Remarks by Under Secretary of State for Management, Patrick Kennedy, to Members of the UN Press on UN Bank Accounts

Patrick F. Kennedy
Under Secretary for Management 

New York, NY

January 13, 2011

FOR IMMEDIATE RELEASE

Reporter: The diplomats coming out, I think, are giving us the sense that this is really dire for them, that it kind of undermines our operations. What can the U.S. do about it?

Under Secretary Kennedy: Well, obviously, any entity – governmental, private – has to have a bank in these days in order to do their business. Cash is still a medium of exchange, but it doesn’t solve all your issues. We had a very good dialogue. Secretary Clinton and Secretary Geithner are personally engaged in working on this issue, and we heard their concerns and we offered a number of suggestions to them on how, if they are a country that has been identified that a bank is dropping their accounts for the bank’s business reasons. Then we have offered some suggestions on what alternative approaches they might take to obtain additional banking services. And we will continue to work with them and we will continue to work with the banking industry as the host nation.

Reporter: What were the suggestions?

Under Secretary Kennedy: I’ve offered them those suggestions, and I would like them to work on them.

Reporter: Has Treasury spoken to J.P. Morgan Chase? Have they said that they don’t look favorably on them closing these accounts?

Under Secretary Kennedy: The State Department and the Treasury Department have been in communication with the banking industry.

Reporter: And is there any possible exception for diplomatic reasons or anything?

Under Secretary Kennedy: We’ve made clear that there is a United States interest in working with embassies in Washington and with working, obviously, with missions to the United Nations in New York. But remember, unlike in many countries, banks in the United States are private entities. They are government-regulated, but they are not government-directed. And therefore banks in the United States, and in other countries as well, but not in every country, make decisions on the basis of business cases.

And if a bank decides to withdraw from a line of business that is not because the bank is saying that the Embassy of Xanadu or the Mission of Shangri La is engaged in some nefarious activity.

They’re simply saying that we have decided not to engage in this line of business: We are private entities. We are responsible to our shareholders and therefore we are going to take the resources that we have committed to one activity and move it to another.

Reporter: Do you think the government regulations make the bank, make those decisions, though? It increases their business, the anti-money laundering laws?

Under Secretary Kennedy: The anti-money laundering activities are a worldwide activity. They are not the activities just of the United States government under the auspices of numerous entities. The world has gotten together to approach the question of anti-money laundering. And so the rules that the United States government follows are a series of worldwide rules. As my Treasury colleague pointed out, at one point, in a review, one of the bodies that the United States is a part of said that the United States was not even perfect in its activities in combating money laundering and encouraged the United States government to do more. So this is a worldwide effort that the United States is a major player in and an important part of. But anti-money laundering is worldwide.

Reporter: We’ve (inaudible) ambassador said he was shopping around looking around for another bank, but was told that, look, there’s no room at the inn. And he said, he’s telling us, listen, how are we going to pay our people? How are we going to contribute to peacekeeping? How is the UN going to continue to function?

Under Secretary Kennedy: Sir, those are obviously very real questions and very, very real concerns. But there are not only one, two or three banks in the United States. And we offered a number of suggestions on how approaches can be made to banks based upon factors that we feel would be appealing to the banks to add this nation or that nation as a customer.

Reporter: Ambassador, has the Administration asked Chase to reconsider?

Under Secretary Kennedy: We have had discussions with the major banks, but we cannot tell a bank what to do. We have outlined our concerns to them.

Reporter: What about the banks that were bailed out and still owe funds to the government? Could the government use its leverage to—?

Under Secretary Kennedy: That’s a question that you would have to ask the representative of the Treasury. I am not technically competent to get into that level of detail.

Reporter: Is it all the missions in Washington as well, all the diplomatic missions in Washington?

Under Secretary Kennedy: Well, it’s not all. A number of banks in Washington and New York have simply decided that this is a line of business that they would rather push their resources in another direction. They are not saying that any country or another is engaged in anything inappropriate or nefarious. They’re just simply saying, “This is a line of business.”

And if you give a little bit of history, you remember that there is almost a periodicity to this. At one point there was a major bank in the Washington metropolitan area, Riggs Bank that had many, many diplomatic clients. Riggs Bank dropped the business line and subsequently went out of business. And all those embassies and consulates were picked up by other United States financial institutions.

Reporter: Do you know how many other banks right now are taking the same action as Chase?

Under Secretary Kennedy: No. I don’t.

Reporter: More than three?

Under Secretary Kennedy: I don’t. We have no survey in hand. Remember there are 192 member states of the United Nations. There are over 150 embassies in Washington. There are over 100 consulates around the United States.

Reporter: How many banks that you know of?

Under Secretary Kennedy: How many banks that I know of? Particularly and specifically, I’d have to have someone get back to you on that. It’s less than a handful that I’m aware of.

Reporter: And how many missions in D.C. are affected?

Under Secretary Kennedy: A number of them.

Reporter: I mean, most?

Under Secretary Kennedy: We’ve been approached by a number of them, but not by all of them.

Reporter: Out of 192, 191 countries, that are here, how many do you figure are affected?

Under Secretary Kennedy: I don’t have a number for you. We know it is a significant enough figure, which is why I’m up here today and why we’re involved.

Reporter: The UN Secretariat rents space to Chase Manhattan to have them inside the building. Is that something that you as the host country might speak to the Secretariat about?

Under Secretary Kennedy: I think that’s a question you should ask the United Nations.

Reporter: (Inaudible)

Under Secretary Kennedy: Well, obviously, the number of. I am not aware of the amount of funds flowing through the bank. Obviously, when you have 191 missions, more than 150 embassies and a number of consulates, it’s a significant amount of business. But it depends upon how they do their business. I mean, some countries might send their UN obligations to their Mission here to be paid. Some of them might wire them directly from their Treasury to the United Nations. So it’s a question that is a good question, but it’s a very complex one. And it depends on the specific actions of each Ministry of Finance or Treasury.

Reporter: Can you just clarify why the banks feel this is no longer in their business interest? They must be telling you.

Under Secretary Kennedy: No. They have said, “We have done our economic analysis. We are a profit-making, for-profit organization. We look at the rate of return on multiple lines of business that we engage in.” Some banks have gotten out of the mortgage banking field of business. Some banks have gotten out of this or that. And this is, several banks have decided that, among multiple lines of business, this is one that they have chosen not to do, and for business reasons.

Reporter: Is there any incident involving a mission? Was there any incident where they ran afoul of (inaudible)?

Under Secretary Kennedy: I am not aware of one.

Reporter: Who are the countries that did that (inaudible)?

Under Secretary Kennedy: You mean in terms of the meeting we were just in? I thought it was an open and frank, but diplomatic, dialogue of our outlining what we are doing as the United States. And offering them suggestions on what they might do. And they’re outlining what they have been doing and what their concerns are. And that’s why I’m here with my Treasury colleague to collect that information as part of the activities we’re engaged in.

Thank you all very much.

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