Undue Diligence: How banks do business with corrupt regimes

This report names some of the major banks who have done business with corrupt regimes. By accepting these customers, banks are assisting those who are using state assets to enrich themselves or brutalise their own people.
This corruption denies the world’s poorest people the chance to lift themselves out of poverty and leaves them dependent on aid. The report sets out what governments, regulators and banks need to do in order to tackle this complicity with corruption.
The world has learnt during 2008 and 2009 that failures by banks and the governments that regulate them have been responsible for pitching the global economy into its worst crisis in decades. People in the world’s richest countries are rightly angry at the increasing job losses and house repossessions.
What is less understood is that for much longer, failures by banks and the governments regulate them have caused untold damage to the economies of some of the poorest countries in the world.
This is happening despite anti-money laundering laws that require banks to know who their customers are and what the source of their funds is. But there are huge loopholes in the system that mean it isn’t working. Governments that regulate them have caused untold damage to the economies of some of the poorest countries in the world.

Undue Diligence presents evidence that:
Barclays kept open an account for the son of the dictator of oil-rich Equatorial Guinea long after clear evidence emerged that his family were heavily involved in substantial looting of state oil revenues.
A British tax haven, Anguilla, and a Hong Kong bank, Bank of East Asia, helped the son of the president of Republic of Congo, another oil-rich African country, spend hundreds of thousands of dollars of his country’s oil revenues on designer shopping sprees. Read his credit card statements.
Citibank facilitated the funding of two vicious civil wars in Sierra Leone and Liberia by enabling the warlord Charles Taylor, now on trial for war crimes in the Hague, to loot timber revenues.
HSBC and Banco Santander hid behind bank secrecy laws in Luxembourg and Spain to frustrate US efforts to find out if Equatorial Guinea’s oil revenues had been looted and laundered.
Deutsche Bank assisted the late president Niyazov of Turkmenistan, a notorious human rights abuser, to keep state gas revenues under his personal control and off the national budget.

International Thief Thief
British high street banks accepted millions of pounds in deposits from corrupt Nigerian politicians raising serious questions about their commitment to tackling financial crime.
By taking money from corrupt Nigerian governors between 1999 and 2005, Barclays, NatWest, RBS, HSBC and UBS helped to fuel corruption and entrench poverty in Nigeria.
What is so extraordinary about this story is that nearly all of these of these banks had previously fallen foul of the UK banking regulator, the Financial Services Authority (FSA), in 2001 by reportedly helping the former Nigerian dictator Sani Abacha funnel nearly a billion pounds through the UK. These banks were supposed to have tightened up their systems but as this report now shows, a few years later, they were accepting corrupt Nigerian money again. There is no sign that the FSA has taken any action this time.
Global Witness’ report, International Thief Thief, is based on analysis of court documents from litigation in London by the Nigerian government to get funds returned from the UK that were stolen by two former state governors. British banks made it possible for Dieypreye Alamieyeseigha of Bayelsa State and Joshua Dariye of Plateau State to bring their corrupt loot into the UK.
“Banks are quick to penalise ordinary customers for minor infractions but seem to be less concerned about dirty money passing through their accounts,” said Robert Palmer, campaigner at Global Witness. “Large scale corruption is simply not possible without a bank willing to process payments from dodgy sources, or hold accounts for corrupt politicians,” he added.
One of the banks profiled in the report is RBS, now majority owned by the taxpayer. RBS allowed former governor Alamieyeseigha to receive bribes and bring £2.7 million into the UK. An English High Court judge found that at least £1.56 million of these funds were bribes paid by a state contractor called Ehigie Edobor Uzamere, currently a Nigerian senator, in order to win a contract to build a fence around the governor’s official lodge. Global Witness has asked RBS whether it carried out adequate checks on its customer and his funds, but has not had a reply.
“It adds insult to injury that not only are ordinary taxpayers propping up failing banks, but that one of these banks has facilitated corruption in Nigeria, a country where more than half the population are still without access to clean water. This undermines British development aid, which fills the gaps created by poor governance and failing state services,” said Palmer.
Global Witness is concerned that banks and the FSA have yet to take this problem seriously enough. Anti-money laundering regulations require banks to identify their customers and the source of funds, but they are not being adequately enforced. Banks need to get much better at checking where the money is coming from and whether it was obtained through corrupt practices. The banks in this report may not have broken the law, but corrupt money still entered the UK and so our financial system is still complicit in corruption.
This is an ongoing problem, as shown by the action taken against HSBC by the US regulators last week. They required HSBC’s American arm to overhaul its due diligence systems following violations of US anti-money laundering laws and inadequate monitoring of transactions and customers, including ‘politically exposed persons’ – ie the foreign senior officials who could be involved in corruption.
The British coalition government plans to abolish the FSA. Whatever body replaces it must take corruption seriously. The government and the new regulator must send a clear signal to the financial sector that corrupt money is not welcome. And the banks themselves must demonstrate much more clearly the steps they are taking to stop dirty money entering the financial system.
Globalwitness.org
Repored / Oct. 11, 2010

Anonymous Company Owners
Anonymous companies are getaway cars for the world’s criminal and corrupt – we must take away the keys. We’re pushing governments to change laws and bring business into the open. Hide
The current financial system makes it simple to hide and move suspect funds around the world. You can quickly and easily set up layer upon layer of paper companies, crossing borders and jurisdictions and making it almost impossible for law enforcement to track down the real human being behind the money. Corrupt politicians, tax evaders, terrorists, drug gangs, fraudsters and other criminals are all able to cover their tracks in this way.
Global Witness wants to fix this loophole, in its efforts to tackle the root causes of corruption, poverty and lots of other problems.
Our advocacy calls for governments to create public registries of the real owners of companies and trusts, so that law enforcement, businesses, NGOs and ordinary citizens know who they’re dealing with.
In recent years, this movement has gathered real momentum. In 2013 the UK government made the issue the central plank of its G8 presidency, and committed to ending anonymous companies by publishing information on the ultimate, beneficial, owners of British companies in a publicly-accessible register. Since then, the E.U. has followed suit and we’re pushing for the U.S., where more anonymous companies are formed than anywhere else, to do the same.
In 2014, Global Witness Founder Charmian Gooch was awarded the TED prize in support of her campaign to end anonymous companies, garnering support from law enforcement and business leaders worldwide. This is an issue whose time has come – we must all push for transparency to become the norm.

Globalwitnes.org

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