The Bank of Boston said today it has uncovered another $110 million in large overseas cash transactions -- most of them between the central bank of Haiti and its Miami-based subsidiary -- that it failed to report to federal officials in violation of federal law.
The Haiti-to-Miami transactions, which took place during a 4 1/2-year period that ended last January, suggested that the bank may have been unwittingly used for the laundering of money by Caribbean drug smugglers, federal law enforcement officials said today.
The money transfers are "part of a big group of transactions" by New England-based banks that are being investigated by a federal grand jury here for possible criminal charges, one official said.
But Bank of Boston Chairman William L. Brown, who disclosed the new reporting violations at the annual shareholders meeting, called them an administrative "mistake" and said the bank had no reason to think the Haitian money transfers represented anything other than the normal recycling of dollars spent by American tourists in that country.
"We can't speak for where the funds came from and how they flowed into the vaults of the bank of Haiti," Brown said after the meeting.
The Bank of Boston, this city's oldest and largest bank, was hit by a torrent of negative publicity last month when it pleaded guilty to a felony violation of the Bank Secrecy Act and paid a $500,000 fine for failing to disclose about $1.2 billion in large cash transfers with a group of mostly Swiss banks.
The Bank Secrecy Act has been described by federal law enforcement officials as a key weapon in their war against money laundering by organized crime figures and drug smugglers. It requires banks to report to the Treasury Department all domestic and overseas cash transactions of $10,000 or more.
Treasury Department officials have said repeatedly in the wake of the Bank of Boston case that bank compliance with the law nationwide has been spotty at best. Moreover, in recent days a number of major banks -- including Manufacturers Hanover Trust, Irving Trust, and Chemical Bank -- have said that, after reviewing their records, they also found they had failed to report hundreds of millions of dollars in transactions with overseas banks.
Manufacturers Hanover, for example, said this week that it had failed to file reports on about 1,400 international transactions totaling about $140 million, and Irving said it had failed to report more than 1,600 currency transactions with 38 foreign banks totaling $292 million.
In announcing the violations today, Bank of Boston Chairman Brown cited disclosures by other banks as evidence that there was nothing "special" about his bank's problems.
"Most banks have had problems like this," Brown said. "There are going to be hundreds of banks around the country that are going to be reporting these violations."
But no other big U.S. banks have reported violations as large as those by the Bank of Boston or been cited for criminal penalties in the recent Treasury crackdown. And Assistant Secretary of the Treasury John Walker recently criticized Bank of Boston for "gross incompetence" and contradictory statements.
According to bank officials, between July 1980 and January 1985 there were 59 separate cash transfers totaling $73 million between the Banque de la Republique de' Haiti, that country's central bank, and Bank of Boston International South (BBI South), the bank's Miami-based international subsidiary.
These transactions, which averaged more than $1.2 million apiece, all involved dollars being shipped from the Haitian bank to the United States. One of the law enforcement officials investigating the Bank of Boston said this could indicate money laundering since Haiti is one of about eight known Caribbean "transfer points" for South American drug smugglers.
In addition, the bank said it had failed to report four other transfers to BBI South -- three from banks in Chile and one from Curacao -- that totaled about $3 million.
Another $20 million in unreported transactions involved Canadian banks and the Casco-Northern Bank, a Maine-based subsidiary acquired by the Bank of Boston last year. Since the transactions date back to July 1980, the bulk of these violations apparently took place before the Bank of Boston owned the bank.
The remainder of the $110 million in transactions were "scattered here and there," according to Brown, although a transaction of about $10 million involved the bank's international teller window in Boston and two non-bank financial institutions, a bank official said.
The new violations were discovered during a corporation-wide review spurred by the earlier federal investigation that led to last month's guilty plea. The review found that none of the bank's divisions that handled international currency transfers were aware of the reporting requirement.
In what he described as a "wholly unrelated matter," Brown told shareholders the bank's internal investigation found that no bank employes had "acted out of improper motive" in keeping two companies controlled by the Angiulo family, a reputed organized crime family, on a special "exempt" list that allowed the Angiulos to exchange large bags of cash for cashier's checks at a Bank of Boston branch without disclosures to federal authorities. The inclusion of Angiulo-controlled companies on the list was "poor judgment" by some bank employes, he said.