US BANKS GIVE ACCESS TO MONEY LAUNDERING, YEAR-LONG PROBE FINDS

US banks are providing a gateway for "rogue" foreign banks to launder
billions of dollars of cash from illegal activities such as internet
gambling, investment scams and drug trafficking, according to a year-long
congressional investigation.

Leading US banks - including Chase Manhattan and Bank of America - have
become facilitators in money laundering by operating so-called
correspondent accounts for high-risk foreign banks, it says.

The report, to be published today by the Democratic staff of the Senate
investigations subcommittee, uncovered widespread money laundering through
correspondent banking - where banks provide services to other banks,
especially wire transfers. Money laundering became a priority for the
Clinton administration following allegations in 1999 that Russian criminals
had used accounts at the Bank of New York to launder about Dollars 7bn
(Pounds 4.7bn).

However, the Clinton administration's efforts to introduce laws to crack
down on laundering failed last year in the face of Republican criticism
that the legislation would have discriminated against foreign banks
operating in the US.

It is unclear how the Bush administration will approach the issue.

US banking regulators at the Office of the Comptroller of the Currency
issued guidance about laundering and correspondent banking in September.
However, according to the Senate investigation, US banks have operated
correspondent accounts "in an atmosphere of complacency, with lax due
diligence, weak controls and inadequate responses to troubling information".

Often, bank staff responsible for correspondent accounts were seen as sales
staff, who were expected to attract new business and had no training to
detect laundering.

The report found that correspondent accounts were used to transfer cash
from internet gambling, and that Chase Manhattan was "fully aware" that its
accounts were handling such funds. Internet gambling is illegal in several
US states.

"Bank of America disclosed that it did not know until tipped off by . . .
investigators the correspondent account it provided to St Kitts-Nevis-
Anguilla National Bank was being used to move hundreds of millions of
dollars in internet gambling proceeds," the report said.

The Bank of New York told the investigation it did not set up money
laundering controls on accounts held by the British Bank of Latin America,
based in Colombia, which allegedly handled Dollars 2.7m in drug money
through its correspondent account. The Bank of New York received two
seizure orders alleging drug proceeds were being laundered through the account.

According to the Senate study, several US banks failed to meet their
internal requirements to visit the foreign banks, while others failed to
collect documentation such as copies of bank charters and financial statements.