Financial Crime World

Money Laundering Scandal in Puerto Rico: Senate Hearing Reveals Alarming Findings

Background

  • Date: July 25, 1985
  • Location: Washington, DC - U.S. Senate, Permanent Subcommittee on Investigations, Committee on Governmental Affairs

A Senate hearing chaired by William V. Roth, Jr. (R-DE) took place to examine money laundering in Puerto Rico following a raid on ten banks in Puerto Rico by federal agents in June 1985.

Members in Attendance

  • Chairman Roth
  • Senators Warren B. Rudman (R-NH), Sam Nunn (D-GA), and Albert Gore, Jr. (D-TN)
  • Daniel F. Rinzel, Chief Counsel
  • Eleanore J. Hill, Chief Counsel to the minority
  • Katherine Bidden, Chief Clerk
  • Charles Morley, Chief Investigator
  • Glenn Fry, Investigator
  • Paul Barbadoro, Staff Counsel
  • Sarah Presgrave, Executive Assistant to the Chief Counsel of the majority
  • Charles Osolin, Press Secretary
  • Debby Kamans, Carla Martin, Colm Connelly, and Chris McAndrews, staff assistants

Opening Statements

Chairman Roth began the hearing by addressing the issue of money laundering in Puerto Rico:

  1. Numerous Bank Secrecy Act violations
  2. Ignorance, negligent disregard, and criminal noncompliance
  3. Dirty money not just for tax evasion
  4. Concerns regarding the Federal Home Loan Bank Board (FHLBB)

Criticism of the Federal Home Loan Bank Board

The FHLBB was criticized for:

  1. Fewer examinations than the FDIC
  2. Significantly fewer Bank Secrecy Act violations discovered
  3. Other responsibilities, but need to address the root causes

Witnesses

  • Charles Blau, Associate Deputy Attorney General, Department of Justice
  • Charles Morley, Chief Investigator, Permanent Subcommittee on Investigations
  • William J. Schilling, Director, Office of Examinations and Supervision, Federal Home Loan Bank Board
  • Antonio J. Munoz, Chairman and CEO, Banco Financiero de Puerto Rico
  • Hector Ledesma, President, Puerto Rico Bankers Association and CEO, Banco Popular de Puerto Rico
  • Mariano J. Mier, President, Puerto Rico Savings and Loan Association and President, First Federal Savings Bank

Evaluation of Puerto Rico’s Banking Regulatory Structure

Evaluation and discussion took place regarding:

  1. Inadequacy of resources and regulations
  2. Training and education for bank personnel
  3. Need for improved communication between agencies

Preventive Measures and Actions

Possible actions the Senate and various departments could take to strengthen the enforcement of the Bank Secrecy Act in Puerto Rico and beyond included:

  1. Increased funding for investigative agencies
  2. More frequent examinations of banks and financial institutions
  3. Improved training and education for bank personnel and law enforcement agents
  4. Legislation to enhance penalties for Bank Secrecy Act violations
  5. Streamlining communication between regulatory agencies and law enforcement
  6. Joint efforts between the Senate, FHLBB, and other organizations to address the situation in Puerto Rico and beyond.