U.S. GOVERNMENT PRINTING OFFICE

73–781 DTP WASHINGTON : 2001

S. Hrg. 107–84

ROLE OF U.S. CORRESPONDENT BANKING IN

INTERNATIONAL MONEY LAUNDERING

HEARINGS

BEFORE THE

PERMANENT SUBCOMMITTEE ON

INVESTIGATIONS

OF THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

MARCH 1, 2, AND 6, 2001

VOLUME 4 OF 5

Printed for the use of the Committee on Governmental Affairs

(

For sale by the Superintendent of Documents, Congressional Sales Office

U.S. Government Printing Office, Washington, DC 20402

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

JOSEPH I. LIEBERMAN, Connecticut, Ranking Democrat

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

JUDD GREGG, New Hampshire

ROBERT F. BENNETT, Utah

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

HANNAH S. SISTARE, Staff Director and Counsel

JOYCE A. RECHTSCHAFFEN, Democratic Staff Director and Counsel

DARLA D. CASSELL, Chief Clerk

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

SUSAN M. COLLINS, Maine, Chairman

CARL LEVIN, Michigan, Ranking Democrat

TED STEVENS, Alaska

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

JUDD GREGG, New Hampshire

ROBERT F. BENNETT, Utah

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

THOMAS R. CARPER, Delaware

JEAN CARNAHAN, Missouri

CHRISTOPHER A. FORD, Chief Counsel and Staff Director

LINDA J. GUSTITUS, Democratic Chief Counsel and Staff Director

ELISE J. BEAN, Democratic Deputy Chief Counsel

ROBERT L. ROACH, Democratic Counsel and Chief Investigator

MARY D. ROBERTSON, Chief Clerk

Page

III

C O N T E N T S

Opening statements: Page

Senator Collins.......................................................................................... 1, 51, 101

Senator Levin............................................................................................ 4, 53, 102

Senator Carnahan ............................................................................................ 9

WITNESSES

THURSDAY, MARCH 1, 2001

John M. Mathewson, former owner of Guardian Bank and Trust (Cayman)

Ltd., accompanied by Oscar C. Gonzalez, Esq. .................................................. 10

James C. Christie, Senior Vice President, Global Treasury Risk Management,

Bank of America, Oakland, California ............................................................... 22

David A. Weisbrod, Senior Vice President, Treasury Services Division, The

Chase Manhattan Bank, New York, New York ................................................. 27

FRIDAY, MARCH 2, 2001

Jack A. Blum, Partner, Lobel, Novins and Lamont, Washington, DC ................ 57

Anne Vitale, former Managing Director and Deputy General Counsel, Republic National Bank of New York, and Current Special Litigation Counsel,

HSBC USA, Inc., New York, New York ............................................................. 60

Robb Evans, Managing Partner, Robb Evans and Associates, Sun Valley,

California .............................................................................................................. 62

Jorge A. Bermudez, Executive Vice President and Head of e-Business,

Citibank, N.A., New York, New York ................................................................. 75

Carlos Fedrigotti, President and Country Corporate Officer for Citibank Argentina, Buenos Aires, Argentina ....................................................................... 78

Martin Lopez, Vice President and Citibank Corporate Bank Head, Republic

of South Africa ...................................................................................................... 80

TUESDAY, MARCH 6, 2001

Arthur O. Jacques, Esquire, Jacques Little Barristers and Solicitors, Toronto,

Ontario, Canada ................................................................................................... 105

Joseph M. Myers, Acting Deputy Assistant Secretary (Enforcement Policy),

U.S. Department of the Treasury, Washington, DC ......................................... 117

Mary Lee Warren, Deputy Assistant Attorney General, Criminal Division,

U.S. Department of Justice, Washington, DC ................................................... 120

ALPHABICAL LIST OF WITNESSES

Bermudez, Jorge A.:

Testimony .......................................................................................................... 75

Prepared statement with attachments ........................................................... 180

Blum, Jack A.:

Testimony .......................................................................................................... 57

Prepared statement .......................................................................................... 162

Christie, James C.:

Testimony .......................................................................................................... 22

Prepared statement .......................................................................................... 143

Evans, Robb:

Testimony .......................................................................................................... 62

Prepared statement .......................................................................................... 172

Fedrigotti, Carlos:

Testimony .......................................................................................................... 78

Prepared statement .......................................................................................... 223

Jacques, Arthur O.:

Testimony .......................................................................................................... 105

Prepared statement with attachments ........................................................... 241

Lopez, Martin:

Testimony .......................................................................................................... 80

Prepared statement .......................................................................................... 233

Mathewson, John M.:

Testimony .......................................................................................................... 10

Page

IV

Mathewson, John M.—Continued

Prepared statement .......................................................................................... 139

Myers, Joseph M.:

Testimony .......................................................................................................... 117

Prepared statement .......................................................................................... 250

Vitale, Anne:

Testimony .......................................................................................................... 60

Prepared statement .......................................................................................... 168

Warren, Mary Lee:

Testimony .......................................................................................................... 120

Prepared statement .......................................................................................... 256

Weisbrod, David A.:

Testimony .......................................................................................................... 27

Prepared statement .......................................................................................... 156

APPENDIX

‘‘Correspondent Banking: A Gateway to Money Laundering,’’ report by the

Minority Staff Report of the Permanent Subcommittee on Investigations

(see contents for report on page 274) ................................................................. 273

EXHIBITS

* May be found in the files of the Subcommittee Page

1. Diagrams on correspondent banking .............................................................. 692

2. American International Bank marketing documents .................................... 694

3. Three nested banks at American International Bank ................................... 697

4. Bank of America call memo on American International Bank ..................... 698

5. American International Bank’s correspondent account history .................... 699

6. Internet gambling advertisement naming Bank of America ......................... 700

7. Fortuna Alliance deposits into Swiss American Bank account at Chase

Manhattan ......................................................................................................... 702

8. Chase Manhattan Bank e-mail of 9/10/99 concerning Swiss American/

Antigua Bank .................................................................................................... 703

9. Chase Manhattan Bank e-mail of 8/5/98 regarding Swiss American Bank . 706

10. Chase Manhattan Bank memo of 11/17/98 regarding Swiss American

Bank ................................................................................................................... 707

11. Frauds through Swiss American Bank/Swiss American National Bank ..... 708

12. Chase Manhattan Bank e-mail of 12/6/99 regarding Swiss American

Bank ................................................................................................................... 709

13. Internet gambling advertisements naming Chase Manhattan Bank ........... 710

14. Chase Manhattan Bank e-mail of 3/19/93 regarding Swiss American

Bank ................................................................................................................... 718

15. Citibank summary of M.A. Bank seizure ....................................................... 719

16. Letter of 9/29/00 from Citibank counsel to the Permanent Subcommittee

on Investigations regarding M.A. Bank. ......................................................... 721

17. Seizure Warrant of 5/14/98 regarding M.A. Bank ......................................... 725

18. Subpoena to Citibank New York dated 5/18/98 regarding M.A. Casa de

Cambio ............................................................................................................... 727

19. Example of an M.A. Bank withdrawal slip .................................................... 731

20. Citibank e-mail of 12/3/99 regarding anti-money laundering procedures .... 732

21. Letter of 9/29/00 from Citibank counsel to the Permanent Subcommittee

on Investigations regarding correspondent banking policy ........................... 734

22. Report of Citigroup Anti-Money Laundering Unit ......................................... 740

23. Schedule of wire transfers through Citibank New York and American

Exchange Company .......................................................................................... 742

24. Monthly statements of Citibank New York correspondent accounts for

Banco Republica, American Exchange Company, and Federal Bank .......... 743

25. Ownership diagram of Grupo Moneta ............................................................. 749

26. Excerpts from Citibank documents regarding relationship with Grupo

Moneta ............................................................................................................... 751

27. Citibank and Central Bank of Argentina documents regarding the antimoney laundering program of Federal Bank .................................................. 752

28. Excerpt from Resolution No. 395/96 of the Central Bank of Argentina ....... 754

29. Excerpt from Citibank memo regarding ownership of Federal Bank .......... 756

30. Citibank account opening steps ....................................................................... 757

Page

V

31. Excerpts regarding Citibank’s policy on opening accounts for offshore

shell banks ........................................................................................................ 758

32. Series of letters exchanged between the Central Bank of Argentina and

Citibank Argentina regarding ownership of Federal Bank ........................... 760

33. British Trade and Commerce Bank certificates of deposit ............................ 782

34. British Trade and Commerce Bank documents ............................................. 784

35. Internet advertisements for offshore shell banks .......................................... 789

36. Treasury Regulations on Suspicious Activity Reports ................................... 804

37. 1997 Citibank memo regarding Grupo Moneta .............................................. 805

38. Bank of America and Chase Manhattan Bank comments on Swiss American Bank .......................................................................................................... 807

39. Chase Manhattan Bank e-mail of 10/12/95 regarding Swiss American

Bank ................................................................................................................... 809

40. Chase Manhattan Bank call memo of 1/23/96 regarding AIB ...................... 810

41. Chase Manhattan Bank e-mail of 9/9/99 regarding Swiss American Bank . 812

42. Bank of America call memo of 9/4/92 regarding Swiss American Bank ...... 813

43. Letter of 3/12/97 from Chase Manhattan Bank to AIB regarding account

closing ................................................................................................................ 814

44. Chart entitled ‘‘Gateway to U.S. Banks’’ ........................................................ 815

45. Summary of Gold Chance Fraud prepared by the Minority Staff of the

Permanent Subcommittee on Investigations, March 6, 2001 ........................ 816

46. Guardian Bank and Trust Visa Card produced by John Mathewson at

the March 1, 2001, Permanent Subcommittee on Investigations hearing ... 823

47. Permanent Subcommittee on Investigations’ staff rendition of a chart

entitled ‘‘$3 Million Deposit of Gold Chance Funds Depleted in Wire

Transfers By British Trade & Commerce Bank to 33 Bank Accounts

in 45 Days, December 1999-January 2000’’ included in the testimony

of Arthur Jacques before the Subcommittee on March 6, 2001 .................... 824

48. Supplemental remarks of Jorge Bermudez .................................................... 825

49. Supplemental remarks of Carlos Fedrigotti ................................................... 827

50. Supplemental questions and answers of the U.S. Department of Justice ... 829

51. Supplemental questions and answers of U.S. Department of the Treasury 855

52. Supplemental questions and answers of Citibank ......................................... 863

53. Supplemental questions and answers of Bank of America ........................... 867

54. Supplemental questions and answers of J.P. Morgan Chase ........................ 868

55. Documents from foreign governments relevant to the Permanent Subcommittee on Investigations staff report or hearings on money laundering:

a. Government of Antigua and Barbuda letter dated July 14, 2000 ........... 871

b. Jersey Financial Services Commission letter dated March 13, 2001 ...... 874

c. Guernsey Financial Services Commission letter dated March 15, 2001 . 876

d. Government of Anguilla Statement of Facts ............................................. 879

e. Press articles on new shell bank prohibitions in the Bahamas and

Cayman Islands ........................................................................................... 883

VOLUME 2

56. Documents related to American International Bank, Caribbean American

Bank or Overseas Development Bank and Trust Company (Case Studies

No. 1–3):

a. American International Bank general documents .................................... 885

b. Ford/Forum documents ............................................................................... 950

c. Mark Harris bank documents ..................................................................... 998

d. Carribean American Bank documents ....................................................... 1024

e. Bank of America documents ....................................................................... 1196

f. Toronto Dominion Bank (New York) documents ....................................... 1225

g. Chase Manhattan Bank documents ........................................................... 1234

h. Popular Bank of Florida (now BAC Florida Bank) documents ............... 1249

i. Overseas Development Bank and Trust documents ................................. 1297

j. First National Bank of Commerce (now Bank One Corporation) documents ............................................................................................................ 1449

k. AmTrade International Bank documents .................................................. 1481

57. Documents related to British Trade and Commerce Bank (Case Study

No. 4):

a. British Trade and Commerce Bank (BTCB) general documents ............. 1493

b. BTCB financial documents ......................................................................... 1604

c. BTCB management and employee documents .......................................... 1729

Page

VI

VOLUME 3

d. BTCB high yield investment program documents .................................... 1823

e. Internet gambling documents ..................................................................... 1842

f. Banco Industrial de Venezuela documents ................................................ 1908

g. Security Bank documents ........................................................................... 1989

h. First Union National Bank documents ..................................................... 2027

i. Koop fraud documents ................................................................................. 2099

j. Cook fraud documents ................................................................................. 2238

k. Gold Chance fraud documents ................................................................... 2287

l. $10 million CD interpleader documents .................................................... 2484

m. Miscellaneous documents relating to BTCB:

1. KPJ Trust/Tiong documents .............................................................. 2621

2. Brett/Bailett documents ..................................................................... 2670

3. Vector Medical Technology documents ............................................. 2682

n. Permanent Subcommittee on Investigation Deposition of John G. Long

IV, February 26, 2001 ................................................................................. *

o. SEALED EXHIBIT: Suspicious Activity Reports .................................... *

VOLUME 4

58. Documents related to Hanover Bank (Case Study No. 5):

a. Hanover Bank general documents ............................................................. 2789

b. Harris Bank International and Standard Bank Jersey Ltd. documents 2857

c. Clerical Medical documents ........................................................................ 2907

d. Eric Rawle Samuel documents ................................................................... 2919

e. Koop fraud documents ................................................................................. 2943

f. Casio Computer fraud documents .............................................................. 2984

g. FSA investigation documents ..................................................................... 3016

h. Unanswered information request to Richard O’Dell Poulden ................. 3043

59. Documents related to British Bank of Latin America (Case Study No.

6):

a. British Bank of Latin America general documents .................................. 3049

b. Bank of New York documents .................................................................... 3100

c. 1999 and 2000 National Money Laundering Strategy excerpts ............... 3127

d. Operation Casablanca and Operation Juno documents ........................... 3138

e. SEALED EXHIBIT: Proprietary information on British Bank of Latin

America ......................................................................................................... *

60. Documents related to European Bank (Case Study No. 7):

a. European Bank general documents ........................................................... 3182

b. Citibank documents ..................................................................................... 3219

c. Taves fraud documents ................................................................................ 3319

d. Benford account documents ........................................................................ 3435

e. Internet Processing Corp. account documents .......................................... 3627

f. Nest Bank documents .................................................................................. 3682

VOLUME 5

61. Documents related to Swiss American Bank and Swiss American National Bank (Case Study No. 8):

a. Swiss American Bank and Swiss American National Bank general

documents .................................................................................................... 3703

b. Bank Ownership .......................................................................................... 3715

c. Bank Leadership .......................................................................................... 3735

d. Fitzgerald case documents .......................................................................... 3814

e. Gherman fraud documents ......................................................................... 3931

f. Debella fraud documents ............................................................................ 3957

g. Fortuna Alliance fraud documents ............................................................. 4035

h. Documents related to other frauds or questionable accounts .................. 4083

i. Bank of New York documents .................................................................... 4122

j. Bank of America documents ....................................................................... 4175

k. Chase Manhattan Bank documents ........................................................... 4222

l. InterSafe Global documents ........................................................................ 4269

m. Documents related to Peter Herrington .................................................... 4282

62. Documents related to M.A. Bank (Case Study No. 9):

a. M.A. Bank general documents ................................................................... 4391

b. Permanent Subcommittee on Investigations correspondence with M.A.

Bank representatives .................................................................................. 4411

Page

VII

c. Permanent Subcommittee on Investigations correspondence with M.A.

Bank agents in Uruguay ............................................................................. 4422

d. Court filings and U.S. Department of Justice correspondence ................ 4434

e. M.A. Bank documents related to Mr. DiTullio .......................................... 4474

f. U.S. Customs records of interviews ........................................................... 4477

g. Permanent Subcommittee on Investigations correspondence with

Citibank ........................................................................................................ 4501

h. Citibank documents related to M.A. Bank ................................................ 4504

63. Documents related to Federal Bank (Case Study No. 10):

a. Central Bank of the Bahamas documents ................................................. 4585

b. CEI related documents ................................................................................ 4617

c. Account opening and closing documents .................................................... 4629

d. Resolution No. 395 of the Central Bank of Argentina ............................. 4647

e. Analyses of Banco Republica, Federal Bank and other Grupo Moneta

entities in Citibank files .............................................................................. 4665

f. Excerpts from the audits of Banco Republica by the Central Bank

of Argentina ................................................................................................. 4793

64. Koop Fraud documents related to Overseas Development Bank and Trust,

British Trade and Commerce Bank, and Hanover Bank .............................. 4835

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