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Senators Ask Greenspan to Mull Action Against Pakistani Bond Sale

March 19, 1992

WASHINGTON (AP) _ Calling the sale of Pakistani government bonds in this country an apparent vehicle for drug money laundering, two senators asked Federal Reserve Chairman Alan Greenspan on Thursday to consider blocking the sale.

An advertisement publicizing the sale of the anonymous ″bearer certificates″ told potential investors: ″No Questions Asked About Source of Funds 3/8″ and ″No Identity to be Disclosed 3/8″ The advertisement ran earlier this week in the Wall Street Journal.

In a letter, Sens. John Kerry, D-Mass., and Hank Brown, R-Colo., asked Greenspan to consider taking ″swift regulatory action″ in response to the sale in the United States of government-backed bonds issued by Pakistan’s central bank.

Federal Reserve spokesman Bob Moore said Greenspan hadn’t received the letter yet and had no immediate comment.

Kerry and Brown sent similar letters to Securities and Exchange Commission Chairman Richard Breeden, Comptroller of the Currency Stephen Steinbrink and William Taylor, chairman of the Federal Deposit Insurance Corp.

Spokesmen for those regulators also said they hadn’t gotten the letter yet.

The five-year bonds went on sale in Pakistan on March 15 and will be available in other countries, including the United States, starting March 23, according to the advertisement.

An official at the State Bank of Pakistan’s office in Karachi was quoted in Wednesday’s Wall Street Journal as saying the bond sale ″is a way to launder the black money.″

In their letter to Greenspan, Kerry and Brown wrote: ″At a time when we have recognized that banks which solicit drug funds are every bit as responsible for the carnage caused by the drug problem in the United States as are the pushers on the street, we urge you to consider swift regulatory action in response.″

Kerry first raised the issue Wednesday at a hearing of his Senate Foreign Relations subcommittee on terrorism. The panel has investigated activities of the Bank of Credit and Commerce International, which was founded by a group of Pakistani bankers. Several former BCCI officials have pleaded guilty to federal money laundering charges.

Brown is the ranking Republican on the terrorism subcommittee.

Kerry and Brown asked Greenspan to have the Fed review the advertisement and the Pakistani bond sale itself to determine ″whether it is in the interests of the United States, and of the safety and soundness of the U.S. banking system,″ to allow American banks to sell the bonds.

The senators urged Greenspan ″to consider action to prevent the sale of such instruments through any bank in the (United States).″

The advertisement lists Bank of America, American Express Bank, Citibank and Chase Manhattan Bank among a group of banks around the world authorized to sell the bonds.

A spokesman for Chase Manhattan told the Journal that his bank isn’t selling the Pakistani bonds and never even heard of them. An American Express spokesman said his company’s bank plans to sell the bonds only through its branch in Pakistan, not in the United States.

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