INSIGHT-Banks wary of doing FIFA business in wake of bribery scandal

By Brett Wolf and Douwe Miedema

ST. LOUIS/WASHINGTON, June 3 (Reuters) - The disclosure thatsome of the world's largest banks had been used as a conduit forbribes allegedly paid to soccer officials has prompted the banksto scrutinize their ties with FIFA, and could make it moredifficult for the sport's powerful governing body to move moneyaround the world.

Major U.S. and European banks say they are stepping upscrutiny of FIFA-related accounts, and are wary in particular ofties to two regional member organizations that featureprominently in the U.S. Department of Justice's indictment.

U.S. authorities last week charged nine current or formerFIFA officials and five sports industry executives in a $150million bribery scheme, accusing them of running a "criminalenterprise" that lasted for 24 years and relied heavily on theU.S. financial system. As the scandal continued to worsen, SeppBlatter, FIFA's long-serving president, said on Tuesday he wasquitting.

Of the nine soccer officials, seven were former or currentofficials at either CONCACAF, the North-American, CentralAmerican and Caribbean football association, or at CONMEBOL, theSouth American regional soccer organization.

A top compliance official at one of the banks named in thecourt documents said it would close any accounts of accusedparties and closely review other FIFA-related accounts,especially those associated with CONCACAF. More scrutiny willnow also be given to other sporting entities, such as the U.S.Olympic Committee, the official added.

U.S. authorities have not accused FIFA itself of wrongdoing,though a person familiar with the matter said on Monday thatU.S. prosecutors believe that FIFA Secretary General JeromeValcke was involved in a $10 million bank transaction that isunder investigation. FIFA and Valcke have denied this was thecase.

And late on Tuesday, a source told Reuters that Blatterhimself is being investigated by U.S. prosecutors and the FBI.

When asked if FIFA is having any trouble getting bankingservices, spokeswoman Delia Fischer said no. A spokesman forCONMEBOL, Nestor Benitez, declined to comment. A CONCACAFspokesman also had no comment.

CLOSELY SCRUTINIZED

Unless government allegations of bribery and moneylaundering expand to include the organization itself, FIFA andits affiliated bodies should be able to use banking services,executives at several banks said. Blatter's departure shouldalso give them some comfort.

"They're going to be very closely scrutinized, but theywon't lose their accounts ... absent the government bringingforth evidence that FIFA was acting as a corruptorganization," said a senior compliance officer at another largebank named in the court documents.

None of the more than a dozen banks mentioned in the U.S.indictment, which include some of the largest global financialinstitutions, such as JPMorgan Chase, Bank of America, Citigroup, HSBC and Barclays,are accused of any wrongdoing.

Still, the senior compliance officer told Reuters that banks"kind of panicked" after comments by Kelly T. Currie, actingU.S. Attorney for the Eastern District of New York, who saidbanks' actions would be reviewed to determine if they knowinglyfacilitated bribe payments.

An HSBC spokesman said: "We are continuing to review theallegations in the indictments ... to ensure that our servicesare not being misused for financial crime."

Citigroup has said it has cooperated with the U.S. probe.JPMorgan and Bank of America declined to comment. Barclays didnot return a request for comment.

"WE JUST DON'T NEED IT"

FBI agents carrying bags and boxes went into CONCACAF'Soffices last week to execute a search warrant. CONCACAF said itwas "deeply concerned" about the developments and that it wascooperating with authorities.

CONCACAF conducted business using accounts at the Floridaand New York branches of major U.S. and Swiss financialinstitutions, the indictment shows, without being specific aboutthe banks concerned.

FIFA was dogged by corruption allegations for years beforethe latest scandal, and at least one major European bank said ithas not been providing banking for FIFA because of that.

"It's not forbidden (to do business with FIFA) but due toreputational risks, we just don't need it," said a spokesman atthe bank, which asked not to be identified due to thesensitivity of the topic.

When asked about FIFA, a spokeswoman for the FinancialAction Task Force on Money Laundering (FATF), which setsinternational anti-money laundering standards, said that "atthis stage, there are no plans to issue further guidance on theprovision of banking services to such officials."

The Office of the Comptroller of the Currency, a regulatorthat oversees major U.S. banks such as Bank of America andCitigroup, declined to comment on FIFA.

But the OCC says it leaves it to banks to decide on acase-by-case whether to terminate relationships with individualclients, just telling them to keep a close eye on risk.

"We expect banks to ... report suspicious activity, forinstance an unusual and unexplained spike in clearing activity,"said Grovetta Gardineer, deputy comptroller for complianceoperations at the OCC. "That doesn't mean that there's actualmoney laundering, but it shows a deviation in the pattern thatshould be looked into."

TOUGH TASK

But unless payments were destined for government officials,it would have been difficult for banks to spot suspicioustransfers, said Jonathan Lopez, a former official at the U.S.Justice Department's money laundering section.

"To ask a bank to decipher between legitimate andillegitimate payments by a multinational organization who by itsnature makes a lot of payments in different countries is goingto be tough," Lopez said.

The widespread use of the dollar means that banks with apresence in America may unwittingly play a role in facilitatingcrime through a network of so-called correspondent banks, whichperform services for banks outside the country, and have longbeen considered a loophole in the U.S. regulatory barriersagainst money laundering.

The indictment shows that a high-ranking FIFA official -believed by U.S. authorities to be Valcke - caused $10 millionto be wired from a FIFA account in Switzerland, to a Bank ofAmerica correspondent account in New York. It was for credit toaccounts held in the names of the Caribbean Football Union andCONCACAF at Republic Bank in Trinidad and Tobago. Those accountswere controlled by former FIFA vice-president Jack Warner, whois among those charged.

FIFA also wired billions of dollars from its accounts at amajor Swiss financial institution into beneficiary accounts inthe U.S. and throughout the world, via a correspondent accountat the U.S. branch of a major Swiss bank, prosecutors said.

Back in 2001, a U.S. Congressional report found thatcorrespondent banks had become conduits for dirty money and thatmany banks established relationships with shell banks with nophysical presence, offshore banks that only did business outsidetheir jurisdictions, and banks with weak controls.

Since then, a slew of guidelines have been issued and legalrequirements established on how to manage the risks of theseaccounts. Major banks, including Standard Chartered Plc and JPMorgan, also have cut some ties with other foreign banks,particularly in risky countries.

JPMorgan, for instance, has a few thousand correspondentbanking relationships and, about two years ago, beganterminating some 500 or 600 of them. It also adopted a policy ofnot taking on new correspondent banking clients. (Additional reporting by Karen Freifeld in New York, AnjuliDavies and Matt Scuffham in London, Thomas Atkins in Frankfurt;Editing by Soyoung Kim and Martin Howell)