WASHINGTON — The financial crimes enforcement division of the Treasury Department plans to enhance information sharing with international and local law enforcement agencies on transactions potentially involved in money laundering, a Treasury official told Senators Thursday.
In prepared remarks to a Senate committee hearing on how top African politicians and their families had evaded anti-money laundering laws to bring hundreds of millions of dollars into the country, James Freis, director of the Treasury's Financial Crimes Enforcement Network, said the agency is pursuing a number of steps to beef up enforcement.
"As we continue to focus on executing our strategy, we must increase global public awareness of the threat posed by foreign corruption so that our efforts to combat this threat become a priority for all nations," Freis said.
Describing large-scale corruption by foreign officials as a threat to the U.S. and the foreign countries involved, he said FinCEN is proposing giving certain foreign law enforcement agencies, as well as state and local agencies in the U.S., the ability to obtain information on bank accounts in anti-money laundering investigations.
Committee Chairman Sen. Carl Levin (D., Mich.) said in opening remarks that the report shows that "a lot more can be done to combat foreign corruption."
He reiterated the bipartisan recommendations in the report for Treasury to repeal all exemptions from the Patriot Act's anti-money-laundering requirements — including covering real estate and escrow agents — and to require greater disclosure of attorney-client bank accounts.
While banks have become more vigilant, Levin said their anti-money laundering safeguards still have holes.
Freis said FinCEN, which regulates anti-money-laundering standards at financial institutions, is developing a proposal to expand the restrictions to the non-bank mortgage industry.
But he noted concerns that imposing such requirements on real estate settlement attorneys could undermine attorney-client privilege. Instead, the agency is working with the American Bar Association to develop voluntary best practices.
The agency is also working with Congress on legislation to prevent the use of shell corporations in money-laundering, Freis said, while citing the need to balance transparency with the need to maintain efficiency and access to financial services.
Levin, who has sponsored a bill to require disclosure of the names of beneficial owners of new U.S. corporations, repeated his call for the legislation.
Ranking minority member Sen. Tom Coburn, (R., Okla.), said he would work with Levin on the bill, which he said needs "a little more balance."
The hearing got off to a quiet start, with a lobbyist and two lawyers that made up the first panel all invoking their fifth amendment rights against self-incrimination regarding their alleged involvement in the transfer of suspect funds that were the subject of the committee investigation.
The two-year probe looked into how money was brought into the U.S. from politically powerful people from Nigeria, Angola, Gabon and Equatorial Guinea — including presidents and central bankers — with the help of lawyers, realtors, lobbyists and other professionals.
Anti-money-laundering officials from Bank of America Corp. and the U.S. unit of HSBC Holdings PLC also testified. The two firms were among a dozen or so banks that cooperated in the investigations, but weren't singled out in the report, getting mixed grades on their response to the suspect funds involved.
According to the report, Bank of America was one of six U.S. banks used by the son of Equatorial Guinea President Teodoro Obiang Nguema to bring over $110 million in suspect funds into the U.S. from 2004 to 2008. Although the Bank of America quickly closed an account used by a shell company with Obiang as the beneficial owner, it took more than a year for the bank to review and close a separate attorney-client account that was being used by Obiang, according to the report.
William Fox, senior vice president and global anti-money-laundering and economic-sanctions executive at Bank of America, said at the hearing that the bank should have done better. But he said he is "confident that the decisions that were made several years ago would be different from the decisions we would make today" given some recent enhancements in its policies.
Wiecher Mandemaker, director of anti-money-laundering compliance at HSBC Bank USA, said his firm may not catch every instance of suspicious activity, but that it has taken a "leadership role" and exceeded legal requirements in combating money laundering.
However, he came under fire at the hearing for being unable to answer questions related to HSBC's relationship with the Angolan central bank. According to the report, Aguinaldo Jaime tried on two occasions in 2002, while in charge of the central bank, to transfer $50 million in Angolan government funds to a private account in the U.S., including using an HSBC account to purchase U.S. Treasurys with the money. The central bank later ordered that money returned when Jaime left the bank.
But the report cited concern that HSBC continues to provide banking services for the Angolan central bank in the U.S., and possibly in offshore accounts in the Bahamas. According to the report, HSBC USA told the subcommittee that it was unable to answer questions about a client's non-U.S. banking activities and that it was constrained further by secrecy laws in the Bahamas.
Mandemaker said at the hearing he doesn't know if the HSBC banking group has Angolan central bank accounts in the Bahamas, while also citing Bahamas' secrecy laws.
Levin countered that he wouldn't let the laws of the Bahamas stop the committee from finding the facts, especially since the HSBC sister bank that allegedly maintained an account in the Bahamas for the central bank had an office in Connecticut.
Mandemaker said he would get back to the committee on the matter, but Levin said after the hearing he wasn't satisfied with the banker's responses.
"I think he's on very weak ground" given the Connecticut link, he told reporters.
Levin said he thinks U.K. law enforcement should also look into HSBC's offshore operations.
"They can't claim that they're a leader in anti-money laundering when at the same time they have a policy at urging clients to hide in secrecy jurisdictions," he said.
By contrast, Levin said Bank of America was "very forthright" with the committee, acknowledging their mistakes and taking action.