Puerto Rican bank accused of money laundering fined $21.6 million
Asociated Press/AP (Puerto Rico)
17/1/2003

By MARCY GORDON, AP Business Writer
Associated Press

WASHINGTON (January 16, 2003 9:46 p.m. EST) - Puerto Rico's largest bank will pay $21.6 million but avoid criminal prosecution for alleged money laundering. Bank officials allowed millions in drug money to be laundered by failing to report suspicious activity to the government, federal authorities said Thursday.

Deposits to accounts in Banco Popular often came in paper bags or gym bags stuffed with small bills, the Justice Department and other federal agencies said.

Under its agreement with the government, the bank admitted to violations of federal anti-money-laundering rules that require banks to notify authorities of suspicious transactions. The bank, based in San Juan, has a year to pay the $21.6 million and show that it is continuing to comply with the rules.

Otherwise, it will face possible criminal prosecution.

"Banks are our first line of defense against money launderers, drug dealers and even terrorists who would attempt to abuse our financial institutions," said Assistant Attorney General Michael Chertoff. "Banks that disregard their duty to conduct adequate due diligence and report suspicious financial activities allow themselves to be exploited for criminal purposes."

The bank's president, Richard Carrion, said Banco Popular officials cooperated fully with the investigation and noted that no bank employee had been charged with a crime.

"We believe strongly that our acceptance of the agreement is the preferred course of action - one that avoids potentially protracted litigation that could have a negative impact on the bank, our clients, our employees and the communities we serve," Carrion said in a statement.

Between June 1995 and June 2000, several suspicious transactions were made by customers of the bank - which filed late or inaccurate reports of suspicious activities, the government said.

The untimely filings and errors "hindered law enforcement's ability to initiate investigations on these accounts in a timely manner, resulting in the laundering of millions of dollars of drug proceeds through these accounts," the agencies said in a news release.

In one series of transactions, Roberto Ferrario Pozzi, who was indicted in December 1998 for alleged money laundering, deposited some $20 million in cash in a Banco Popular account, the agencies said. They said Ferrario Pozzi and employees of Phone Home, a phone card company, often made deposits in paper bags or gym bags full of cash.

The Treasury Department's Financial Crimes Enforcement Network, known as FinCen, which will receive $20 million as a civil penalty from the total paid by the bank, said it was one of the largest such penalties it had assessed.

In a similar case, New York-based U.S. Trust Corp. agreed in July 2001 to pay $10 million in fines to settle regulators' allegations that its internal controls and record keeping were inadequate. But U.S. Trust, an investment firm catering to wealthy families that is owned by brokerage Charles Schwab Corp., did not admit to any allegations in its settlement with the Federal Reserve and the New York State Banking Department.

The agreement with Banco Popular was announced by the Justice Department, FinCen, the Internal Revenue Service, the U.S. Customs Service and the Fed, which has regulatory authority over the bank.