The Treasury Department and Drug Enforcement Administration announced that Beirut-based Lebanese Canadian Bank SAL has been designated a "primary money laundering concern" for allegedly helping a Lebanese-based drug trafficking organization launder as much as $200 million a month in drug profits. The designation was made under the USA Patriot Act.
The agencies said the smuggling ring is run by alleged drug kingpin Ayman Joumaa and has provided financial support for Hezbollah, which the U.S. designated a terrorist organization in 2001.
The DEA's special operations division agent in-charge, Derek Maltz, said the group laundered proceeds obtained by smuggling tons of cocaine from South America to Europe and the Middle East via West Africa.
The group also laundered money through trading consumer goods throughout the world, including through U.S. used car dealerships, said the Treasury's undersecretary for terrorism and financial intelligence, Stuart Levey.
Levey said the designation announced Thursday seeks to "protect the U.S. financial system from the illicit proceeds flowing through LCB and to deprive this international narcotics trafficking and money laundering network of its preferred access point into the formal financial system."
"Any financial institution that collaborates in illicit conduct on this scale risks losing its access to the United States," Levey added.
In addition to the designation, Levey said the Treasury Department also proposed a rule to restrict how U.S. banks can do business with Lebanese Canadian Bank, which has a representative office in Montreal. The formal designation of the bank is intended to warn other banks and financial institutions around the world.
Georges Zard Abou Jaoude, chairman and general manager of the Lebanese Canadian Bank told a Lebanese television network, "All our books are open, with full transparency, whether for Lebanese monetary authorities represented by the anti-money laundering bureau or even American authorities." He added that one individual named by the Treasury Department had not done any transactions in four years.
As of 2009, the bank had assets of more than $5 billion, officials said.
Levey attributed the bank's involvement in the money laundering to a failure to control vulnerable transactions, including cash deposits and cross-border wire transfers, and lack of due diligence on high-risk customers such as currency exchange houses. He said U.S. authorities are working with Lebanon's Central Bank and the country's finance officials to curb such activity in the country.
Some bank managers, whom the government did not name Thursday, were complicit in the money laundering, Levey said. In a written statement describing what led to the designation, U.S. authorities also said at least one person involved in the drug trafficking and money laundering network worked directly with bank managers.
Joumaa, along with nine people and 19 entities, was identified last month by the Treasury Department as specially designated narcotics traffickers under the Foreign Narcotics Kingpin Designation Act. He was specifically named on Thursday as having laundered money with the bank.
Authorities also said Hezbollah's Tehran, Iran-based envoy, Abdallah Safieddine, helped Iranian officials get access to Lebanese Canadian Bank and key bank managers.
Several subsidiaries of the Lebanese Canadian Bank are also covered by the designation. They include Dubai-based Tabadul for Shares and Bonds LLC and Prime Bank Limited of Gambia, in the West African nation. Levey said another Hezbollah supporter is a part owner of Prime Bank Limited.
Levey and Maltz declined to discuss what role, if any, Hezbollah may have in the drug trafficking ring.
But Maltz did say that DEA agents have been investigating links between Lebanese drug traffickers and their Colombian counterparts for about five years. He said the investigation shows the bank has been involved in money laundering for at least three years.
Associated Press Writer Bassem Mroue contributed to this report from Beirut.