Riggs Bank was a Washington, DC-based commercial bank with branches located in the surrounding metropolitan area and offices around the world. For most of its history, it was the largest bank in the nation's capital. Riggs had been controlled by the Albritton family since the 1980s, but they lost control after various corporate scandals and management problems. On May 16, 2005 a merger with PNC Bank was concluded and the Riggs nameplate retired.
The earliest incarnation of Riggs Bank was formed in 1836 when William Wilson Corcoran opened a small brokerage house. In 1840, Corcoran and George Washington Riggs, the son of a neighbor, formed "Corcoran & Riggs", which offered checking and depositing services. The bank got a major boost in 1844, when The U.S. government assigned Corcoran & Riggs to be the only federal depository in Washington. Corcoran & Riggs financed Samual Morse's invention of the telegraph in 1845, one of several notable backings in its history. The bank also lent $16 million to the U.S. government to pay for the Mexican-American War in 1847 and, in 1868, provided $7.2 million in gold towards the purchase of Alaska.
In 1854 Corcoran retired, and the bank changed its name to "Riggs & Co." After accepting a government charter, "Riggs National Bank" was born in 1896. By 1900, Riggs was twice as large as any other bank in the capital. In 1909, Riggs' president formally presented to the U.S. Congress a plan for economic relief. Many financial reforms were implemented as a result of this plan, including the establishment of the Federal Reserve in 1913. Beginning in the early 20th century, the bank embarked on a successful project to become known as the bank of embassies and diplomats, and by 1950 most embassies in Washington were customers. Many branches thereafter opened within embassies in Washington D.C. and London.
In 2002, Joseph L. Allbritton, the Chairman of the Board, was inducted into the Washington Business Hall of Fame. This may be considered ironic due to the scandals that would unfold over the next two years.
Through its history Riggs Bank served many notable personalities. Twenty-two U.S. Presidents or their families banked at Riggs, including John Tyler, Abraham Lincoln, Ulysses S. Grant, and Dwight D. Eisenhower. Accounts were also held by Senators Henry Clay, John C. Calhoun, and Daniel Webster, Confederate president Jefferson Davis, American Red Cross founder Clara Barton, suffragist Susan B. Anthony, and generals William Tecumseh Sherman and Douglas MacArthur.
In the early 2000s, Riggs was beset with scandal. Investigators were surprised that so little oversight was conducted involving suspicious international transactions, especially after the September 11 attacks. A bank regulated by the Office of the Comptroller of the Currency, the OCC itself lost some creditability especially when other government agencies and the U.S. Senate launched their own investigations and discovered transgressions that the OCC should have cited long ago.
Saudi money transfers
A Saudi named Omar al-Bayoumi housed and opened bank accounts for two of the 9/11 hijackers. About two weeks after the assistance began, al-Bayoumi's wife began receiving monthly payments totaling tens of thousands of dollars from Princess Haifa bint Faisal, the wife of Saudi ambassador and Bush family confidant, Prince Bandar bin Sultan, through a Riggs bank account. [*]
Upon discovery of these transactions, the FBI began investigating the bank for possible money-laundering and terrorist financing. Although the FBI and later the 9/11 Commission ultimately stated that the money was not intentionally being routed to fund terrorists, investigators were surprised to see how lax the safeguards at Riggs Bank were. Several Saudi accounts were discovered to have financial improprieties, including a lack of required background checks and a consistent failure to alert regulators to large transactions, in violation of federal banking laws.
Many of these transactions involved Prince Bandar personally, often transferring over $1 million at a time. According to British investigations on the Al Yamamah deal, reported by The Guardian, Bandar would have received over $ 1.5 billion in bribery from BAE Systems, laundered through the Riggs Bank.
Pinochet's frozen funds
Augusto Pinochet, the former dictator of Chile, has been widely accused since 1973 of corruption, illegal arms sales, and torture. In 1994, Riggs officials invited Pinochet to open an account at Riggs Bank. Arrested in 1998 in Britain for possible extradition to Spain, his accounts were ordered frozen by court orders. A recent U.S. Senate report has revealed that Riggs executives helped Pinochet disguise millions of dollars. By using shell companies and hiding accounts from federal regulators, Riggs illegally allowed Pinochet to retain access to much of his fortune [*].
The Senate report also indicated that regulators were negligent in holding the bank accountable. Although Pinochet's accounts at Riggs had been reported in U.S. and British newspapers, and although these accounts were largely unreported to regulators, those same regulators never made a serious effort to investigate. The comptroller tasked with investigating Riggs in 2002, R. Ashley Lee, was later given an executive position at Riggs.
The disclosure of the Riggs accounts reignited the case against General Pinochet, and a ruling that he was not mentally competent to stand trial was overturned when it was proven that the general himself had orchestrated some of the huge transactions. In 2004, he was ordered to stand trial for crimes against humanity, and additional claims of mental and physical incompetence have been overruled. Pinochet died however in December 2006 before being judged. However, in September of 2007, Pinochet's widow and five children were indicted by a Chilean court on charges including embezzlement.
Equatorial Guinean funds
In July 2004, the US Senate published an investigation into Riggs Bank, into which most of Equatorial Guinea's oil revenues were paid until recently. This showed that accounts based at the embassy to the United States of Equatorial Guinea were allowed to make large withdrawals without properly notifying federal authorities. At least $35 million were siphoned off by long-time dictator of Equatorial Guinea, Teodoro Obiang Nguema Mbasogo, his family and senior officials of his regime.
The same Teodoro Obiang Nguema bought, on November 2006, a $ 35 million house in Malibu, CA
Simon Kareri, the Riggs employee in charge of the Equatorial Guinea and other accounts, stands accused of money-laundering in separate charges. As the account manager, it is alleged that he established a fake holding company in his wife's name, and diverted funds into this account.
In the Senate Permanent Subcommittee on Investigations hearing in July, 2004, Mr. Kareri, under advisement from legal counsel, refused to answer any questions of the panel by invoking his 5th Amendment Rights.
In that hearing, the President of Riggs Bank was asked why the bank would willingly enter into a business arrangement with the dictator of Equatorial Guinea, a man who willingly exercises his hold over his people with demonstrations of murder and torture on state-run television. In a copy of correspondence to President Mbasogo, the letter, "thanked the president for his establishment of several bank accounts, and encouraged a working relationship to help establish and secure the stable reign of his country..."
Riggs Bank was fined $25 million for violations of money-laundering laws. A long running Justice Department investigation was wrapped up quickly in Feb. 2005 with Riggs pleading guilty and paying a $16 million fine for violations for the U.S. Bank Secrecy Act after a Wall Street Journal article reported 12/31/04 that Riggs had extensive ties to the CIA, including that several bank officials held security clearances. Also, on Feb 2005, the bank and Allbritton family agreed to pay $9 million to Pinochet victims for concealing and illegally facilitating movement of Pinochet money out of Britain Terence O'Hara, Allbrittons, Riggs to Pay Victims Of Pinochet, The Washington Post, February 26, 2005 . No similar payment has been made with regard to Equatorial Guinea, as reported in this weekly Anti-Money Laundering Report from the Fair Finance Watch
Riggs and its executives have denied any wrong-doing, although some may now face criminal trials. Members of the Albritton family resigned from the bank board. The operation was acquired by PNC Bank in 2004. PNC phased out the scandal-plagued embassy business. On May 16, 2005, the Riggs name was officially retired, and all Riggs branches opened as PNC branches.
The severe scandals at such an august company have shaken the industry. The U.S. Congress is considering establishing a single federal agency to enforce money-laundering and terrorist-financing laws. Daniel P. Stipano, deputy chief counsel at Riggs's lead regulator, said, "What happened with Riggs is unacceptable. It cannot be repeated."
Scandal coverage from the Washington Post
Scandal overview from the New York Times
BBC News: Bank payout to Pinochet victims