BANCO POPULAR AGREES TO PAY A U.S. FINE FOR LAX CONTROLS

Puerto Rican Bank Failed To Report Possible Money-Laundering Activity

In the latest sign of the U.S. government's money-laundering clampdown
after the terrorist attacks, Banco Popular de Puerto Rico admitted that its
internal controls were lax and agreed to pay almost $22 million.

The admission by Puerto Rico's largest bank came as part of a deferred
prosecution -- a severe measure against a financial company -- under which
the Justice Department can bring a criminal case against the bank should it
break the law during the next 12 months.

Banco Popular is a unit of Popular Inc., which has $33 billion in assets.
Popular also has a sizable U.S. presence that includes its Banco Popular
North America unit. It owns almost 100 bank branches in the U.S. from
California to Florida as well as 115 consumer-finance stores.

Popular admitted to the government's findings that it had failed to file
suspicious-activity reports -- documents that law-enforcement authorities
and regulators use to look for potentially illegal funds. The admission in
itself was a rare move. Most financial cases are settled without the bank
admitting or denying wrongdoing.

"We've put this behind us and there has been no employee involved in
criminal activity," Popular Chief Executive Richard Carrion said. "It's a
strong message about the importance of anti-money-laundering procedures."

The action comes amid a broad crackdown on money laundering prompted by the
widespread use of the U.S. financial system by the terrorists who attacked
New York and Washington in September 2001. Regulators and law-enforcement
officials since then have sought to plug perceived holes in the U.S. and
global financial networks that permit the flow of terrorist and other
illegal funds.

Last month, the New York State Banking Department fined Western Union
Financial Services Inc., the money-transmission unit of First Data Corp. of
Denver, $8 million for what allegedly was widespread noncompliance with
anti-money-laundering laws.

That action included alleged violations of the USA Patriot Act, a law
passed in late 2001 that introduced new requirements for financial firms to
have effective anti-money-laundering programs in place. Western Union
settled the New York action without admitting or denying wrongdoing.

Suspicious-activity reports are one of the chief tools that banks have to
flag potential illegal activity to law-enforcement authorities. Banks file
them when they believe a transaction may be related to drug trafficking,
terrorism or other crimes, or is simply designed to dodge other reporting
requirements, such as filing a form for transactions involving more than
$10,000 in cash.

The Justice Department filed a criminal information against Banco Popular
in federal court in Puerto Rico, charging it with one count of failing to
file suspicious-activity reports. Citing the bank's remedial actions, the
government recommended that any prosecution of the bank be deferred for 12
months and eventually dismissed if the bank commits no further wrongdoing.

At the same time as the court action, the Financial Crimes Enforcement
Network, a federal financial-investigative agency, assessed a $20 million
fine against Banco Popular. The bank will satisfy the fine through the
forfeiture of $21.6 million to the U.S.

"Banks that disregard their duty to conduct adequate due diligence and
report suspicious financial activities allow themselves to be exploited for
criminal purposes," said Michael Chertoff, assistant Attorney General.

The information says Banco Popular between 1995 and 2000 filed either
inaccurate or untimely suspicious activity reports. Many of the lapses
related to transactions involving alleged drug-trafficking, officials said.

One bank customer, Roberto Ferrario Pozzi, deposited about $20 million in
cash into an account at the bank between June 1995 and March 1998. The
deposits were made by him and by employees of his phone-card, long-distance
and money-transmission business. Cash often was brought to the branch in
paper bags or gym bags and sometimes disrupted the activities of the branch
as employees counted the bills.

But the bank didn't investigate and file timely and complete
suspicious-activity reports, oversights that resulted in "the laundering of
millions of dollars of drug proceeds," the Justice Department said.

Mr. Pozzi was indicted on money-laundering charges in December 1998 and was
caught in Colombia in May 1999. He eventually was extradited back to Puerto
Rico where, in 2002, he was sentenced to 97 months in prison.