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Argentine banks switch to Europe

Wednesday, February 14th 2007 - 20:00 UTC
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Argentine Central Bank Governor Martín Redrado Argentine Central Bank Governor Martín Redrado

US financial and anti-money laundering regulations have increased the cost of doing business with US banks to such an extent that Latin American businesses are turning to European financial institutions, Argentina's central bank chief said yesterday.

Argentine Central Bank Governor Martín Redrado said that more than 200 correspondent accounts held by Argentine financial institutions at US banks had been closed as a result of US financial rules between March 31, 2001, and September 30, 2005. Fifty Argentine institutions, both private and public, had closed correspondent accounts in the United States during that time and not one case involved suggestions of money laundering or terrorist financing, Redrado told a conference in Miami. "Something along the process is flawed," he said. "This outcome has nothing to do with the objectives pursued by standards that combat global crimes. On the contrary, should this trend persist, it will result in growing informality within financial circuits, greater political reluctance to cooperate, and a diversion of financial channels toward other more realistic markets." Correspondent banking involves banking transactions performed by a US financial institution for a foreign one. US financial authorities are concerned that correspondent accounts can be used as conduits for dirty money that is more difficult to spot because the clients are one step removed. As a result, they have placed strict due diligence requirements on banks operating correspondent accounts. In some cases, banks have chosen to close down correspondent accounts so as to avoid any risk. In others, the cost of the due diligence may be making those accounts inviable. Redrado said Argentine banks were turning away from US banks. "Business is going to European banks," he told reporters after his speech to an anti-money laundering conference hosted by the Florida International Bankers Association. He said the same was true "from Mexico through to Patagonia." Redrado stressed that Argentina shared the objectives of US regulations such as the USA Patriot Act, enacted in the aftermath of the September 11 attacks. But he said elements of US financial regulations, such as the requirement for due diligence, had to be adequately defined and also adjusted to the realities in regional economies. Buenos Aires Herald

Categories: Economy, Argentina.

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