This research article discusses the role of the bank either knowing or unknowingly in laundering the money obtained by cheating. When massive money is transferred, banks should exercise utmost caution so that they cannot be later accused that indirectly helping the cheaters to cleanse their dirty money. Banking has now more moral responsibilities in identifying and reporting such suspicious activities and to cleanse their system at the nip of the bud itself so that the dirty money is not being laundered through their banking channels else they may have to witness litigation proceedings to refund the money to the losers of the game.
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Lloyds Bank was established in Birmingham in 1765. In the first half of the twentieth century, the bank expanded its operations in South America, Europe and India. In 1995, TSB Group PLC and Lloyds bank merged. In 2009, the Lloyds TSB Group plc acquired HBOS plc and presently it has been rechristened as Lloyds Banking Group.
Lloyds TSB, UK is facing an accusation that it permitted about thirty-three percent of the payoffs from the $242 million burglaries from Brazil’s bank “Banco Noroeste” to be converted through its branch in Zurich.
An international team of invigilators claimed that LLOYDS TSB ought to indemnify a major chunk of £132 million which it ill-gotten from “Banco Noroeste” in Brazil and clandestinely converted with the help of the Swiss division of the Lloyds TSB, UK.
Money laundering is the process of conversion of money derived from an illegal activity like illegal drug dealing by hiding the identity of the individuals who sourced the money and transforming it into assets that seem to have emanated from a legitimate source. Thus, money laundering is a cycle where the ultimate aim is to have access to “clean appearing “money at the end of the said process.
In 1994, when Nelson Sakaguchi, an executive of Banco Noroeste met Ikechukwu Christian Anajemba and his wife Amaka and Emmanuel Odinigwe, who impersonated themselves as executives of the Central Bank of Nigeria.
Mr. Sakaguchi was lured with a large fee in a swap for investing the Banco Noroeste’s money in Nigeria’s new airport.
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Sakaguchi who had sole charge of the bank’s Cayman division, reportedly started to forward the money to a number of different companies via banks in the US to try to get his share of the loot. Later, in 1997, Banco Santander was acquired by Central Hispano, Spain’s biggest bank for $500 million. The accountants of the Spanish bank detected the said financial fraud and questioned Mr. Sakaguchi about the genuineness of the dealing.
Sakaguchi informed that the money was paid for the Nigerian airport. Later, investigators found that the losses were as much as $242 million.
Banco Noroeste shareholders employed William Richey, a former prosecutor who disbanded organized crime in Miami. Mr. Richey traced the funds to banks in “New York, London, Switzerland and finally in Nigeria.”
Disgruntled shareholders of Banco Noroeste filed a case against Lloyds TSB in Swiss court recently. Naresh Asnani, an UK resident and former customer of Lloyds TSB, who was the master brain for this money laundering transaction, was detained in Switzerland.
Mr. Asnani was charged for having laundered $122 million on behalf of Ikechukwu Christian Anajemba and Emmanuel Nwude Odinigwe, two Nigerian nationals who were said to be the supposed orchestrates behind the loot.
Anajemba is now no more and seemingly killed by his rivals. Both the Amaka Anajemba, the widow of Anajemba and another accomplice Odinigwe are now detained in Lagos.
The Lloyds TSB in collusion with Citibank is charged of permitting money to be converted in bank accounts opened by Ansani, who alleged to have lawful business grounds for moving billions of dollars in return to Odinigwe bank account in Nigeria.
In 1995, due to tight foreign exchange controls, companies importing goods in to Nigeria were suffering. Exporting companies received payment for their product in Nigerian naira but had to defer for imports from foreign countries in American dollars. Due to strict foreign exchange control measures in Nigeria, it is not so easy for the Naira to be converted in to American dollars but with the help of black marketers.
In July 1995, Ansani acting as a trader of electronic products started his business bank account with Lloyds TSB bank. Between September 1995 and May 1997, about $ 76 million was channeled from Cayman Island division of Banco Noroeste via a chain of banks located in New York to Ansani account. Wasmer of Lloyds TSB who managed Ansani account in Switzerland was vouched for the genuineness of the transaction to his immediate superiors at London headquarters of Lloyds TSB.
Mr. Wasmer due to pressure from his London superiors questioned Mr. Asnani about the sources and sanctity of some of the large sums of money moved into the account. Ansani claimed that these funds were the proceeds of the export realization of crude oil and other petroleum products from Nigeria. Ansani claimed that proprietor of the funds sold the export funds to him as he had paid for them in Naira.
According to Mr. Asnani that the millions of US dollars in the account were employed to defer for imported products like candles, air-conditioners and batteries from the Far East. Mr. Asnani gave Mr. Odinigwe name as the oil exporter from Nigeria. Though Lloyds TSB bank account was finally closed in 1997 by Ansani, but with recommendations of Mr. Wasmer, Asnani opened up a new account in Citi Bank at Switzerland. From Citi bank, a further $46 million was transferred to some destinations in Nigeria.
In his testimony in Swiss Court , Ibrahim Lamorde, the deputy chairman of Nigeria’s Economic & Financial Crimes Commission which has been set up to investigate and to eschew financial fraud emanating from Nigeria deposed that in 1995, when the money was started to be transferred, consciousness of Nigerian fraud was at its height. Further, banks in the world had been monished about the “419” defraud where investors were required to shell out an upfront fee in exchange for bountiful gains later.
Lamorde denied that Odinigwe was not an oil trader at all. His name was got attention of the Nigerian authorities only when he became a board member of the Union Bank.
Mr. Lamorde claimed that it would have been very easy for banks to vouch Mr. Ansani’s statement that the dollar transfers were pertaining to a genuine oil trader or not.
However, Asnani retracted from his earlier admission of money laundering fraud and alleged that had been compelled to accept to money-laundering to free his father from criminal cases.
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Banco Noroeste, however, claimed that it is continuing its efforts to demand money from Citibank and Lloyds TSB. Both Citibank and Lloyds TSB are now both contesting the claims in Swiss court.
It is to be remembered that Lloyd’s TSB and Citi Bank have collected or transferred money for a customer and in such a situation, the bank has acted only as the agent of its customer. Hence, a bank cannot be held liable for having acted upon the instruction of clients. In Foley v.Hill, it was held that when money was received by a bank, it ceases to be the money of the principal or neither is it the money of the banker. Thus, any money that is deposited in to a bank becomes bank’s money and it cannot be held for acting or conniving for money laundering offense if it has acted upon the instruction of a customer. (Savla 70).
As per Patriot Act of USA, now financial institution has to vouch the personal identity of the client during the opening process of account itself and has to establish anti money laundering programs. Now, banks in USA have to file a SAR (Suspicious Activity Report) about the transaction to FinCEN and if serious, reporting has to be made to law enforcement directly.
Now, financial institutions throughout the world are obliged to block to accounts and other assets of specified countries, individuals, entities if it receives instruction from OFAC (Office of Foreign Assets Control) in this regard.
Now, various anti-money laundering provisions in the banking system have been introduced like reporting suspicious transactions and “know your customer” procedures.
It is to be observed Lloyds TSB case pertaining to transaction that have occurred during 1994 to 1997 and there is no single case law that have found banks liable for money laundering offense as of now. (McCollum 137).
Now, banks are required to comply with a barrage of new regulations and if not their creditability will be at stake. Further, banking institutions may have to incur huge penalties if they go along with money launderers. If Lloyds TLB and Citi Bank have acted negligently now, definitely they have to incur huge penalties that court may impose on them.
McCollum, Bill. Taking the Profit Out of Drug Trafficking: The Battle Against Money Laundering: Congressional Hearing. Darby: Diane Publishing, 2001.
Merrell, Caroline. 2004. Lloyds under fire in money-laundering case. Web.
Savla, Sandeep. Money Laundering and Financial Intermediaries. Frederick: Kluwer Law International, 2001.