The Federal Reserve Board yesterday ordered the parent company of Riggs Bank to comply with anti-money-laundering law, saying the company and its board of directors must take steps to ensure the bank it owns reports suspicious financial transactions to federal authorities.
Riggs National Corp. agreed to the cease-and-desist order but "without admitting to any allegations," the Federal Reserve Board said in a written statement. The order was issued "in connection with deficiencies relating to the lack of oversight, internal controls and procedures to ensure compliance with the Bank Secrecy Act," the statement said.
The act, which Congress strengthened after the terrorist attacks of Sept. 11, 2001, requires financial institutions to alert law enforcement officials to unusual banking activity that might be money laundering.
The order came a day after Riggs Bank agreed to pay $25 million in civil penalties for what federal regulators called a "willful, systemic" violation of anti-money-laundering law. Money laundering is the use of complex transactions to conceal that funds are derived from or going to be used for illicit activities.
In imposing the fine on Thursday, regulators at the Office of the Comptroller of the Currency, a bank regulator, and at the Financial Crimes Enforcement Network, a law enforcement unit of the Treasury Department, said the bank failed to report, detect or even look for clearly suspicious transactions in accounts related to foreign embassies.
Riggs officials have acknowledged years of deficiencies in reporting to law enforcement hundreds of millions of dollars in suspicious financial transactions by foreign customers, particularly those connected with the embassies of Saudi Arabia and Equatorial Guinea.
In its order yesterday, the Fed said Riggs will close a Florida subsidiary that provided banking services for foreign customers. The order requires Riggs to take steps including submitting plans to strengthen board oversight of its management and operations and to improve risk management practices. It also requires the company to seek Fed approval before its pays any dividends or buys back stock.
Riggs spokesman Mark N. Hendrix has repeatedly said the company is "100 percent committed to fulfilling our obligations."
Foreign accounts at Riggs Bank have been under investigation for more than two years by the FBI and for more than a year by bank regulators and three Senate committees.
Under pressure from regulators, Joe L. Allbritton, head of the family that has controlled Riggs for more than two decades, told the board of directors two weeks ago that he will relinquish his last official post with the company at the annual meeting later this month, stepping down as vice chairman of the bank's parent company. His wife, Barbara, said she, too, would resign from its board.
Their son Robert L. Allbritton, 34, will remain chairman of both the parent company and the bank, jobs he assumed in early 2001, bank officials have said. And the Allbritton family will retain their 43 percent controlling stake in Riggs.
Federal scrutiny has led the company to decide to shed most of its embassy banking business, an arena it had dominated proudly for decades in the Washington area.
While regulators did not force the resignation of the Allbrittons, they have put pressure on directors of the parent company's board and of the bank's board to radically make over Riggs's corporate culture, which enabled many bank officials to look the other way when foreign customers engaged in unusual transactions.