Spitzer heart Pinochet heart US Treasury department
NewYorkers are crazy and incredulous after news broke yesterday that their maverick, do-gooder, ivy-leaguer, father of three, former Attorney General, likes prostitutes.
Funnily, Eliot Spitzer, governor of New York state (will he resign wednesday?), was tripped up by the same laws that snagged our dear friend and money-launderer, dictator-in- —, Augusto Pinochet. Politically-exposed-persons is their official designation. Read the Wall Street Journal in Wednesday’s coverage. I thought of it before them, for the record.
A well-known example of a PEP was the late Chilean dictator Augusto Pinochet, who allegedly used accounts at Riggs Bank to siphon illicit funds from Chile. The failure of Riggs to monitor Mr. Pinochet and a former Saudi ambassador led to a Justice Department settlement, a $25 million fine and ultimately the sale of the bank.
Unlike Pinochet, I think, Spitzer loved to pay thousands of dollars for sex, up to 80,000 dollars according to federal investigators cited in the Associated Press. In order to do that, and not have his wife, his three daughters, the Democratic party battling for control over the NY State legislature, or the good citizens of New York State, find out…he had to transfer money in sketchy ways to sketchy places.
Reporting from the Treasury Department and IRS beat in D.C., NY Times reporters (David Johnston and Stephen Labaton) explain, here. On March 13th, the NY Times did another back-story story on How this all happened.
Last summer, employees at a large New York bank detected something suspicious: Gov. Eliot Spitzer was moving around thousands of dollars in what they thought was an effort to conceal the fact that the money was his own, federal officials said on Tuesday.
One of the New York banks which filed the SAR was Capital One’s North Fork, according to the article. The other bank was HSBC. This time the SAR filing triggered the FINCEN (Treasury Department) to alert the IRS to look into the accounts of the shell company receiving Spitzer’s money.
They said the apparent sleight of hand kept the transactions small and removed his name from deposits. The governor’s actions prompted the bank to file alerts known as Suspicious Activity Reports with the Treasury Department, which were reviewed by I.R.S. agents on Long Island, the federal officials said.
This is what bank officials in the Banco de Chile in New York, Citibank in Miami and Riggs Bank in Washington DC (and a host of others) did not do in 2004 when Senate investigators found Pinochet’s name on bank accounts as he moved big chunks of cash around in funny ways. This was what stimulated the Senate Investigative Committee to look into Pinochet. That was the beginning of the end for Pinocho.
A few months later, another New York bank sent its own reports of suspicious activity to the Treasury. They showed that Mr. Spitzer and others, including people overseas, collectively deposited hundreds of thousands of dollars into an account of a company called QAT International Inc., whose business involved foreign accounts and shell companies and appeared to be vaguely related to pornography Web sites.
A law generated in reaction to 9/11 and possible terrorist usage of US banking system to launder money, the Bank Secrecy Act says that banks should clamp down on suspicious activity and generate Suspicious Activity Reports or SAR’s to the Financial Crimes Enforcement Network, part of the Treasury Department. See Troutman Sanders AML for a VERY detailed breakdown of the Act.
Last July, suspecting that Mr. Spitzer might be involved in some kind of public corruption, the Treasury Department referred the banks’ reports to a section of the Manhattan federal prosecutor’s office that usually handles cases involving official wrongdoing. The case was not turned over to the criminal unit, which would usually investigate major prostitution rings.
Stay tuned by reading the NY Times, Ny Observer and the blog by Liz Benjamin and the Albany Times-Union for more info and breaking news. I guess the Wall Street Journal would have intense coverage, but their print edition is going to be stronger than their web edition. Not sure if WSJ.com will offer archive material.