A man stands in front of the entrance of a closed Banco Madrid branch in Madrid yesterday. Spanish bank Banco Madrid has filed for bankruptcy after the US accused its Andorran parent of laundering money for organised crime groups.
Reuters/Madrid
State-appointed managers at Andorra’s Banca Privada d’Andorra (BPA) have capped cash withdrawals in an attempt to contain the damage from US allegations the bank laundered money for international criminal gangs.
The mountainous principality between France and Spain is heavily reliant on financial services. Standard & Poor’s (S&P) has said the problems at BPA — a lender which it said represented about a fifth of all assets and liabilities in the Andorran banking system — could strain the national finances.
Andorra took over the management of the bank after the US Department of the Treasury described it last week as an “easy vehicle” for criminal gangs in Russia, China and Venezuela to funnel their profits.
The problems at BPA, which could lose its ability to operate with US counterparties due to the allegations, prompted S&P to cut Andorra’s sovereign rating one notch last week to two levels above junk.
To shore up the bank, its provisional administrators have imposed a limit on cash withdrawals from ATM machines of €2,500 per week per account and have also limited national and international transfers.
The principality’s finance minister said yesterday the banking system was under stress but he insisted the scandal at BPA was an isolated case.
“Andorra has initiated a transformation process and is committed with transparency, international standards of exchange of information and the fight against money laundering ... to preserve our position as a world-class financial centre,” Jordi Cinca told Andorran television.
Andorran banks have expanded at a breakneck rate in recent years, increasing their assets under management by nearly two-thirds in the five-year period to 2013, and spreading to a wide array of countries, including neighbouring Spain, the US, Mexico, Dubai and Brazil.
The sector’s assets under management are 17 times the size of the local economy and S&P has said the central government would not be able to provide enough financial support to BPA if it was required.
Andorran banks have no direct access to European Central Bank (ECB) facilities from their head offices, however they could access ECB funding through subsidiaries in the eurozone if those units had eligible collateral to park with the ECB.
US authorities allege that BPA facilitated the movement of $4.2bn in transfers related to Venezuelan money laundering.
The chief executive of BPA, who was suspended along with the rest of the board last week, was arrested at the weekend on suspicion of money laundering.
The scandal has already spread to Spain where BPA’s Spanish unit, Banco Madrid, filed for bankruptcy yesterday after customers rushed to empty their accounts in the wake of the US allegations.
Banco Madrid had 15,000 clients with assets under management of about €6bn ($6.3bn) before the US allegations.
The Bank of Spain will guarantee deposits of up to €100,000 per client. It said fewer than 500 clients had more than €100,000 deposited at the bank.
The Spanish stock market regulator said it had suspended reimbursement of investment funds managed by Banco Madrid.
US officials said BPA’s alleged money laundering occurred largely through its Andorran headquarters but Spain’s anti-corruption prosecutor is looking into whether similar activity occurred at its unit there, a judicial source told Reuters.
