Royal Bank of Scotland, which is moving to dismiss litigation against it for allegedly providing financial services to terrorist organizations, has something of a history of doing business with groups designated as terrorists. In the wake of the 9/11/01 attacks, it emerged that RBSâ Citizens Bank unit had transferred money for Al-Barakaat, which even RBS later acknowledged to the Federal Reserve âappears to have provided funds to Al-Qaeda.â RBSâ defense was that its wire transfers had been to the United Arab Emirates which âwas not at the time of the wire (or today) in the high-risk for anti-money laundering category.âIt also emerged that up to and after 9/11/01, Royal Bank of Scotlandâs NatWest unit was a correspondent bank for Banke Millie Afghan Kabul, a nationalized company of the Islamic State of Afghanistan. Banke Millie was among seven corporations blacklisted by the United Nations in April 2000 as part of a sanctions regime against the Taliban. RBSâ NatWest, however, continued to be listed as a correspondent for Banke Millie long after the UN designation. While RBSâ chairman Sir Fred Goodwin characterized the issue, then raised by Inner City Press, as ânonsense,â even the Federal Reserve grilled RBS about it. A Federal Reserve memo obtained by Inner City Press reflects that
âReserve Bank and Board staff called Greg Lyons, counsel for Citizens, to ask him to provide the following information in writing to the Reserve Bank: (1) an explanation of RBS's relationship with Afghan organizations, (2) a description of RBS's due diligence process regarding banks for which RBS offers correspondent services, and (3) a list of RBS's correspondent banks. Mr. Lyons agreed to provide a written response to our request. Staff also requested that a copy of the written response be provided to Inner City Press.â
RBS withheld its list of correspondent banks. RBS was subsequently hit with the highest fine issued by the UK Financial Services Authority, for lack of anti-money laundering controls. The FSA's December 17, 2002, press release stated that its
âinvestigation revealed weaknesses in RBS's anti-money laundering controls across its retail network. The investigation found that RBS failed either to obtain sufficient 'know your customer' ("KYC") documentation adequately to establish customer identity, or to retain such documentation, in an unacceptable number of new accounts opened across its retail network.â
Despite this history, RBS spokesman Mike Keohane has stated that that the issues raised against RBS have âno merit,â and RBS is arguing that it cannot be sued in the United States, despite its ownership of Citizens Bank in the Northeast, Charter One Bank in the Midwest, and RBS Greenwich Capital Markets, which does business nation- (and world-) wide, including with high-cost mortgage lenders. The current case is 05-CV- 4622, before Judge Charles Sifton of in the U.S. District Court for the Eastern District of New York in Brooklyn, brought by plaintiffs including Tzvi Weiss, regarding RBS NatWest Account Number 140-00-08537933, for Interpal. RBS has told Judge Sifton it will file a motion on January 26 seeking dismissal of the case, in which the plaintiffs are seeking treble damages.
A separate case is pending in New Jersey against Credit Agricoleâs Credit Lyonnais unit, which claims that it closed the account at issue in September 2003. RBS, on the other hand, will not confirm or deny with whom it currently banks â just as it would not disclose after 9/11/01 its correspondent banking relationship, even in Afghanistan. Similarly, after the fall of Saddam Husseinâs regime in Iraq, U.S. currency transferred to Iraq in violation of the sanctions and rules of the U.S. Office of Foreign Asset Control was traced to a Royal Bank of Scotland vault in London. When the issue was raised to the U.S. Federal Reserve, the Fed deferred to vaguely-defined (and not yet disclosed) âconfidential compliance examinations.â Seeing the now-ubiquitous RBS âless talk, more actionâ advertisements around New York City, including in the corridors of LaGuardia Airport, one wag suggested a modification: âRBS means less standards, more profits.â