Riggs Bank fined $25M in federal probe
By Marcy Gordon
Associated Press
WASHINGTON — The Federal Reserve ordered Riggs Bank's parent company yesterday to take steps to prevent money laundering after the bank was fined $25 million in connection with a probe into possible links to terrorism financing.
The action came a day after Treasury Department regulators levied the record-setting fine against Riggs for its handling of millions of dollars in foreign-held accounts.
In a cease-and-desist order issued by the central bank, Riggs will have to take actions such as hiring an independent consultant to conduct a review.
Its operation in Miami — which Riggs plans to close — will be required to retain an outside consultant to review previous account transactions for suspicious activity.
The Federal Reserve has jurisdiction over bank holding companies. The Atlanta Fed had previously advised Riggs's Miami-based subsidiary of deficiencies in its compliance with laws to prevent money laundering, the order noted.
Riggs is a midsize Washington bank with a near-exclusive franchise on business with the capital's diplomatic community.
The credit-rating agency Standard & Poor's said the fine, combined with anticipated restructuring charges of $15 million to $21 million in the April-June quarter, "should result in a large loss in the second quarter and prevent Riggs from being profitable for the year."
Standard & Poor's and other agencies have recently downgraded their ratings of Riggs, reflecting what S&P yesterday called "continued profitability pressures and regulatory uncertainty."
Treasury's Office of the Comptroller of the Currency issued the fine in an order made public late Thursday, after weeks of negotiations between Riggs and banking regulators.
In addition to the now-closed accounts that diplomats from Saudi Arabia controlled, the order by the comptroller's office mentioned accounts held by officials of Equatorial Guinea.
The order requires Riggs to make special reviews of its operations and account transactions and gives regulators advance notice of any dividend payments to shareholders.
