Banco Madrid hit by BPA money laundering storm

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Spain’s Banco Madrid has filed for bankruptcy and had its funds suspended by local market authority CNMV following money laundering allegations against its owner Banca Privada d’Andorra (BPA).

Earlier last week, the US Treasury filed charges against BPA claiming that it laundered money for international criminal gangs. The US Treasury said that BPA was an “easy vehicle” for criminal organisations in Russia, China and Venezuela to raise capital.

Andorra took control of the bank and capped cash withdrawals to €2,500 per week per account, and limited national and international transfers in an attempt to contain the damage. At the same time, S&P cut Andorra’s sovereign rating one notch to two levels above junk, while BPA could lose its ability to operate with US counterparties due to the allegations.

The CEO 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. As well as looking into Chinese and Russian links, the anti-corruption prosecutor has tracked down about 20 names of former Spanish politicians who might be involved in financial wrongdoings with Banco Madrid, Reuters reported.

Although the Andorran bank does not have direct access to ECB’s facilities, it could still able to get them through its eurozone based such as Banco Madrid, which has seen huge outflows after the US Treasury went public with its allegations against BPA.

Banco Madrid , which offered private banking services, had about €6bn AUM before the allegations, and 15,000 clients with deposits.

Deposits of up to €100,000 per client will be guaranteed, and the Bank of Spain said fewer than 500 clients had more than that amount held at the bank.

Banco Madrid said it had undergone a “sharp deterioration in its economic and financial situation” in recent days after its parent company was named a “primary laundering concern” by the US government, the Wall Street Journal reported.

According to Morningstar’s estimates, Banco Madrid saw net outflows of €17m, some 0.58% of its total AUM.

After it filed for bankruptcy, local regulator CNMV temporarily suspended Banco Madrid’s 21 fund and Sicavs’ reimbursements to conduct further investigations.

According to the local trade press, the funds that were suspended were those managed by Banco Madrid Gestión de Activos:

  • Banco Madrid Ahorro
  • Banco Madrid Dolphin Acciones
  • Banco Madrid Ibérico Acciones
  • Banco Madrid Renta Fija
  • Banco Madrid Sicav Selección
  • Banco Madrid Confianza, Equilibrio, Dinámico y Rendimiento
  • Premium JB fund range

However, the CNMV chief Elvira Rodríguez said the suspension was temporary and assured the regulators were doing all they could to reopen them as soon as possible.


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