March 11, 2015 / 2:36 PM / 4 years ago

UPDATE 1-Andorra's BPA an isolated case, supervisor says amid probe

* Andorra takes control of private-owned bank BPA

* Says money laundering probe limited to one bank

* Investigation follows U.S. scrutiny of BPA (Adds details, background)

ANDORRA LA VELLA, March 11 (Reuters) - Andorra’s financial authorities said on Wednesday a money laundering probe at Banca Privada D’Andorra (BPA) had no implications for the rest of its banking sector, as the lender’s Spanish unit also distanced itself from the case.

Andorra — a small principality and tax haven in the Pyrenees mountains between Spain and France — took control of privately-owned BPA on Tuesday, citing alleged bad practice.

Supervisors said the move, a first for the principality and which came after a U.S. notice declaring the bank under suspicion for money laundering, was an isolated case.

“The investigations into alleged money laundering are limited to one concrete bank, they do not cast doubt on Andorra’s financial sector,” Maria Cosan, head of supervisory body INAF told a news conference in capital Andorra la Vella on Wednesday.

Clients of BPA, the fourth biggest bank by assets out of the five in Andorra, had raised queries about the lender on Wednesday, Cosan added, though she said it was too early to tell what the repercussions on its operations would be.

Authorities have stressed that the intervention was nothing to do with the bank’s solvency.

INAF’s Cosan said courts had already been investigating BPA. She would not detail why the state had decided to step in now, although she added it was to do with “international relations.”

“The United States is the United States, there’s not always a scientific and logical reasoning as to how they do things,” Cosan said.

The U.S Treasury’s Financial Crimes Enforcement Network (FinCEN) said on Tuesday BPA was involved with the proceeds of organised criminals in Russia and China, $2 billion in laundered funds from Venezuelan state oil company PDVSA, foreign corruption, and other criminal activity.

Calls to PDVSA in Venezuela’s capital Caracas went unanswered. The news comes days after the United States declared Venezuela a national security threat and ordered sanctions against seven officials from the oil-rich country.

The probe also comes amid renewed focus by global regulators on banking fraud, as they crack down on lenders and tax evasion cases. Britain’s HSBC has been in the spotlight over a tax scandal at its Swiss arm.

Andorra has moved to improve collaborations with other countries on fraud and tax investigations in recent years, signing up to international information sharing agreements.

The Bank of Spain has also taken over Banco Madrid, BPA’s Spanish subsidiary, which on Wednesday said it was reviewing internal controls and cooperating with regulators but stressed it operated independently from BPA and was confident it had acted within the law.

Both BPA and Banco Madrid are open for business as usual, and INAF said it had not suspended the board or taken any other actions as it waited for the investigation to take its course.

BPA said it was opening an internal probe and collaborating with authorities. (Writing by Sarah White in Madrid; Editing by Julien Toyer and Mark Potter)

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