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Marevas for Montesinos as Caymans Freeze $100m

A staff reporter, 29 January 2005

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Another tale of private correspondent banking gone wrong is unfolding as the Cayman government freezes monies believed to belong to Peru’s f...

Another tale of private correspondent banking gone wrong is unfolding as the Cayman government freezes monies believed to belong to Peru’s former chief of intelligence and his allies. The Abacha and Peruvian Montesinos scandal—both covered extensively on Complinet--have pushed "the proceeds of foreign potentates" to the forefront of the world’s anti-laundering agenda in recent months. The US Senate sub-committee report on money laundering has alerted the world to another commonly used laundering route – through the correspondent accounts of the world using banks that do not have credit relationships with each other. Even though the details of the case remain scant, the impounding of monies at Wiese Bank International in the last few days has shed light on a process that appears to contain all these elements. The quantity of impounded cash is in some doubt: the local press are claiming that it is more than £33m; the head of the Cayman Islands Compliance Association believes it to be at least $80m; and the Peruvian regulators at the Comision Nacional Supervisora de Empresas y Valores have told Complinet that it is well over $100,000. Whatever the exact sum, regulators believe it belongs to the fugitive Vladimir Montesinos, his wife, and three Peruvian men named Malca, Valencia and Venegas. According to a publicised report from the Government Information Service, senior crown counsel for the attorney general obtained injunctions in the Grand Court to freeze the accounts. Classical pre-Woolf litigation is still the rule in the British colony, so it is likely that the amounts were frozen by means of Mareva injunctions, now known in the UK as freezing orders. Information is still obtained by means of Norwich Pharmaceutical disclosure orders. The case is being treated as a money laundering event because local legislation dating back to 1996 makes it illegal to deal with monies which emanate from a criminal offence in another jurisdiction. The Peruvian government will, in due course, commence proceedings in the Caymans for the recovery of the funds. More than one Peruvian bank is understood to be involved and an offshore US bank may have been instrumental in the transfer of funds through correspondent accounts. Pilar Yebes, an official at the Comision in Lima declined to say how the Peruvian government had decided that the funds belonged to Montesinos, but told Complinet that a Peruvian bank had sent the money to its subsidiary in the Caymans: "Over $100m was sent by a large Peruvian bank based in Lima, Wiese Sudameris, to its subsidiary, Wiese Bank International. The parent bank is the product of a merger between Bank Bise and Lima Sudamerico. Our Bank of Commerce has been implicated as well. The money came from the government, in which Montesinos was a powerful figure at the time." Alistair Walters, a partner at the law firm of Bruce Campbell & Co and the chairman of the Cayman Islands Compliance Association, speculated about the nature of the laundering process in this case: "Wiese Bank has got to be a Class B bank under our law, which means that it can only conduct offshore business rather than local business. When money is transferred from South America in these cases - even from a parent bank - it usually passes through one or more banks along the way. This is the way in which perfectly innocent transactions are often done. “The money would have to have passed through a correspondent bank account onshore in "clearing bank" - usually in New York or perhaps in Miami because of its proximity to the region. Wiese Bank wouldn’t have been a major bank capable of using its own funds, so it would have had a relationship with onshore banks. A lot of funds moving here from parent banks in South America go through major US clearers like Citibank. They then go to a locally registered Class A Cayman bank and on to the Class B bank. A Class A bank therefore has to be the conduit for all overseas monies coming into the Class B bank. “Whether this happened is of course speculation. Nobody here is talking about the existence or otherwise of a US "clearer", but this is because the proceedings haven’t reached that stage yet," said Walters. All this will be grist to the Senate sub-committee’s mill. Correspondent accounts at private banks are going to be the next target for the US anti-laundering effort, and the story of Montesinos’ missing millions will lend point to the senators’ warnings about the "black hole" in the United States’ fight against the laundrymen.

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