Bank fined $25 million in terrorism investigation

WASHINGTON — The Federal Reserve ordered Riggs Bank’s parent company Friday to take steps to prevent money laundering after it was fined $25 million in connection with a probe into possible links to terrorism financing.

The Fed’s action came a day after the Treasury Department levied the record-setting fine against Riggs for its handling of millions of dollars in foreign-held accounts.

In a cease and desist order issued by the central bank, Riggs agreed to take actions such as hiring an independent consultant to conduct a review. Its operation in Miami — which Riggs plans to close — will be required to retain an outside consultant to review previous account transactions for possible suspicious activity.

The Federal Reserve has jurisdiction over bank holding companies. The Atlanta Fed had previously advised Riggs’s Miami-based subsidiary of deficiencies in its compliance with laws to prevent money laundering, the order noted.

The action followed the $25 million civil fine against the midsize Washington bank, which has a near-exclusive franchise on business with the capital’s diplomatic community. The fine, which had been expected, is the largest ever imposed on a financial institution for such violations, experts said.

Credit-rating agency Standard & Poor’s said that the fine, combined with anticipated restructuring charges of $15 million to $21 million in the April-June quarter, “should result in a large loss in the second quarter and prevent Riggs from being profitable for the year.”

Standard & Poor’s and other agencies have recently downgraded their ratings of Riggs, reflecting what S&P on Friday called “continued profitability pressures and regulatory uncertainty.”

The Treasury Department’s Office of the Comptroller of the Currency issued the fine in an order made public late Thursday, after weeks of negotiations between Riggs officials and banking regulators.

“Riggs failed to properly monitor, and report as suspicious, transactions involving tens of millions of dollars in cash withdrawals, international drafts that were returned to the bank, and numerous sequentially numbered cashiers’ checks,” the office said.