The government of Andorra took over management of Banca Privada d’Andorra after two foreigners arrested in Spain were alleged to have collaborated with bank managers to do money laundering on a massive scale. The funds involved are believed to include about $2 billion embezzled from the state oil company in Venezuela. Larger sums of money funneled through the bank came from criminal enterprises in Russia and China. One of the two arrested men also carried money, authorities in Spain believe, for tax-dodging Spanish businesses. The bank, in turn, funneled money through four U.S. banks supposedly on behalf of a long list of shell companies, most apparently created by the bank itself. Andorra said some bank managers took bribes to arrange money-laundering transactions. Bank of Spain has similarly put managers in charge of the bank’s Spanish subsidiary, Banco de Madrid. In both cases, authorities emphasized that the financial stability of the banks is not in doubt. The United States formally declared the bank a suspected money-laundering operation earlier this week, though an investigation has apparently been going on for years.
U.S. banks passed Fed stress tests, if not exactly with flying colors. Bank of America must revise and resubmit its plan, but this must be seen as a victory for the bank after its previous efforts. Three of the banks most identified with Wall Street, JPMorgan, Goldman Sachs, and Morgan Stanley, passed only after extensively revising their plans to boost their financial strength. Two European-owned banks, Deutsche Bank and Santander, failed miserably, with the Fed hinting that these two banks do not quite seem to know where their money is. Citizens Bank, until recently owned by London-based RBS, is breathing easier after passing this year’s test. Its difficulties last year were tied to RBS’s financial difficulties and the turmoil surrounding the spinoff from RBS.
The tax-evasion case against HSBC has reached a court in France. Authorities there say they have a list of nearly 9,000 French customers that evaded taxes with the bank’s assistance — and that’s just looking at transactions conducted in Switzerland in 2006 and 2007.
CommerceWest earned $5 million in fees for 1.3 million fraudulent transactions it processed for a criminal customer and failed to alert regulators as required by law when other banks grew suspicious. Now the bank has agreed to pay $4.9 million in fines and admit wrongdoing. In a deferred prosecution agreement, the Department of Justice will ask to have the criminal charges dismissed if the bank can keep its hands clean for two years. Officials seized millions of dollars in assets from the customer that originated the fraudulent transactions. Plaza Bank separately settled its smaller part in the case and will pay $1.2 million. These enforcement actions might seem timid when you look at the size of the fines, but they represent a turnaround from the Bush years. In that era, Justice had an unofficial hands-off policy toward businesses that defrauded consumers using made-up transactions, fearing that if they went after criminal enterprises, they might be seen as being tough on business.
Doral Financial Corp., holding company for the failed Doral Bank and other financial subsidiaries, has begun the process of bankruptcy liquidation. Shareholders could get some money back if court rulings that blocked a tax refund for the company are eventually overturned.
An executive of Long Island’s Gold Coast Bank was arrested and charged after police reviewed security video that showed the executive assaulting a security guard at a sports event.