Short of a last minute intervention by the Nigerian Central Bank, all Nigerian diplomatic missions in the United States would have been left without a US bank to manage their banking needs, Empowered Newswire reports.
This is because, several foreign Missions in the United States, including Nigeria’s diplomatic posts in New York, Washington DC and Atlanta are having a tough time securing new banking relationships with local American banks as the stringent regulations of the US Patriot Act meant to fight terrorism and its funding are forcing the banks to drop accounts of foreign embassies and missions.
Several US banks including top ones like J.P Morgan Chase, Bank of America among others have had to shed the accounting relationships of diplomatic missions in the last two years, and the trend has now caught up with Nigeria’s embassies and other African missions here including permanent missions to the United Nations.
Actually some embassies are now known to be transacting business in raw cash due to this situation, which according to US government sources is currently receiving the official attention both from the US State Department and the Treasury Department.
In the case of Nigeria, it was learnt that it took the arm-twisting intervention of the Nigerian Central Bank for all the Nigerian missions in the US to get new accounts with Citibank, which has branches in Nigeria.
After the accounts of Nigerian missions here were shut by a local US Bank, M&T, the CBN was said to have intervened requesting Citibank to offer the banking services needed by the Nigerian missions considering their relationship with the federal government, Nigeria as a country and their business interests in the country. Citibank, US, is known to be interested in the Nigerian Sovereign Wealth Fund, while also managing some of Nigeria’s foreign reserves.
A State Department official was reported as saying, that at a time within the last several months there were about 37 embassies in Washington alone which faced the problem. In New York the South African Ambassador Baso Sanqgu last year told the press that “we cannot get banking services. We are shopping around.”
Yesterday, Nigeria’s Ambassador to the US, Prof Ade Adefuye also noted in a chat that while the Patriot Act has been on for a while, most African embassies did not expect to be affected by it until terror groups like Al-Shabaab started getting into the picture as an Al-Qaida affiliate in Somalia.
Specifically the main challenge the US Patriot Act imposed on the local banks here is the detailed and comprehensive reporting that is required when a banking transaction of over $10,000 could be perceived as potential money laundering, since many terrorist activities are financed through such suspicious financial activities.
What the USA Patriot Act, title III Subtitle B has done and which is now being actively implemented against the embassies including the Nigerian missions in the US is that the US Bank Secrecy Act stands amended as to make it easier for law enforcement and regulatory agencies to police money laundering operations.
A summary of that new provision says “the BSA was amended to allow the designated officer or agency who receives suspicious activity reports- to notify U.S. intelligence agencies.
Also the amendments legislated by the Patriot Act “also addresses issues of record keeping and reporting by making it a requirement that financial institutions report suspicious transactions; through the creation of anti-money laundering programs and by better defining anti-money laundering strategy; and by making it a requirement that anyone who does business file a report for any coin and foreign currency receipts that are over US$10,000.”
In the case of Nigeria, the bank that closed the missions’ accounts not too long ago in Washington DC, M&T had given a three month notice to the Embassy earlier this year.
Although Mr. Philip Hosmer, the spokesperson of the Bank was not immediately available for comments yesterday, it was learnt that M&T Bank asked the Nigerian Embassy in January to close its accounts by March this year. But that was later extended till April due to the investment forums the embassy was hosting about the same time.
But most of the US banks that closed the accounts of foreign missions are determining that the cost of running all those reports and monitoring overtakes their profits and so they decide to cut-off the embassies.
Indeed the $10,000 bar for the banks to file reports and undertake such monitoring is considered very low considering the size and volumes of how many of such amounts are being transacted by the embassies
A former African Diplomat and now the United Nations Under Secretary-General and Special Adviser for Africa, Ambassador Maged Abdelaziz in an earlier report in the media said he understood that U.S. government requirements that JPMorgan and other banks monitor foreign accounts for money laundering or transactions that could be linked to terrorist groups made those parts of their business too costly. According to him, the banks feel “overburdened” by the requirement of submitting reports to the government.
Adefuye who said that the Nigerian missions accounts are now running smoothly with Citibank, also confirmed that Ambassadors from Africa who are mostly the ones currently feeling the impact of the baking problem have met with the US Department of Treasury top officials on how to “lessen the rigors on the US Patriot Act.”
Last month Reuters quoted a US government official Payton Knopf, a spokesman for the U.S. mission to the UN saying "over the last two years, several U.S. banks have decided to close all or some of their diplomatic mission banking business and a number of foreign missions in the U.S. have been affected.”
"We recognize the impact of these closures…, we are working with the affected missions, relevant U.S. agencies, and the private sector to find a way to ensure as soon as possible that these foreign missions have access to the customary banking services."
The report added that “last year, several U.S. banks suddenly began closing accounts of foreign missions and diplomats due to the high costs of monitoring financial activity to prevent money laundering and monetary support for terrorist activity.”