank of
Florida.
Due Diligence. There is no indication in available bank
records that Espirito Santo Bank performed any due diligence
review, source of funds analysis, or transaction monitoring for
the Pinochet-related accounts. The bank clearly knew who the
client was, because the account manager had handled the
Pinochet accounts at RIBC, and his superior, the head of
Espirito Santo Bank, had communicated with Mr. Pinochet while
the head of RIBC. Espirito Santo Bank pointed out that, at the
time the Pinochet-related accounts were opened in 1991, it was
not the bank's normal practice to evaluate the source of funds
deposited into a client's accounts, or to monitor account
activity, although both procedures are required by the bank's
AML controls today.
From 1998 until March 2000, Augusto Pinochet was the
subject of civil and criminal proceedings in Spain, the United
Kingdom, and Chile, including issuance of a 1998 Spanish court
order directing financial institutions to freeze Mr. Pinochet's
assets on a worldwide basis. These proceedings and the issuance
of the freeze order were repeatedly described in international
and United States news media reports. Throughout this period,
Espirito Santo Bank failed to alert any court or law
enforcement entity to the accounts it then held for Mr.
Pinochet, containing millions of dollars.
When asked why the bank closed the last of the Pinochet-
related accounts in January 2000, bank officials explained
that, in every case where it closed a Pinochet-related account,
the bank had acted at the request of Mr. Pinochet.
Transactions of Interest. Virtually all of the Espirito
Santo accounts saw multiple transfers of funds to and from
other Pinochet-related accounts.
Consider, for example, the first two accounts that were
opened within a week of each other in 1991, one for Mr.
``Ugarte'' and Ms. ``Hiriart'' and one for Trilateral
International Trading. Over the course of the next 8 years, the
Ugarte/Hiriart account received deposits totaling about $2.1
million. Half this amount, about $1.1 million, came from the
Trilateral account, in multiple transfers over time varying
from $18,000 to $500,000 per transfer. Between August 1992 and
August 1994, the account also received multiple transfers of
funds totaling about $525,000 from one of the military officer
accounts at Riggs, opened in the name of Gabriel Vergara
Cifuentes. Another $410,000 or so came from checks drawn on
accounts at Banco de Chile and Citigroup, where Mr. Pinochet
and his family had numerous accounts, and from checks drawn on
accounts at American Express International Bank and Swiss Bank
Corporation in New York.
Available records show withdrawals from the Ugarte/Hiriart
account totaling about $1.8 million. They include about
$440,000 withdrawn in various amounts for ``Daniel Lopez,'' an
alias used by Mr. Pinochet; Mr. Pinochet's assistant, Monica
Ananias Kuncar; his son, Marco Pinochet; a Chilean military
official, Eugenio Castillst Cadiz, who maintained an account at
Riggs; and his daughters, Ines Lucia and Maria Veronica
Pinochet. Another $500,000 was wire transferred in September
1997, to Levant Management, a Chilean company and Espirito
Santo bank client since 1996.\132\ Another $550,000 was
transferred to the Trilateral account, and about $350,000 went
to various, other unknown parties. This account closed in
December 1999.
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\132\ Espirito Santo Bank indicated that, in 2000, the name of
Levant Management had changed to Rio Investment Corporation, and that
it was related to a money exchange business in Chile called Intercam
Turismo.
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Available records show that the 1991 Trilateral account
received deposits over 8 years totaling about $3.5 million. It
appears that the account's initial funding, about $1.19
million, came from a Pinochet account at Riggs in 1991.\133\
Records indicate that another $1.4 million was deposited into
the account in July 1993, via a credit memo. The source of
those funds is not identified. About $550,000 was transferred
over time from the Ugarte/Hiriart account at Espirito Santo
Bank, together with about $195,000 from the Santa Lucia trust
account. Another $175,000 appears to have been interest
generated from the account and various CDs established for
Trilateral. One account statement dated July 31, 1993,
identifies multiple CDs whose value then totaled about $2.6
million.\134\
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\133\ In January 1991, Miami Riggs Account No. 70754-7, opened for
Mr. Pinochet and his wife, sent a $1.15 million wire transfer to the
Bank of Bahamas for further credit to Deloitte & Touche. At the time,
Deloitte & Touche had an agreement with Riggs to provide it with a
variety of services, including management of Riggs Bank & Trust Co.
(Bahamas), which was then a shell bank. Ten months later, in October
1991, Deloitte & Touche sent a $1.19 million wire transfer to Espirito
Santo Bank for deposit into the newly opened Trilateral account.
\134\ See Espirito Santo Bank account statement for Account No.
0116150253 for July 1993.
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Despite these CDs, the Trilateral account did not function
as a savings account; rather it distributed most of the money
it received. On August 24, 1993, for example, about $1.9
million was withdrawn from the Trilateral account and
transferred to a newly established account for the Santa Lucia
Trust, providing that trust's initial funding. From 1992 until
1999, another $1.1 million was transferred over time in varying
amounts to the Ugarte/Hiriart account at Espirito Santo Bank,
as described above. On September 9, 1998, an Espirito Santo
cashiers check for $400,000, drawn on the Trilateral account
and made payable to Augusto Pinochet Ugarte, appears to have
been cashed at Banco de Chile in Chile.\135\ The purpose and
ultimate use of this $400,000 cashiers check is not currently
known. The Trilateral account closed in January 2000.
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\135\ A letter to the bank dated the same day discloses that Mr.
Pinochet instructed Espirito Santo Bank to debit both the Trilateral
and Santa Lucia Trust accounts to finance this $400,000 check. Bank
records show that the Trust had deposited $70,000 into the Trilateral
account on September 11, 1998, just after the cashiers check was drawn
on that account.
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The Santa Lucia Trust account was first opened in August
1993, just after the Trust was established. Shortly after the
account was opened, the Trust received a $1.9 million deposit
from the Trilateral account and established a $1.9 million CD
in Miami, which was then transferred to a trust account at
BESIL in the Cayman Islands. During the 6 years the trust
account was open, account records show that it accumulated
deposits totaling about $2.3 million, most of which came from
the $1.9 million transfer from the Trilateral account and
interest earned on that amount. The vast majority of these
funds was kept in the trust's BESIL account in the Cayman
Islands, while the Miami account usually showed modest
balances. This account closed in January 2000.
The final Espirito Santo account, opened for Mr. Pinochet's
daughter in trust for his granddaughter, was active for only 8
months. The account was opened in August 1993, with $15,000
from an unidentified source. Within 1 month, half the total,
about $7,200 was withdrawn in multiple checks of various
amounts payable to Mr. Pinochet's assistant, Monica Ananias
Kuncar. The account was closed in April 1994.
In December 1999, Espirito Santo Bank transferred all of
the funds in the Pinochet-related accounts that were then open,
including the Ugarte/Hiriart joint account, the Trilateral
account, and the Santa Lucia Trust account, to the Miami office
of Coutts & Co. (USA) International. The bank wire transferred
about $2,000 from the joint account and about $12,000 from the
Trilateral account. In the case of the Trust, the bank wire
transferred about $12,700 from the Trust's Miami account, and
over $2.3 million from the Trust's Cayman account to its Miami
account and from there to an account at Coutts. All of the
funds wire transferred by Espirito Santo Bank were deposited at
Coutts into an account in the name of Eastview Finance, S.A.
Each of the wire transfer records also referenced Oscar Aitken
in connection with the Eastview account. As explained earlier
with respect to Banco de Chile, Mr. Aitken is a Chilean
attorney who had close ties to Mr. Pinochet and who allowed
Eastview Finance, a BVI corporation he controlled, to act as a
conduit for Pinochet funds.
Regulatory Oversight. Espirito Santo Bank told the
Subcommittee that neither its state nor federal regulators ever
inquired about any of the Pinochet-related accounts, and it had
never provided information about them to any regulator or law
enforcement authority.
D. Other Financial Institutions
In addition to the Riggs, Citigroup, Banco de Chile-United
States, and Espirito Santo Bank accounts described above, the
Subcommittee saw evidence of Pinochet-related accounts and
transactions involving a host of other financial institutions
operating in the United States, including Banco Atlantico which
is now part of Banco de Sabadell; Bank of America; Coutts & Co.
(USA) International which is now part of Banco Santander; Ocean
Bank; and PineBank N.A.
Banco Atlantico. In September 2004, Banco Atlantico merged
with Banco de Sabadell to become the fourth largest bank in
Spain, offering a wide range of financial services, including
retail and private banking.\136\ Although no Pinochet-related
accounts have been identified at any U.S. branch or affiliate
of Banco Atlantico or Banco de Sabadell, records indicate that,
from 1981 until 2000, foreign affiliates of Banco Atlantico in
Gibraltar; Madrid, Spain; and Zurich, Switzerland repeatedly
transferred substantial sums of money to Pinochet accounts at
Riggs Bank in the United States, totaling in excess of $5.8
million.
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\136\ Information about Banco Atlantico is taken from its website,
public filings, subpoenaed documents, interviews with bank
representatives, and information supplied by other financial
institutions. The relevant documents are maintained in Subcommittee
files.
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Banco Atlantico and Banco de Sabadell fully cooperated with
Subcommittee requests for documents and related information,
providing all requested U.S. documentation. Citing bank secrecy
laws, however, neither bank supplied any records from Banco
Atlantico's overseas affiliates in Gibraltar, Madrid, and
Zurich.\137\ Information about transactions involving these
foreign affiliates were reconstructed from Banco Atlantico wire
transfer records and from records produced by other financial
institutions. In addition, the Subcommittee obtained
information suggesting that the Banco Atlantico affiliate in
Gibraltar may have had a single account opened in the name of
Mr. Pinochet and his son, Marco Pinochet.
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\137\ In addition, records related to Banco Atlantico Gibraltar
Ltd. were unavailable because, in November 2004, Banco Atlantico sold
its Gibraltar branch to the European Financial Group (EFG) of
Switzerland, and transferred all of its Gibraltar records to EFG. Banco
Atlantico indicated that all of its Gibraltar staff switched employment
to EFG as well, which meant that none of Banco Atlantico's current
staff had personal knowledge of the Pinochet accounts in Gibraltar.
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While limited documentation prevents a complete analysis of
the Pinochet transactions involving Banco Atlantico, the
evidence available to the Subcommittee indicates that, between
1981 and 2000, more than $5.8 million was transferred from
Banco Atlantico's overseas affiliates to Pinochet-related
accounts at Riggs Bank through 13 wire transfers and one check.
The 13 wire transfers were routed through a Banco Atlantico
branch in New York before being transmitted to Riggs.\138\ The
paperwork associated with these transactions reference Augusto
Pinochet; ``Ramon Pinochet'' and ``A.P. Ugarte'' disguised
variants of his name; ``Daniel Lopez,'' a Pinochet alias;
``M.L. Hiriart'' or ``M. Hiriart,'' believed to be Mr.
Pinochet's son (but possibly his wife); ``Marco P. Hiriart''
and ``Mario P. Hiriart,'' believed to be Mr. Pinochet's son;
and various Chilean military officers with Riggs accounts in
Miami.
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\138\ The Banco Atlantico office in New York office has since
closed.
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According to the available records, one check originated in
Madrid, one wire transfer originated in Zurich, and eight wire
transfers originated in Gibraltar. Due to incomplete records,
the origins of four other transfers cannot be determined, but
they likely originated overseas since there were no Pinochet
accounts at Banco Atlantico in the United States. The key
transactions are the following.
--On November 23, 1981, a Banco Atlantico account in
Madrid sent a $400,000 check payable to ``El Portador,'' the
bearer of the check. This check was deposited into Miami Riggs
Account No. 350413, which had been opened that same day in the
name of Jorge Ballerino Sanford and/or Ramon Castro Ivanovic.
This account was the first of the military officer accounts at
Riggs Bank in Miami, as described earlier.
--On July 19, 1994, ``M. Hiriart'' sent a $250,000 wire
transfer through the Banco Atlantico New York correspondent
account to Miami Riggs Account No. 710053, opened in the name
of Daniel Lopez in trust for Augusto J. Pinochet.
--On July 25, 1994, a Banco Atlantico account in Zurich
sent a $147,000 wire transfer to Miami Riggs Account No. 709345
opened in the name of Gabril Vergara Cifuentes, a Chilean
military officer. No originator's name was provided on the wire
transfer.
--In November 1994, ``M. Hiriart'' sent a $627,000 wire
transfer through the Banco Atlantico New York correspondent
account to Miami Riggs Account No. 710053, opened in the name
of Daniel Lopez in trust for Augusto J. Pinochet.
--On February 3, 1995, ``RAPI'' sent a $217,000 wire
transfer through the Banco Atlantico New York correspondent
account to Miami Riggs Account No. 710467 opened in the name of
Juan Ricardo Mac-Lean Vergara, a Chilean military officer.
--On September 25, 1995, ``Mario P. Hiriart'' sent a
$417,000 wire transfer from a Banco Atlantico account in
Gibraltar to Miami Riggs Account No. 710467 opened in the name
of Juan Ricardo Mac-Lean Vergara, a Chilean military officer.
--On February 22, 1996, ``Marco P. Hiriart'' sent a
$226,000 wire transfer from a Banco Atlantico account in
Gibraltar to Miami Riggs Account No. 710467 opened in the name
of Juan Ricardo Mac-Lean Vergara, a Chilean military officer.
--On September 26, 1996, ``M. Hiriart'' sent a $365,167
wire transfer for ``M.L. Hiriart'' from a Banco Atlantico
account in Gibraltar to Washington Riggs Account No. 76750393
opened in the name of Augusto Pinochet Ugarte and/or Lucia
Hiriart Rodriguez.
--On May 28, 1996, ``Marco Hiriart'' sent a $427,344 wire
transfer from a Banco Atlantico account to Washington Riggs
Account No. 76750393 opened in the name of Augusto Pinochet
Ugarte and/or Lucia Hiriart Rodriguez.
--On February 25, 1997, ``M. Hiriart'' sent a $805,442
wire transfer for ``M.L. Hiriart'' from a Banco Atlantico
account in Gibraltar to Washington Riggs Account No. 76750393
opened in the name of Augusto Pinochet Ugarte and/or Lucia
Hiriart Rodriguez.
--On May 27, 1997, ``M. Hiriart'' sent a $843,397 wire
transfer for ``M.L. Hiriart'' from a Banco Atlantico account in
Gibraltar to Washington Riggs Account No. 76750393 opened in
the name of Augusto Pinochet Ugarte and/or Lucia Hiriart
Rodriguez.
--On March 10, 1998, ``Marco P. Hiriart'' sent a $143,110
wire transfer for ``Sr. AP Ugarte'' from a Banco Atlantico
account in Gibraltar to London Riggs Account No. 74041013, an
account which is unknown to the Subcommittee.
--On January 29, 1999, ``Ramon Pinochet'' sent a $499,985
wire transfer for ``Transamerica Merchant International'' from
a Banco Atlantico account in Gibraltar to Account No. 449700000
at Refeo Capital Market International bank, an account which is
unknown to the Subcommittee.
--On July 24, 2000, ``M.L. Hiriart'' sent a $487,111 wire
transfer for ``M.L. Hiriart'' from a Banco Atlantico account in
Gibraltar to Washington Riggs Account No. 76835282 opened in
the name of Augusto Pinochet Ugarte and/or Lucia Hiriart de
Pinochet.
These transfers and other information available to the
Subcommittee indicate that Mr. Pinochet and his family had at
least one account at the Zurich branch of Banco Atlantico. When
the Zurich branch closed in 1994, the evidence indicates that
the Pinochet account or accounts were transferred to the Banco
Atlantico branch in Gibraltar. The number of Pinochet-related
accounts located in the Gibraltar branch remains unclear; some
information obtained by the Subcommittee suggests there may
have been just one joint account for Mr. Pinochet and his son,
but the wire transfer documentation indicates it is also
possible there were three accounts for Mr. Pinochet, his wife,
and his son Marco. In November 2004, the Gibraltar affiliate
was sold to the European Financial Group of Switzerland;
information provided to the Subcommittee indicates that, at the
time of the sale, one or more of the Pinochet accounts was
apparently still in existence and allegedly disclosed to the
buyer as part of the due diligence process associated with that
sale.
Bank of America. Bank of America is one of the largest
financial institutions in the United States, managing assets in
excess of $470 billion and reporting net income in 2004 of
about $14 billion.\139\ It offers clients a wide range of
financial services, including retail banking, private banking,
credit cards, brokerage services, and investment advice.
According to the bank's website, it employs over 175,000
individuals worldwide, maintains offices in 35 countries, and
supports clients in 150 countries.
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\139\ Information about Bank of America is taken from its website,
public filings, subpoenaed documents, interviews with bank
representatives, and information supplied by other financial
institutions. The relevant documents are maintained in Subcommittee
files.
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Bank of America fully cooperated with Subcommittee requests
for documents and related information, providing all requested
U.S. documentation. Citing bank secrecy laws, however, the bank
did not supply any records from foreign affiliates which, the
bank disclosed, ``may maintain or may have maintained accounts
in Chile and Spain'' for Mr. Pinochet or his family.\140\
Information about a few transactions involving BankBoston and
Mr. Pinochet have been reconstructed from records produced by
other financial institutions.
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\140\ Letter dated 12/20/04, from Bank of America to the
Subcommittee. In 2004, Bank of America completed its acquisition of
FleetBoston, and all of its affiliates, including BankBoston in Chile
which is known to have maintained accounts for Mr. Pinochet and other
family members.
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Account records indicate that, from 1993 until 2004, Bank
of America maintained three U.S. accounts and as many as six
CDs at a time for Mr. Pinochet's daughter, Ines Lucia Pinochet.
At least three of these CDs, in the amount of $100,000 or more,
were purchased in 2002; the other CDs, which ranged in value
from $10,000 to $125,000, were purchased between 1996 and 2002,
and some were held in trust for one or more of her sons. The
maximum amount of funds in Ms. Pinochet's Bank of America
accounts at one time totaled about $420,000, in December 2002.
One source for the funds in the accounts was a $300,000
Riggs cashiers check issued in September 2002, which withdrew
funds from Ms. Pinochet's account at Riggs in London. The
cashiers check was deposited into Ms. Pinochet's Bank of
America account on September 30, 2002. Nine days later, on
October 9, Ms. Pinochet purchased three $35,000 Bank of America
cashiers checks and later deposited two of them into an account
she held at PineBank in Miami. Also, on October 9, 2002, she
wrote a $60,000 personal check from her Bank of America account
to her PineBank account, for a total transfer from her Bank of
America account to her PineBank account of $130,000. Bank of
America closed her U.S. accounts in 2004.
In addition, documents obtained by the Subcommittee from
Riggs Bank show that BankBoston in Chile, cashed two cashiers
checks for Mr. Pinochet in 2001, that together provided him
with $100,000.
--On January 3, 2001, BankBoston cashed a Riggs cashiers
check dated August 18, 2000, for $50,000, made payable to
``Augusto Pinochet.''
--On October 1, 2001, BankBoston cashed a Riggs cashiers
check dated May 15, 2001, for $50,000, made payable to ``Maria
Hiriart and/or Augusto P. Ugarte.''
Because bank secrecy laws in Chile preclude Bank of America
from producing documentation related to these transactions, the
Subcommittee does not know who presented the Riggs cashiers
checks to BankBoston. According to a Chilean appeals court
finding, the checks were cashed at BankBoston ``by a third
party, despite the fact that they were nominative. Then various
amounts of the cash in dollars were changed to cash in Chilean
pesos on the informal market so that said transaction would not
be reported to the Central Bank.'' \141\
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\141\ Case No. 1649-2004, Court of Appeals of Santiago, 12/10/04,
at 7.
Coutts & Co. (USA) International. Coutts & Co. (USA)
International is an Edge Act corporation that was once part of
the Miami-based Coutts Group, which is the international
private banking arm of The Royal Bank of Scotland Group.\142\
In May 2003, the Coutts Group sold Coutts & Co. (USA)
International and its Latin American private banking division
to Banco Santander Central Hispano (``Banco Santander''). Banco
Santander is one of the largest banks in Chile and in Europe.
Coutts & Co. (USA) International became part of Banco
Santander's International Private Banking Unit, which manages
about $25 billion globally. Coutts & Co. (USA) International is
headquartered in Miami.
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\142\ Information about Coutts & Co. (USA) International and its
parent Banco Santander is taken from their websites, public filings,
subpoenaed documents, interviews with bank representatives, and
information supplied by other financial institutions. The relevant
documents are maintained in Subcommittee files.
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Banco Santander has cooperated with Subcommittee requests
for documents and related information pertaining to Coutts &
Co. (USA) International. Because Banco Santander purchased
Coutts & Co. (USA) International in 2003, and the Coutts
accounts were not transferred to Banco Santander until January
2004, its personnel is not familiar with many of the
transactions involving Mr. Pinochet, which took place years
earlier. The bank also no longer employs the Coutts personnel
who had knowledge of these transactions. Information about some
of the transactions involving Coutts & Co. (USA) International
has been supplemented from records produced by other financial
institutions.
The evidence available to the Subcommittee indicates that,
beginning in 1993, Coutts & Co. (USA) International opened
multiple accounts for Eastview Finance S.A. and Tasker
Investments Ltd., offshore corporations controlled by Oscar
Aitken, the Chilean lawyer with ties to Mr. Pinochet.\143\
Acting as an introducing broker, Coutts also helped Eastview
Finance open a brokerage account at Pershing Securities in June
2001.
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\143\ Eastview Finance had Account Nos. 763802 and 763810, as well
as a custody account, while Tasker Investments Ltd. had Account Nos.
56297511 and 56297521. Coutts also maintained other accounts for Mr.
Aitken.
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In December 1999, as part of its process for closing its
Pinochet-related accounts, Espirito Santo Bank wire transferred
all of the funds in the Pinochet joint account, the Trilateral
account, and the Santa Lucia account, totaling about $2.3
million, to Coutts & Co. (USA) International for further credit
to Eastview Finance. One of the four wire transfers used to
transfer the funds to Coutts referenced ``A.P. Ugarte,'' the
name of the account at Espirito Santo Bank that was the source
of the funds. The account documentation indicates that, as part
of the process of accepting the Espirito Santo wire transfers
totaling about $2.3 million, the Coutts account manager
assigned to the Eastview account was required to explain the
source of the incoming funds. The account manager indicated
that the source of the funds was Mr. Aitken's business
investments and rental properties. According to Banco
Santander, Mr. Aitken never informed the bank that the Eastview
account or the incoming funds were associated with Mr.
Pinochet.
Once the $2.3 million was deposited into the Eastview
account at Coutts, the funds were invested in short term CDs.
In March 2000, some of the CDs matured and $400,000 was
transferred out of Coutts to an account at a Chilean financial
services firm, called Monex. In October 2000, other CDs with a
value of about $1.9 million matured, and Eastview Finance
invested part of the funds, about $1.49 million, in a fixed
income financial instrument offered by Pulsar Internacional, a
Mexican holding company. The remaining $500,000 was transferred
to Monex in November 2000.
Over the 11 years it was open, from 1993 until 2004, the
Eastview account at Coutts experienced significant activity and
substantial funds transfers. While the nature of many of these
transactions cannot be determined, some of the transactions
involve financial institutions with Pinochet-related accounts
and the source of much of the funds in the account after
December 1999, can be traced to Pinochet funds transferred from
Espirito Santo Bank. For example, in November 1997, the
Eastview account at Coutts sent a $394,000 wire transfer to a
Tasker account at Morgan Stanley. In April 2002, an Eastview
account at Banco de Chile-United States, Account No. 105033261,
sent a $26,156 wire transfer to the Eastview account at Coutts.
In April 2002, the Eastview account at Coutts sent a $200,000
wire transfer to a Monex account at Banco de Chile New York,
and the wire instructions referenced ``Abanada Finance Ltd.'' A
similar transfer for $35,000 took place in October 2002. In
March 2002, the Eastview account at Coutts sent a $1,500 wire
transfer to Bank Leumi in Miami for ``Aleman, Cordero, Galindo
and Lee `re: GLP'.'' A similar transfer of $1,200 occurred in
September 2002. In November 2003, the Eastview account at
Coutts sent a $132,000 wire transfer to the Tasker account at
Lehman Brothers, Account No. 74315017, that had been set up by
Banco de Chile. It is clear that the Eastview account at Coutts
functioned as a conduit for Pinochet funds. Whether the Tasker
account also received Pinochet funds is currently unclear.
In addition to maintaining the Aitken-related corporate
accounts, Coutts also played a role in the November 1997 loan
issued by the New York branch of Banco de Chile-United States
to Augusto Pinochet for $500,000. When the loan was issued, Mr.
Pinochet immediately withdrew the loan proceeds using a
personal check drawn on his New York Banco de Chile account and
made the check payable to Coutts & Co. (USA) International. The
check was delivered on the same day to the Miami office of
Coutts. At the same time, Mr. Aitken asked Coutts to use the
check to purchase four CDs in the name of Eastview Finance,
each in the amount of $125,000, which would be picked up later
by representatives of Banco de Chile in Miami. Coutts declined
to complete the transaction, however, before the personal check
had time to clear. Instead, Coutts delivered the check to the
Miami branch of Banco de Chile. On the same day, the Miami
branch sent Coutts a Banco de Chile cashiers check for
$500,000. Coutts accepted the cashiers check and, in return,
issued a Coutts cashiers check in the same amount. The Coutts
cashiers check was then delivered to the Miami branch of Banco
de Chile, where it was used to buy four CDs in the name of
Eastview Finance. In response to questions, Banco Santander has
indicated that it does not know why Coutts was involved in this
transaction nor what role it played.
In 2003, Coutts was sold to Banco Santander. According to
Banco Santander, the Aitken accounts were not identified by
Coutts during the due diligence process. In the late fall of
2004, the Aitken offshore corporate accounts were brought to
the attention of Banco Santander, and the bank closed all of
its accounts related to Mr. Aitken, except for one. The only
account now open is the Eastview account holding the Pulsar
financial instrument. According to Banco Santander, Pulsar
Internacional declared bankruptcy and the Pulsar financial
instrument is currently tied up in bankruptcy proceedings.
Banco Santander has allowed the account to remain open pending
the identification of a purchaser or resolution of the
bankruptcy matter, but has frozen all activity in the account.
Ocean Bank. Ocean Bank is a state-chartered bank which
offers a range of financial services, including private
banking, consumer lending, corporate lending, and merchant card
processing.\144\ According to its website, Ocean Bank managed
over $4.6 billion in assets last year and increased its income
by more than 50 percent from 2003 to 2004. It is headquartered
in Miami and operates 23 branches in Florida.
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\144\ Information about Ocean Bank is taken from its websites,
public filings, interviews with bank representatives, and information
supplied by other financial institutions. The relevant documents are
maintained in Subcommittee files.
---------------------------------------------------------------------------
Ocean Bank fully cooperated with Subcommittee requests for
information. Information about some of the accounts and
transactions involving Ocean Bank has been reconstructed from
records produced by other financial institutions.
Ocean Bank currently maintains at least four accounts and
CDs for Mr. Pinochet's son, known to the bank as Marco Antonio
Hiriart. A checking account, first opened in December 1998,
currently holds a modest balance. Three CDs have a total value
in excess of $325,000, two of which were established in 2003,
and one in 2004.
The source of funds for the three CDs appears to have been
Cititrust Account No. 10328149, a Bahamas account opened in the
name of Meritor Investments Ltd., the Bahamian offshore
corporation controlled by Marco Pinochet. Between October 2003
and June 2004, at least five wire transfers, totaling $349,326,
moved funds from the Meritor account in the Bahamas to the
Ocean Bank checking account in Miami. In addition, Cititrust
records show that, on June 8, 1995, Meritor Investments Ltd.
sent a $81,300 wire transfer to an Ocean Bank account for
Sociedad de Inversiones Fermar Limitada, a Chilean real estate
company owned by Marco Pinochet. This wire transfer indicates
that Mr. Hiriart had a fifth account at Ocean Bank, opened as
early as 1995, in the name of his Chilean corporation. The
current status of the Sociedad de Inversiones Fermar Limitada
account is unknown.
PineBank. PineBank N.A. is a small, nationally chartered
bank located in Miami, Florida.\145\ According to its website,
it specializes in global trade finance and international
private banking focused on Latin America, the Caribbean, and
emerging markets.\146\ Bank records indicate that Augusto
Pinochet's grandson, Rodrigo Andres Garcia, the son of Ines
Lucia Pinochet, is employed by the bank.
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\145\ Information about PineBank N.A. is taken from its website,
public filings, subpoenaed documents, and information supplied by other
financial institutions. The relevant documents are maintained in
Subcommittee files.
\146\ Among other countries in Latin America, PineBank conducts
business related to Chile. In 2003, PineBank as well as the Bank of New
York, and Banco de Chile's New York branch, were accused of accepting
stolen certificates of deposit from a Chilean government business
development agency, the Corporation for the Promotion of Production
(``Corfo''), in a $100 million major fraud carried out by insiders at
Corfo and a brokerage firm Inverlink. Legal proceedings related to this
matter are ongoing. See, e.g., ``Chile `` Shaken But Not Broken,'' The
Banker, 5/1/03; ``Chilean financial scandal hits US shores,'' UPI, 11/
7/03.
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PineBank fully cooperated with Subcommittee requests for
documents and related information. Information about some of
the accounts and transactions involving PineBank has been
reconstructed from records produced by other financial
institutions.
The bank maintained several accounts and CDs for Ms.
Pinochet from 2001 until 2004. The first account was opened on
August 15, 2001, in the name of ``Ines L. Hiriart.'' Over time,
the bank established three CDs for her, with a total value of
about $170,000. Bank of America records show that between
October and December 2002, Ms. Pinochet transferred $130,000
from an account at that bank to a PineBank account, using funds
traceable to her Riggs account in London. In December 2002,
PineBank issued her a loan to purchase real estate in Chile. In
2003, her account received deposits totaling about $150,000
from Sun Trust Bank, which Ms. Pinochet explained were related
to a sale of real estate in Florida. According to the bank's
due diligence records, the source of funds in Ms. Pinochet's
accounts came primarily from real estate sales and marital
assets, and her parents did not play any apparent role in the
banking relationship. In 2004, PineBank closed all of her
accounts.
Other Financial Institutions. In addition to the financial
institutions named above, the Subcommittee investigation saw
evidence of transactions involving Mr. Pinochet, his immediate
family, offshore entities he controls, or third parties willing
to act as conduits for Pinochet funds at a number of other
financial institutions operating in the United States,
including American Express; Bank Atlantic in Miami; First
National Bank and Trust Company in Stuart, Florida; Kislam
National Bank in Miami; Morgan Stanley; and Swiss Bank
Corporation which is now part of UBS AG. Limited Subcommittee
resources have precluded an analysis of each of these
transactions and related financial accounts.
E. A Secret Web of Accounts
Because Mr. Pinochet was able to open or utilize accounts
at so many financial institutions operating in the United
States, often under disguised names, he was able to construct a
secret web of U.S. accounts that he could use to move funds and
transact business with little or no notice from U.S. regulators
or law enforcement. He used these accounts to complete
transactions, not only within the United States, but also
across international lines.
One of the ways he kept this web of accounts secret was his
use of multiple account names, as described throughout this
Report. The Subcommittee also located at least three different
Chilean passports that Mr. Pinochet used when opening accounts
at U.S. financial institutions.\147\ One is an official
diplomatic passport issued in the name of ``Augusto Pinochet
Ugarte.'' \148\ Another is a non-diplomatic passport issued in
the name of ``Augusto P. Ugarte.'' \149\ The third is a non-
diplomatic passport issued in the name of ``Jose Ramon
Ugarte.'' \150\ The three passports have different
identification numbers, different photographs, and different
signatures. It is possible that his use of these different
passports made it more difficult for financial institutions,
regulators, and law enforcement to track his various accounts.
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\147\ The Chilean government informed the Subcommittee that a
Chilean judge has taken possession of four different passports for Mr.
Pinochet, removed from one of Mr. Pinochet's offices in Chile. It is
not known whether those passports match one or more of the passport
copies on file with U.S. financial institutions.
\148\ See Riggs document, copy of Passport No. D002569, from
documentation associated with Miami Account No. 707547, Bates
RNB032201.
\149\ See Riggs document, copy of Passport No. A029627, from
documentation associated with London Account No. 25005393, Bates
RNB033779.
\150\ See Citigroup document, copy of Passport No. A010625, from
documentation associated with New York Account No. 10040217, Bates
C000071.
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The following examples help illuminate how Mr. Pinochet
used his various accounts to manipulate the U.S. financial
system, move funds, and transact business.
Moving Money from Gibraltar to Washington to Santiago. On
July 17, 2000, ``M. L. Hiriart,'' believed to be Mr. Pinochet's
son Marco (but possibly Mr. Pinochet's wife), attempted to wire
$487,111 from Banco Atlantico in Gibraltar to Riggs Bank
Account No. 76750393, a joint account for Mr. Pinochet and his
wife in Washington. Because that Riggs account had been closed
in 1999, the transfer was not completed. One week later, on
July 24, $487,111 was successfully transferred from Banco
Atlantico in Gibraltar to Washington Riggs Bank Account No.
76835282, a successor joint account opened in the name of
Augusto Pinochet Ugarte and/or Lucia Hiriart de Pinochet.\151\
The monthly statement for this joint account, covering the
month of July 2000, shows an opening balance of $82,447.49, and
a new balance of $569,964.82 on July 24, the final day of the
statement period. At that point, the funds transferred from
Gibraltar comprised the vast majority of the funds in the Riggs
joint account.\152\
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\151\ Letter dated 12/15/04, from Banco de Sabadell, S.A., Miami
Agency to the Subcommittee; Riggs Bank monthly statement for Account
No. 76835282, 6/22/00 through 7/24/00, Bates RNB 033008. The funds also
went through the New York correspondent account of Banco Atlantico.
\152\ See Riggs Bank monthly statement for Account No. 76835282, 6/
22/00 through 7/24/00, Bates RNB033009.
---------------------------------------------------------------------------
On August 18, 2000, the first significant activity in the
joint account since the July 24 wire transfer was a debit of
$400,056. These debited funds were used to finance eight
cashiers checks issued by Riggs in the amount of $50,000
each.\153\ Each of these cashiers checks was made payable to
Augusto Pinochet. A Riggs private banker then flew to Santiago,
Chile and hand-delivered the cashiers checks to Mr.
Pinochet.\154\ By September 1, 2000, the checks began to be
cashed at BankBoston and Banco de Chile branches in
Santiago.\155\ Over the following 4 months, according to an
appeals court in Chile, the checks ``were cashed at Banco de
Chile and Bank Boston by a third party, despite the fact that
they were nominative. Then various amounts of the cash in
dollars were changed to cash in Chilean pesos on the informal
market so that said transaction would not be reported to the
Central Bank.'' \156\
---------------------------------------------------------------------------
\153\ See Riggs Bank monthly statement for Account No. 76835282, 7/
25/00 through 8/21/00, Bates RNB033009; Riggs Negotiable Instrument
Issuance Log, 8/18/00, Bates OCC0000045748. Reprinted in 2004 Hearing
Record at 1091. Riggs charged a $7 fee for each of the cashiers checks.
\154\ See 2004 Hearing Record at 151.
\155\ See, e.g., Riggs Cashiers Check No. 1674316, payable to
Augusto Pinochet, Bates OCC0000045749, reprinted in 2004 Hearing Record
at 1092-3.
\156\ Case No. 1649-2004, Court of Appeals of Santiago, 12/10/04,
at 7.
---------------------------------------------------------------------------
In this example, then, funds went from a Banco Atlantico
account in Gibraltar, to a Riggs account in Washington, were
converted into cashiers checks that were physically carried to
Mr. Pinochet in Santiago, were then converted into dollars as
the checks were cashed, and were ultimately converted into
pesos on the Chilean black market. How the funds were used
subsequently is currently unknown to the Subcommittee.
Moving Money from New York, the Bahamas and Gibraltar to
Washington. On April 22, 1996, Mr. Pinochet's son, Marco
Pinochet Hiriart, faxed a letter to Carol Thompson, the Senior
Vice President of Latin America in Riggs Embassy Banking
Division, requesting specific information to wire transfer
funds to an account in his mother's name at Riggs Bank in
Washington.\157\ The following day Ms. Thompson replied with a
letter providing the requested information.\158\ Two days
later, on April 25, Marco Pinochet sent a $403,000 wire
transfer from New York Citigroup Account No. 10328149, opened
in the name of Meritor Investments, to a Cititrust clearing
account in the Bahamas. Meritor Investments Ltd. is a Bahamian
offshore corporation controlled by Marco Pinochet and
administered by Cititrust, a Citigroup affiliate located in the
Bahamas. It is not clear why the funds from the New York
account went to the Cititrust clearing account in the Bahamas
instead of the normal Citibank Private Bank clearing account in
New York; it is possible that this routing was done to remove
the name of Meritor Investments, the true originator of the
funds, from the wire transfer documentation. On April 25, the
$403,000 was deposited into Riggs Bank Account No. 76750393, a
joint account for Mr. Pinochet and his wife in Washington,
D.C.\159\
---------------------------------------------------------------------------
\157\ See letter from Marco P. Hiriart to M. Carol Thompson, 4/22/
96, Bates RNB029549.
\158\ See letter from Maria Carol Thompson to Marco P. Hiriart, 4/
23/96, Bates RNB029547.
\159\ See Riggs money transfer documents, 4/25/96, Bates RNB029114-
16. See also Cititrust monthly statement for Meritor Investments Ltd.,
Account No. 10328149, 4/1/96 through 4/30/96, Bates C008265-66. At the
time of the transfer, the Meritor account had a balance of $5,057.
After the transfer was completed, the account had an overdraft of
$397,942. On April 30, $403,000 was deposited into the Meritor account,
covering the overdraft. The source of funds for this deposit has not
been established.
---------------------------------------------------------------------------
In Washington, the monthly statement for the Riggs joint
account, covering the month of April 1996, shows an opening
balance of $374,701.97. A new balance of 779,410.03, which
includes the transferred sum, appears on April 30, the final
day of the statement period. At that point, the funds
transferred from the Meritor account comprised the majority of
the funds in the Riggs joint account.\160\
---------------------------------------------------------------------------
\160\ See Riggs Bank monthly statement for Account No. 76750393, 4/
1/96 through 4/20/96, Bates RNB032144.
---------------------------------------------------------------------------
Two weeks later, on May 13, 1996, the Pinochet joint
account received a deposit of $1 million, plus interest, from a
CD which had matured. Two days later the CD was renewed, and $1
million was debited from the account to finance the new
CD.\161\ Two weeks after that, on May 28, ``Marco Hiriart''
sent a $427,344 wire transfer from Banco Atlantico in Gibraltar
to the same joint account of his parents at Riggs Bank in
Washington, increasing the account balance to more than $1.2
million.\162\
---------------------------------------------------------------------------
\161\ See Riggs Bank monthly statement for Account No. 76750393, 5/
1/96 through 5/31/96, Bates RNB033148.
\162\ Id.
---------------------------------------------------------------------------
Three days later, on May 31, 1996, a series of transactions
moved $1 million from the Pinochet joint account in Washington
to an investment account opened in the name of Ashburton Co.
Ltd., a Bahamian offshore corporation controlled by Mr.
Pinochet. First, $1.1 million was transferred from Mr. and Mrs.
Pinochet's joint account into a Riggs International Private
Banking Division clearing account.\163\ From the clearing
account, the funds were transferred to Washington Riggs Account
No. 76715547, a money market account that had been opened in
the name of Ashburton. At the time of the transfer, the
Ashburton money market account in Washington had a zero
balance.\164\ On the same day, May 31, $1 million was
transferred from the Ashburton money market account in
Washington to Riggs Account No. 2121401/640041018, an
investment account which was then managed by Riggs Bank & Trust
Co. (Bahamas) td. for Ashburton.\165\
---------------------------------------------------------------------------
\163\ Id.
\164\ See Riggs Bank monthly statement for Account No. 76715547, 5/
31/96 through 6/30/96, Bates RNB032148.
\165\ Interview with Riggs Bank representative. See also Riggs Bank
monthly statement for Account No. 76715547, 5/31/96 through 6/30/96,
Bates RNB032148.
---------------------------------------------------------------------------
In this example, the funds originated at Marco Pinochet's
offshore corporation. The funds moved from the corporation's
New York account through a Cititrust account in the Bahamas,
joined funds sent from a Banco Atlantico account in Gibraltar,
and ended up in a Riggs account in Washington, D.C. for Augusto
Pinochet and his wife. From there, the funds went to Augusto
Pinochet's offshore corporation's money market account, and
finally to his offshore corporation's investment account.
These two examples show how Augusto Pinochet used accounts
opened in his name, the name of his immediate family members,
and in the name of offshore entities controlled by him or his
family members to move funds quickly and quietly across three
continents, with no questions asked. Countless other examples
are possible.
Uncovering the Web. Despite the decades-long existence of
multiple Pinochet-related accounts at multiple financial
institutions operating in the United States, until 2004, U.S.
financial regulators and law enforcement apparently were
unaware that Augusto Pinochet had constructed an extensive
network of U.S. accounts and was using them on a regular basis
to move funds and transact business. The OCC came closest to
uncovering this secret web of accounts in mid-2002, but its
inquiries at that time to three banks apparently generated
insufficient information about Pinochet-related accounts to
sustain a larger investigation.
In June 2002, two OCC examiners were in the midst of
conducting the agency's targeted review of the Pinochet
accounts at Riggs Bank. As part of that review, the OCC
examiners noted a number of transactions involving other
financial institutions, and contacted Citigroup, Banco de
Chile-United States, and Bank of America to determine whether
they, too, had Pinochet accounts in the United States.
OCC documentation indicates that, in response, Citigroup
told the OCC that it did not have any accounts for Mr. Pinochet
or his wife, without mentioning the dozens of accounts it
maintained for Marco, Ines Lucia, and Maria Veronica Pinochet
or the fact that the bank had previously provided multiple
accounts to Mr. Pinochet. Citigroup has indicated that none of
its personnel recall conveying this information to the OCC and
cannot explain why the bank would not have followed its normal
practice of disclosing related and closed accounts. Banco de
Chile-United States told the OCC about the U.S. accounts it had
provided Mr. Pinochet from 1995 to 1999, and about the bank's
longstanding relationship with the Pinochet family in Chile,
but reported no existing U.S. Pinochet accounts in 2002. The
bank did not then disclose that certain Aitken-related accounts
in the United States had served as conduits for Pinochet funds
in the past nor did it later contact the OCC when it received
the $6 million transfer from Riggs Bank in mid-July. Banco de
Chile has said that it was not then aware that the $6 million
was associated with Mr. Pinochet. Bank of America told the OCC
that its only U.S. accounts were for Mr. Pinochet's daughter,
Ines Lucia Pinochet. The bank had not then acquired any foreign
affiliates, such as BankBoston, with Pinochet accounts outside
of the United States.
After receiving this information from the three banks, the
OCC examiners reviewed the closed Banco de Chile accounts for
Mr. Pinochet and the current Bank of America accounts for Mr.
Pinochet's daughter. The examiners made no further inquiry to
Citigroup about transactions indicating it had handled Pinochet
funds. After reviewing the account documentation, the OCC
examiners took no action to determine what happened to the
Pinochet funds at Riggs Bank once that bank closed its Pinochet
accounts in July and August 2002.
Part of the reason for the examiners' inaction may have
been that, around the same time in mid-July, the longstanding
OCC Examiner-in-Charge at Riggs Bank announced that he planned
to retire from the OCC, was offered a position at Riggs Bank,
and then recused himself from all matters involving the bank
until he left the agency, which occurred in October 2002. As
indicated in the Subcommittee's 2004 Minority Staff Report, the
Examiner-in-Charge also instructed the two OCC examiners who
had completed the Pinochet review not to include their
examination memorandum in the OCC's electronic files for Riggs
Bank. He apparently gave them no further instructions about the
Pinochet accounts at Riggs. When a new Examiner-in-Charge began
work, he was immediately confronted with other issues involving
Riggs Bank and apparently did not perform any additional
analysis related to the Pinochet accounts nor did he inquire as
to the destination of the Pinochet funds that left Riggs.
By failing to trace what happened to the $6 million in
Pinochet funds that left Riggs, both the OCC and the Federal
Reserve failed to learn that these funds went to another
financial institution operating in the United States. They also
failed to learn that Mr. Pinochet was using accounts belonging
to offshore corporations at that financial institution to move
funds and transact business, and that he opened related
accounts at a U.S. securities firm. Mr. Pinochet was able to
make use of these accounts for an additional 2 years.
Banco de Chile-United States has pointed out that if the
OCC, Federal Reserve Bank, or Riggs Bank had alerted it in 2002
to the money laundering concerns related to the $6 million in
Pinochet funds, it could have protected the bank's reputation
by refusing the funds transfer. Timely notice would also have
helped the bank to prevent Mr. Pinochet from adding to his
secret web of accounts in the United States.
It was not until 2004, that the OCC and Federal Reserve
renewed their efforts to locate Pinochet-related accounts at
other financial institutions operating in the United States.
After the Subcommittee hearing on July 15, 2004, a number of
banks filed Suspicious Activity Reports describing transactions
or accounts involving Mr. Pinochet. Citigroup contacted both of
its regulators in July with information about its past and
current relationship with the Pinochet family. In September,
Banco de Chile disclosed the Pinochet funds deposited into U.S.
accounts opened for the offshore corporations controlled by Mr.
Aitken. As regulators worked with these and other banks, the
web of U.S. accounts constructed by Mr. Pinochet was gradually
revealed.
Section 314(b) Inquiries. Significant work tracing Pinochet
funds and accounts at other financial institutions was also
performed by Riggs Bank. Once Riggs established its Security &
Investigations Group in the summer of 2003, that office began
to trace certain Pinochet-related transactions to learn more
about the source of the funds in the Riggs accounts. As part of
this effort, Riggs contacted a number of financial institutions
to obtain more information about specific transactions and
accounts. In most cases, Riggs sent an inquiry under Section
314(b) of the Patriot Act which allows financial institutions
to share information about ``individuals, entities,
organizations and countries suspected of possible terrorist or
money laundering activities,'' without incurring legal
liability for disclosing information.
Most of the contacted financial institutions provided Riggs
with the requested information and worked with Riggs to
understand the underlying transactions, but a few financial
institutions did not. One bank, Citigroup, declined to provide
any information in response to Riggs' Section 314(b) requests.
When the Subcommittee asked why, Citigroup pointed out that, at
the time the requests were made, Riggs was under civil and
criminal investigations raising questions about the bank's
management and operations. Another bank, Banco Atlantico,
expressed a willingness to cooperate but asserted it was unable
to assist, because the requested information involved
transactions handled by its foreign affiliates and those
affiliates operated under bank secrecy laws prohibiting client-
specific disclosures, even to an affiliate.\166\
---------------------------------------------------------------------------
\166\ This same intrabank disclosure problem was discussed at the
Subcommittee's 2004 hearing in connection with Riggs accounts opened
for Equatorial Guinea. See, e.g., 2004 Hearing Record at 168-69
(``[B]anks in the United States attempting to do due diligence on large
wire transfers to protect against money laundering are unable to find
out from their own foreign affiliates key account information. This bar
on disclosure across international lines, even within the same
financial institution, present a significant obstacle to U.S. anti-
money laundering efforts.'') aws that prevent U.S. and foreign
affiliates of the same financial institution from exchanging client-
specific information remain a substantial impediment to anti-money
laundering efforts.
---------------------------------------------------------------------------
Still another bank, Espirito Santo Bank in Miami,
interpreted the legal protections afforded by Section 314(b) so
narrowly, that it failed to provide highly relevant
information. In response to a Riggs request letter dated
December 8, 2004, Espirito Santo Bank responded on February 14,
2005, that it had opened an account for ``A.P. Ugarte or M.
Lucia Hiriart.'' At the same time, the bank failed to disclose
additional accounts which had been opened by Mr. Pinochet in
the name of offshore entities he controlled. Espirito Santo
Bank wrote:
``The request also referenced possible personal investment
companies or trusts established in the names of Augusto Jose
Ramon Pinochet Ugarte or Maria Lucia Hiriart Pinochet through
Deloitte & Touche, Bahamas. Espirito Santo Bank has no
knowledge of the existence of any such personal investment
company or trust. Because the request was specific as to the
information requested, we are responding only to those specific
requests. A broader inquiry on your part may result in our
sharing additional information with regard to accounts or
trusts maintained by the named or related individuals.''
Espirito Santo Bank had, in fact, several accounts that had
been opened in the name of an offshore corporation and an
offshore trust controlled by Mr. Pinochet. The bank did not
disclose them in its February letter, presumably because
neither entity had been opened ``through Deloitte & Touche,
Bahamas,'' and the bank interpreted Section 314(b)'s legal
protections so narrowly that it apparently felt it could not
offer any relevant information that had not been specifically
requested. Instead, Espirito Santo Bank essentially invited
Riggs to send a broader request, and is awaiting a response
from Riggs.
Section 314(b) of the Patriot Act provides financial
institutions with a powerful tool to share information and
resolve questions about particular transactions and accounts to
guard against money laundering and terrorist financing. The
evidence in the Riggs case study suggests, however, that issues
of interpretation as well as bank secrecy laws in foreign
jurisdictions limit its usefulness and should be addressed. To
increase the usefulness of Section 314(b), U.S. financial
regulators should consider issuing guidance clarifying that the
legal protections afforded by Section 314(b) are broad and
clearly permit financial institutions to respond to requests
for information, including by offering information about
specific accounts and transactions that may help expose or
prevent money laundering or terrorist activities. This guidance
could be issued as a separate document or by expanding 31
C.F.R. Sec. 103.110, the regulation implementing Section
314(b). To address the problem of bank secrecy laws that
restrict the information that an institution's affiliates can
provide, the United States should continue to work with other
countries and international bodies, particularly the European
Union, to enable a financial institution's U.S. and foreign
affiliates to exchange client information across international
lines to safeguard against money laundering and foreign
corruption.
In addition, to prevent the types of problems identified in
this Report, steps need to be taken to stop funds that have
been identified as suspicious under U.S. anti-money laundering
laws from freely traversing the U.S. financial system. These
steps can and should be taken by both financial institutions
and U.S. financial regulators. For example, a financial
institution that closes or asks a client to close an account
due to money laundering concerns, including concerns about
foreign corruption, should, before transferring the funds to
another financial institution, warn that financial institution
under Section 314(b) of the Patriot Act that the funding
transfer is the result of an account closure due to possible
money laundering or foreign corruption concerns. With that type
of warning, financial institutions can protect themselves from
accepting suspect funds and clients. U.S. regulators can and
should do their part as well. Once U.S. financial regulators
identify a suspect account, they should take reasonable steps
to prevent the suspect funds from being sent to another U.S.
financial institution without an appropriate warning, identify
related accounts at other financial institutions operating in
the United States, and, if necessary, dismantle any network of
suspect U.S. accounts.
A P P E N D I X
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