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US moves to banish foreign banks suspected of money laundering

Posted - Aug. 25, 2004 at 8:20 a.m.



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WASHINGTON, Aug 25 (AFP) - The United States has moved to banish from the country two foreign banks suspected of helping the Iraqi regime of Saddam Hussein, before its ouster last year, launder money siphoned from the UN oil-for-food program.

The Treasury Department on Tuesday formally designated Infobank of Belarus and First Merchant Bank, operating in Turkish-controlled northern Cyprus, as institutions of "primary money laundering concern," which effectively shuts them out of the US financial system.

The designation means the targeted banks cannot maintain any correspondent accounts in the United States, a key tool for conducting business in the country.

In addition, US banks have been instructed to keep an eye out for attempts by the two targeted banks to get access to the American market through intermediaries.

"Today's designation alerts the global financial community of the threat posed by these entities," Treasury Undersecretary Stuart Levey said in a brief statement. "It also serves notice to others that there will be significant consequences for institutions that launder tainted money or engage in similar corruption: we will cut you off from the US financial system."

The action against Infobank is seen as an implicit warning to Belarus President Alexander Lukashenko, who is reported to have close ties to people running the privately-owned bank his government licensed to engage in foreign exchange transactions.

US officials believe Infobank was at the heart of a scheme run by Saddam Hussein and his closest associates to use the oil-for-food program to extract bribes from foreign contractors, impose illegal surcharges on them, and plainly smuggle out oil in violation of UN sanctions.

The former Baghdad regime was able to pocket that way 10.1 billion dollars between 1997 and 2002, according to US congressional estimates.

Infobank helped the government of Saddam launder these profits through several other foreign banks and shell corporations, treasury officials said, and then return them to the Iraqi government, which used the proceeds to purchase weapons or finance military training.

First Merchant Bank has been used as a conduit for the laundering of fraudulently obtained funds, the officials said.

In addition, the individuals who own, control, and operate it have links with organized crime and apparently have used First Merchant Bank to launder criminal proceeds, according to US government data.

US officials declined to say whether the Cyprus-based bank had played any role in the scheme to scam the UN program.

The oil-for-food program was launched by the United Nations in late 1996 in response to criticism that Gulf War-era UN sanctions were hurting more the Iraqi people than the Saddam government.

It allowed limited UN-supervised sales of Iraqi oil on condition that the proceeds would be used to purchase food and medicine for the Iraqi people.

But the program is now under investigation for allegations of massive bribery as Iraqi officials demanded kickbacks from eager contractors, and UN controllers appeared to be looking the other way.

The US administration -- as well as the United Nations -- are under strong pressure from Republicans in the US Congress, who are successfully pushing through legislation that would withhold 10 percent of US dues to the world body in the next fiscal year, if the probe does not move forward.

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US-Iraq-Cyprus-Belarus-money

COPYRIGHT 2004 Agence France-Presse. All rights reserved.

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