January 9, 1998

A Background Check Far From Ordinary

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    GENEVA -- On Feb. 27, 1995, a Swiss lawyer filled out an application to open a Citibank account in Geneva for an obscure company from the British Virgin Islands known as Capricorn Trading.

    The handwritten document identified the company's owner as Asif Zardari and listed his address as Bilawal House, Karachi, Pakistan.

    Opening the account was the sort of discreet service performed daily by Citibank's private banking department, which prides itself on "white gloved" treatment of well-placed clients, many of them from poor, politically unstable countries in the third world. But Zardari was no ordinary client and this was no ordinary account. Although his application did not say so, he was the husband of Pakistan's prime minister, Benazir Bhutto. The address on the form was her personal residence, so well known in Pakistan, and to most of those doing business with Pakistan, that it was akin to writing "Hillary Clinton, The White House."

    At the time, Pakistani investigators say, Zardari was amassing a fortune of more than $100 million in Swiss bank deposits and luxury properties abroad, much of it bought with payoffs from foreign companies doing business in Pakistan. The largest single portion -- more than $40 million -- coursed through Citibank account No. 342034, according to the investigators.

    Citibank's procedures called for bank officers to conduct an extensive review of a potential client's background, and the source of his money, under a process known as "due diligence." The intent is to prevent money-launderers, corrupt politicians or others engaged in criminal conduct from using the bank to handle illicit funds. Citibank officials told Congress in 1989 that they had set up an elaborate system to detect suspicious transactions in the United States and overseas.

    Officials at the bank's headquarters in New York declined to comment on Zardari, citing the confidentiality owed by the bank to its clients.

    Private bank accounts are not opened lightly. A former bank official, Peter Sperling, said that new accounts typically must be approved by the manager responsible for a country or region. Sperling said bankers risk scaring off a potential client when they raise questions about the source of their money. "The dilemma becomes: How far do you push the customer," he said.

    Information about Zardari's business dealings was readily available in Pakistan, where Citibank is the dominant foreign bank. He was jailed on corruption charges for more than two years after the end of his wife's first term. By 1995, he was widely known as "Mr. 10 Percent" for his role as an intermediary in deals involving the government.

    In this period, other banks competing for the lucrative private banking business maintained a policy against accepting deposits from the relatives of politicians in office. Chase Manhattan, for example, declined to open an account for Raul Salinas, the brother of Mexico's president, who was also referred to in Mexico as "Mr. 10 Percent."

    Citibank had no policy against accepting deposits from politicians or their family members, and moved nearly $100 million out of Mexico and into Swiss accounts for Salinas at the same time it opened Zardari's account in Geneva.

    According to records obtained by the Pakistani inquiry, Zardari's company opened its first account with Citibank in October 1994, at the bank's offices in Dubai, a Middle Eastern sheikdom two hours' flying time from Pakistan.

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