21 Nov The Degraded State: Some Can’t Even Get Checking Accounts
Here’s an interesting story from FP’s The Cable: Several dozen countries can’t get checking accounts with which to operate their embassies in Washington. Angola is the lead example: the Bank of America shut down its accounts here and no one else appears to want its business.
The Angolans, frustrated and running out of options, are considering reciprocity measures, such as closing the bank accounts of the U.S. embassy in Angola, refusing to receive the credentials of incoming U.S. Ambassador Christopher McMullen, or closing the banks accounts of U.S. companies in Angola, such as Chevron, Exxon, BP
, and Boeing
“We don’t know why it is happening,” the Angolan diplomat said. “In the context of the Vienna Convention, we hope the American administration is going to take measures for us to operate here. The administration says that Angola is a strategic partner to the U.S., so we would like at least to be treated as a strategic partner… A diplomatic mission cannot operate anywhere without a bank account.”
Article 25 of the Vienna Convention of 1961 on Diplomatic Relations states, “The receiving State shall accord full facilities for the performance of the functions of the mission.”
Why are the banks running away from embassy business? According to the State Department official, several banks, including Bank of America, are calculating that the effort spent making sure government accounts are not being abused for money laundering purposes, sometimes with suspected links to terrorism, is becoming too complicated and costly to justify keeping the accounts.
Leaving the VCDR complications aside, this kind of situation would have been unthinkable in the old world, both because even the worst bad guys had their bankers in Washington and because any difficulty would have been solved with a phone call, high level (USG) official to high level (bank) counterpart. That BoA can’t take what has to be a pretty small hit in dealing with these sovereign entities (presumably building its favor bank in the process) says something about one aspect of the new public/private dynamic.
I think I read a story in the Wall Street Journal that J.P. Morgan Chase is closing accounts with diplomatic offices (I think the one mentioned was with China). It was published in Friday’s paper.
Strangely, the banks cannot give a bank account to Angola, but have much less problem when it comes to Mexican drug money. Wachovia was so good about NOT investigating that it even told its own internal investigators to remain quiet about their suspicions. So are the banks to be believed? It seems rather that they have found a way to attack regulation that catches the government’s attention… http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html
This makes sense to me, why would these banks want to go thru the trouble of assuring these accounts are not being abused when they probably add very little to the bank. The PR hit that Bank of America would take if it is found out that a terrorist group has been using the bank to launder money is just too big of a risk. However, why does Angola need a US bank account? We have always gone overseas and didnt have to get a foreign banking account, is it just simplicity? I guess the US will have to pressure the banks to keep these accounts, but probably wont take the blame if a link between the banks and a terrorist account pops up down the road.