Andorra moves to contain money-laundering scandal

Mon Mar 16, 2015 2:56pm EDT
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By Julien Toyer and Carlos Ruano

MADRID (Reuters) - State-appointed managers at Andorra's Banca Privada d'Andorra (BPA) have capped cash withdrawals in an attempt to contain the damage from U.S. allegations the bank laundered money for international criminal gangs.

The scandal - which has also spread to neighboring Spain, where BPA's Spanish unit Banco Madrid filed for bankruptcy on Monday - is a blow for the mountainous principality, which relies heavily on financial services.

Standard & Poor's (S&P) has said the problems at BPA - a lender which it said represented about a fifth of all assets and liabilities in the Andorran banking system - could strain national finances.

Andorra took control of the bank after the U.S. Department of the Treasury described it last week as an "easy vehicle" for criminal gangs in Russia, China and Venezuela to funnel profits.

S&P has since cut Andorra's sovereign rating one notch to two levels above junk, while BPA could lose its ability to operate with U.S. counterparties due to the allegations.

The chief executive of the bank, who was suspended along with the rest of the board last week, was arrested at the weekend on suspicion of money laundering.

BPA's provisional administrators have imposed a limit on cash withdrawals from ATM machines of 2,500 euros per week per account, and limited national and international transfers.

The principality's finance minister said on Monday the banking system was under stress but he insisted the scandal at BPA was an isolated case.   Continued...

The logo of the Banco de Madrid can be seen at its headquarters in Madrid March 11, 2015.  REUTERS/Andrea Comas