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Stopping Banks from Hiding Human Rights Abusers' Money:
A Recent Settlement by Riggs Bank Highlights the Issue


Monday, Apr. 04, 2005

In late February, Riggs Bank and its principal owners agreed to pay $8 million to a foundation established for victims of the former Chilean dictator Augusto Pinochet. In exchange, a Spanish court agreed to dismiss criminal charges against bank officials - who are alleged to have violated an asset freeze order by transferring at least $8 million from Pinochet's London account, to a new Washington, D.C. account.

Both the criminal proceedings that led to the settlement, and the settlement itself, are important milestones with respect to international human rights. They hold a bank accountable for allegedly hiding the money of a dictator with a heinous record of human rights abuses.

In so doing, they establish that financial institutions have a responsibility not to aid and abet dictators, but rather to act in a manner that allows for governments to properly locate and freeze their assets, so that restitution can ultimately be made to their victims.

This is a welcome exception to the long history of wrongdoers hiding their assets in foreign accounts in an often-successful attempt to evade justice. Now, bank officials will have to think long and hard before aiding and abetting known human rights abusers in hiding their assets.

The Factual Background: A Senate Report Condemns Riggs' Role

In1997, Madrid prosecutor Baltasar Garzón initiated a Spanish criminal action against former general Augusto Pinochet. Under Spanish law, anyone in the world can be tried for genocide, torture, and a limited set of other serious human rights violations, if the crimes are committed against Spanish citizens. Garzón sought to try Pinochet for crimes against humanity -- such as the forced "disappearances" of thousands of people, including a number of Spanish citizens, under Pinochet's regime.

In 1998, Pinochet travelled to London for a medical procedure. Garzon sought to extradite him to Spain, and issued an order freezing Pinochet's assets worldwide, so that victims might receive compensation if the retired general were ever convicted in court.

Pinochet was arrested, and spent 16 months under house arrest in London. But eventually, Britain's home secretary declared him unfit for trial, and, in 2000, allowed him to return to Chile. (Currently, Pinochet is under investigation in Chile for tax fraud, and has been indicted there on murder charges.)

On July 15, 2004, after an investigation, the minority staff of the U.S. Senate Committee on Governmental Affairs' Permanent Subcommittee on Investigations released a report alleging that Riggs Bank had deceptively circumvented the order freezing Pinochet's assets.

In particular, the report claimed, Riggs -- a U.S. financial institution -- had arranged to have millions of dollars of Pinochet's money secretly transferred from its London branch to its Washington, D.C. branch.

According to the report, Riggs put Pinochet's money in hidden accounts under aliases, and took other steps to obscure his identity and hide the transfer - committing crimes allegedly including money laundering in Spain, Britain, the United States, the Bahamas and Chile. The U.S. Senate report condemned Riggs not only for ignoring the asset freeze proceedings, but also for ignoring what it said were "red flags involving the source of Mr. Pinochet's wealth…and public allegations of serious wrongdoing by this client."

Based on the report, in September 2004, lawyers for a group of Pinochet's victims petitioned a Spanish court to add certain Riggs directors and officers as additional defendants in Garzón's actions against Pinochet. (In Spain, private citizens may initiate a criminal proceeding.) Riggs itself was not added as a defendant because in Spain, corporations cannot be tried under criminal law.

In January 2005, in the U.S., Riggs pleaded guilty to a failure to report suspicious transactions worth hundreds of millions of dollars. Under the plea agreement, the bank agreed to pay $16 million in fines. A federal court accepted the plea in late March 2005. Based on the plea, money laundering charges were dropped; they would have involved not only the Pinochet accounts, but also the accounts of government officials from the repressive West African nation of Equatorial Guinea.

Finally, this March, the Senate subcommittee issued an updated report on the Riggs Bank matter. It asserts that " [t]he relationship between Riggs Bank and Augusto Pinochet was more extensive than previously disclosed, encompassing 28 accounts instead of nine, spanning 25 years instead of eight, including secret accounts opened under misleading names, and involving more personal, high-level contact between Riggs officials and Pinochet than previously described. "

Other Recent Allegations that Banks Have Aided and Abetting Human Rights Violators

The Riggs Bank case is not the first time that banks are alleged to have aided and abetted a repressive leader.

In the late 1990s, Swiss banks, and other European banks, were sued under the U.S.'s Alien Tort Claims Act (ATCA) for allegedly aiding and abetting the Nazi regime by acting as conduits for stolen money and property of Holocaust victims. (For more on the ATCA and its use to pursue claims against banks, see my previous column.)

Also in the 1990s, dictator Ferdinand Marcos was sued in federal court in Hawaii under the ATCA for violating Filipino citizens' human rights. In that case, a jury awarded plaintiffs $2 billion after finding Marcos responsible for summary executions, disappearances and torture.

Unfortunately, the plaintiffs have yet to collect on that judgment. One of the issues highlighted in the case was the role that Swiss banks played in allegedly concealing Marcos's assets. The judge in the case described the banks as Marcos's agents, and joined them as parties to the proceedings, but the banks were ultimately released from the suit.

Another Avenue for Victims: The International Criminal Court

Finally, in addition to particular nations' avenues of recourse - such as Spain's human rights violations law, and the U.S.'s ATCA - there is also a possible international remedy that could apply to bank officials who aid and abet human rights violators in hiding their assets.

The International Criminal Court (ICC) has the power to provide for civil reparations and redress for victims - including the power to order a defendant to compensate them for the harms he or she caused. Pursuant to Article 75 of the ICC Statute, the ICC may set forth principles for reparation for victims, which may include restitution, indemnification and rehabilitation.

The existence of these means of recourse for victims means that banks can no longer act with impunity in helping human rights violators hide their assets. Now, banks that do so may have to face the music, too - a very positive development for justice.

Anita Ramasastry is an Associate Professor of Law at the University of Washington School of Law in Seattle and a Director of the Shidler Center for Law, Commerce & Technology.

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