Chile's second-largest bank, Banco de Chile, has agreed to demands by U.S. regulators that it stop doing business with former dictator Augusto Pinochet and his lawyer, stop concealing information from the United States and other governments, and correct practices in its New York and Miami branches that violated federal laws designed to prevent money laundering.
In consent agreements released yesterday with the Federal Reserve Board and the Office of the Comptroller of the Currency, a unit of the Treasury Department, Banco de Chile agreed to fundamental changes in operations at the two branches.
Those changes include running background checks on key employees every 18 months, keeping accurate and thorough records about banking accounts, and certifying it has ended any relationship with Pinochet, 89, or lawyer Oscar Aitken.
"Banco de Chile is 100% committed to continue its full cooperation with its supervisors. We are determined to avoid a recurrence of any similar situation," the bank's chief executive, Pablo Granifo Lavin, said in a written statement yesterday.
The regulatory action against Banco de Chile stems from ongoing investigations by regulators and the Justice Department into Pinochet's accounts at Riggs Bank. Last week Riggs pleaded guilty to criminal violations of anti-money-laundering laws and agreed to pay a $16 million fine. Civil and criminal investigations of individuals at the bank and its holding company continue.
Regulators acted after discovering "serious deficiencies" in Banco de Chile's compliance with U.S. law, including allowing the use of other people's names to hide accounts controlled by Pinochet.
A probe by the Senate permanent subcommittee on investigations last summer found that when Riggs closed its Pinochet accounts from 2000 to 2002, it sent more than $3 million in the form of difficult-to-trace cashier's checks to Pinochet in Chile. Most of those checks were cashed at Banco de Chile in Santiago.
Members of Congress have criticized federal regulators for failing to detect and stop abuses at Riggs and other banks sooner.
A Chilean judge is investigating Pinochet to determine whether he obtained any of his millions of dollars in assets illegally and whether he has hidden money in foreign banks. The judge has requested information from banks in the United States, Switzerland, Spain and Luxembourg.
In 1998, a judge in Spain issued an extradition order to have Pinochet face charges in that country of terrorism and torture during his tenure as head of Chile, which started in the 1970s. The judge recently issued a new indictment that includes Aitken and several current and former directors and employees of Riggs.
Banco de Chile said in a Securities and Exchange Commission filing last month that it might also be liable for civil penalties.
Banco de Chile was one of several U.S. and Latin American banks that Pinochet, his family and several high-level Chilean military officers used to transfer money to and from Pinochet's Riggs accounts in the past 20 years, according to government sources.
