[LINK] "Banking Enclave of Andorra Shaken by U.S. Accusations"

[rfmcdonald]

Bloomberg's Macarena Munoz depicts the effect on Andorra of accusations from the United States that some in its substantial banking sector are laundering money.

Juan Ovelar made a quick decision when he heard the U.S. government had accused his Andorran bank of money-laundering, and immediately withdrew most of his funds.

“I’m worried that everyone will do the same as I did and there will be a knock-on effect that could affect other banks,” said Ovelar, 27, a computer expert from Argentina, in an interview outside the headquarters of Banca Privada d’Andorra in the capital Andorra La Vella.

The U.S. Treasury named Banca Privada d’Andorra, the country’s fourth-largest bank, a “primary money-laundering concern” on March 10. That led to its seizure by Andorran authorities, the arrest of the chief executive officer and a run on customer funds at the lender’s Spanish unit.

The bank’s fate sent tremors through Andorra, a 181-square-mile (469 square-kilometer) Catalan-speaking microstate in the eastern Pyrenees with an economy based on skiing, tax-free shopping and banking. The scandal raises risks for its financial industry, which makes up almost a fifth of the 1.8 billion-euro ($2 billion) economy and is too big to be bailed out by the state, said Xavier Puig, a professor at Barcelona’s Universidad Pompeu Fabra.

Customers lined up at the bank’s branches to take out their money after it limited cash withdrawals to 2,500 euros a week, starting March 16. The bank’s new management, appointed by local regulators, imposed the limit after international banks severed credit lines, a person with knowledge of the situation said.