Spanish bank seeks protection following US money laundering probe

Banco de Madrid has stopped operations and is seeking protection from creditors after the US accused its parent, Banca Privada d’Andorra, of money laundering.

Customers of the Spanish bank withdrew a lot of funds, leading to a strong deterioration of its financial situation, according to an emailed statement yesterday from Banco of Spain, the central bank. Client deposits of up to €100,000 are guaranteed by Spain’s deposit-guarantee fund, the central bank said.

A US Treasury report on March 10 showing Andorra- based parent bank BPA, is a “primary money laundering concern” sparked withdrawals, said Banco de Madrid, triggering Spain’s first banking collapse since 2003.

“This is the first time a solvent bank is worth zero,” Juan Ignacio Sanz, a banking professor at Barcelona’s Esade business school.

“Its funds have been contaminated by the money-laundering allegations and no one wants to work with it. This is not a solvency problem, it is a reputational problem” he said.

BPA processed hundreds of millions of euro via four US correspondent banks in transactions that bore signs of being done for illicit purposes, the Treasury said.

The bank engaged in activities involving proceeds from criminal groups in Russia and China, and with Venezuelan money launderers, the report said.

Bloomberg