US authorities 'destroyed' Banca Privada d'Andorra

US authorities "destroyed" an Andorran bank by accusing the group of money laundering without warning or any chance to address the alleged problems, attorneys for the controlling shareholder family said in a letter to the US Department of Treasury.

Banca Privada d'Andorra, one of five banks in Andorra, is now on financial life support after US authorities in March accused the bank of laundering money for organised crime in China and Russia, and corrupt officials in Venezuela.

BPA's Spanish subsidiary, Banco de Madrid, filed for bankruptcy less than a week after the announcement by the Financial Crimes Enforcement Network, a unit of the Department of Treasury.

The sternly worded response to US authorities on behalf of brothers Ramon and Higini Cierco, the former non-executive co-chairmen of BPA, is part of a chorus of complaints from Europe about the long arm of US enforcement.

But being hit by tough US penalties has not threatened the survival of large European banks like BNP, which agreed last year to pay $8.9bn for violating US sanctions and pleaded guilty to such offences.

In contrast, BPA relied on international correspondent banks for links to the US financial system. Those banks, which have not been accused of wrongdoing, have cut off ties in the wake of the money laundering accusations.

FinCEN has proposed banning US banks from opening or maintaining correspondent accounts for BPA, a death sentence for the bank that the Cierco brothers are fighting to avoid. FinCEN could soon finalise that proposal.

"The simple expedient of telling the Cierco brothers that there were good reasons not to do business with these intermediaries would have resolved the issue," attorneys for the brothers said. "Instead, the issuance of the [money laundering] notice, suddenly and without prior dialogue, has destroyed a solvent, viable financial institution."

The brothers, who were not involved in day-to-day oversight of the bank, were ousted along with the rest of the BPA board by the Andorran government after the FinCEN action. No BPA directors were accused of wrongdoing.

The accusations have rocked the small principality nestled between France and Spain, where the banking sector makes up 20 per cent of Andorra's gross domestic product.

BPA, the fourth largest of the five Andorran banks, was sacrificed to avoid US scrutiny of larger competitors, the attorneys for the brothers said. They also accused FinCEN of having a history of accusing small banks of money laundering without assessing the legitimate business of the banks.

FinCEN declined to comment on the Cierco brothers's response.

"BPA's corrupt high-level managers and weak anti-money laundering controls have made BPA an easy vehicle for third-party money launderers to funnel proceeds of organised crime, corruption, and human trafficking," said Jennifer Shasky Calvery, FinCEN director, in March.

One example FinCEN cited was the case of a high level manager at BPA providing "substantial assistance" to an alleged money launderer working for Russian organised crime, who was later arrested by Spanish authorities.

In another example, a manager at BPA was accused of accepting bribes from a Chinese intermediary who allegedly worked for Chinese organised criminals engaged in money laundering and human trafficking. The intermediary was arrested in 2012 by Spanish authorities.

If the Cierco brothers had been notified of FinCen's concerns, they would have addressed the issue since they had worked to adhere to regulatory standards, their attorneys said.

Since at least 2003, BPA has hired KPMG and Deloitte to conduct annual anti-money laundering audits, which had never raised serious concerns, the attorneys said. Those reports were submitted to the government regulator now headed by Maria Cosan, formerly of KPMG.

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