The Dirty Money War

A whirlwind of allegations linking at least two Argentine financial institutions to elaborate international money-laundering networks has damaged the credibility of the nation’s banking system and further complicated the government’s task in reviving the economy.

Even as embattled Central Bank President Pedro Pou teetered in early March on the brink of forced resignation or dismissal, an Argentine congressional committee was gearing up to probe into a web of alleged dirty money transactions over more than a decade, linking Buenos Aires to the Bahamas, the Cayman Islands, and New York.

Susana Viau, correspondent for the leftist Página 12 of Buenos Aires (March 1), reported that details of the cross-border banking relationships and the magnitude of the money transfers came to light as part of a report issued recently by the Democratic membership of a U.S. Senate subcommittee.

Specific charges linked Banco República, a now-defunct Argentine bank owned by Raúl Moneta, a close confidante of former President Carlos Menem, to an offshore Bahamas-licensed bank, Federal Bank. Federal Bank was described as “the pivot of a vast and prolonged operation for circulation of money of doubtful origins.” The scheme is believed to include corporate bribes paid for government business and substantial sums of earnings concealed from Argentine tax authorities.

Viau noted that the subcommittee report showed Federal Bank monetary transfers exceeding US$4 billion through its correspondent banking account with U.S.-based Citibank over an eight-year period between 1992 and 2000. The report alleged that Federal’s private banking clients in Argentina used these transfers “to pull money out of the country and return it laundered in the form of ‘loans.’ ” Viau reported the subcommittee also produced detailed evidence on Argentine-based Mercado Abierto’s relationship with Cayman-licensed MA Bank. It is said to have laundered money for Mexico’s Juarez drug cartel in the late 1990s and transferred these funds through its correspondent account at Citibank.

In an interview with Página 12 correspondent Eduardo Tagliaferro (March 1), federal deputy Elisa Carrió, co-chair of the Argentine congressional probe into money-laundering, harshly criticized Pou and other senior Central Bank officials for failing to exercise appropriate oversight “Now it will depend on the investigation to be conducted in Argentina. We face a task that has global relevance.”

Some Argentine commentators viewed the escalating pressure for Pou’s resignation as motivated less by the fallout from the money-laundering allegations than by the ruling Alliance coalition’s eagerness to settle political scores. Pou was installed by the prior Peronist govern ment as Central Bank president and made influential enemies as a champion of Menem’s aborted dollarization scheme. “Pedro Pou is a man without friends, held suspect in his management...his efficacy even by those who defend him,” wrote columnist Joaquin Morales Solá in the conservative La Nación of Buenos Aires (Feb. 18).

But Morales Solá warned that President Fernando de la Rúa must tread cautiously in intervening in the affairs of Argentina’s supreme monetary authority. “Neither the convertibility system of the Argentine economy (anchoring the peso at 1:1 parity with the U.S. dollar) nor Pou’s decisions in the sound exercise of his functions is under discussion,” the columnist said. “Rather, it is his ability to... supervise movements of funds in the banking system and his personal honesty to remain in that role.”

Morales Solá observed in La Nación (March 4) that a swiftly executed change in Central Bank leadership, coupled with installation in early March of an aggressive new economy minister, could offer De la Rúa and the ruling Alliance the last, best hope of political salvation prior to midterm congressional elections in October. “Argentine society is in no mood to live through another year of recession, and…no one can foresee an electoral triumph (for the Alliance) with an immobile economy,” he wrote.