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US Charges Cyprus, Belarus Banks with Money Laundering - 2004-08-24

The United States is targeting two foreign banks for sanctions under anti-terrorism laws designed to crack down on money laundering.

The U.S. Treasury Department is accusing Infobank of Belarus of having helped the former Iraqi regime of Saddam Hussein launder funds obtained through violations of the United Nations' oil-for-food program. It is also accusing First Merchant Bank of the Turkish Republic of Northern Cyprus of ties to organized crime and serving as a conduit for money laundering.

The Treasury Department is proposing one of the harshest sanctions at its disposal: cutting the banks off from the U.S. financial system.

"What our notices will impose is a special measure against the two banks that will prohibit covered financial institutions, or essentially U.S. financial institutions from establishing, maintaining, administering or managing any correspondent account in the United States for or on behalf of First Merchant Bank or Infobank," said William Fox, the Treasury Department's director of the financial crimes enforcement network.

There will be a 30-day "comment period" where concerned parties in the United States and elsewhere can present their opinions before sanctions are imposed.

Under the USA Patriot Act, adopted after the September 11, 2001 terrorist attacks on the United States, the Treasury Department may designate foreign financial institutions as being "of concern" for money laundering. The department can then propose measures ranging from additional reporting requirements for financial transactions to actually severing the banks' ties to the United States.

In waging the war on terrorism, one of the Bush administration's primary goals is to dry up terrorists' sources of funding and to dismantle the financial networks they use. The United States has long had similar goals for cracking down on drug trafficking and other forms of organized crime.

"The designation of these two financial institutions as primary money laundering concerns is yet another step in our efforts to protect the integrity of the U.S. financial system, and forms part of our ongoing initiative to identify rogue financial institutions around the world that pose a risk to not only the U.S. financial system, but also the international financial system at large," said Treasury Department Assistant Secretary for Terrorist Financing Juan Zarate.

No comment from Infobank or First Merchant Bank was immediately available.