US Banks, Lobbyists Abetting Corrupt Regimes, Probe Finds
NEW YORK - The global bank HSBC
may be running offshore accounts for central banks. According to a U.S.
Senate investigation, an HSBC subsidiary in London called HSBC Equator
Bank had a sister bank in the Bahamas.
According to an
internal e-mail, the bank told HSBC USA it had been providing offshore
accounts to central banks for 20 years, because the banks wanted to
avoid "Mareva" injunctions, legally enforceable orders to freeze funds.
was revealed by a report to be released Thursday by the Senate
Subcommittee on Investigations. A subcommittee staff member who worked
on the investigation said, "You have a central bank saying to their
banker, I don't want to have to comply with a legally enforceable order
so put me offshore. So they did."
HSBC declined to confirm or
deny the charge. HSBC told IPS, "HSBC takes compliance matters very
seriously. HSBC's record demonstrates a commitment to vigorous
enforcement and continuous enhancement of anti-money laundering
policies and practices." It would not comment further.
committee's 350-page report of an investigation that lasted two years
focuses on how U.S. banks, lawyers, real estate and escrow agents hide
the origins of funds belonging to foreign government officials and
other "politically exposed persons" (PEPS) who might be moving illicit
Only banks are required under U.S. law to know their
customers and reject dirty money. Subcommittee head Sen. Carl Levin
will chair a hearing Thursday on how U.S. agents help launder funds
into the U.S. banking system.
In the HSBC case, the committee
was looking into money transfers from the National Bank of Angola.
Other case studies in the report involve Equatorial Guinea, Nigeria and
From 2004 to 2008, Teodoro Nguema Obiang Mangue, son of
the president of Equatorial Guinea, employed two lawyers, Michael
Berger and George Nagler, to set up U.S. shell companies - Beautiful
Vision Inc., Unlimited Horizon, Inc., Sweetwater Malibu LLC, Sweetwater
Management Inc., and Sweet Pink Inc. - with no employees or places of
business, to open bank accounts and move money. Berger and Nagler will
testify at the hearing.
The lawyers used their attorney client
and law office accounts to hide the origin of the money and transfer it
to an account in Citibank, which would never see a wire transfer from
Equatorial Guinea. At this time Obiang was the subject of criminal
investigations and complaints in the U.S. and France.
lawyers moved nearly 30 million dollars in wire transfers to buy a
30-million-dollar residence in Malibu, on the coast of California. An
escrow agent, the Sidley Austin law firm, sent 900,000 dollars to help
purchase the Malibu mansion.
When the law firm inquired of the
Justice Department if it was okay to accept the funds, part of a
21-million-dollar transfer that initially was to buy a Gulfstream jet,
the department replied it had no basis for seizing the funds, the
Money moved from Obiang's bank in Equatorial Guinea
to a correspondent account at Wachovia Bank which then transferred the
funds to Bank of America in Oklahoma City. In a six-month period, about
73 million dollars went through the Wachovia account. Another 37
million dollars went through Citibank.
discussed this with the banks. The aide said, "Wachovia said they've
decided to add Mr. Obiang's name to the interdiction software just
because they don't want to handle his funds. Citibank has declined to
take the same step, because they said they're afraid they would get so
many hits from Obiang that it would require their staff to take an
awful lot of time to research those wire transfers."
spokesperson told IPS, "Were not commenting. We were only mentioned a
couple of times, so we'll leave it to the report and decline."
the case of BAI, Banco Africano de Investimentos, a
seven-billion-dollar private bank whose largest stockholder is
Sonangol, the state oil company, the report shows how HSBC ignored
basic anti-money laundering rules.
Aside from Sonangol, the
banks' major shareholders are the oil company's top executives, and the
bank's clients are people in the oil and diamond industry. "We have a
PEP bank," the committee aide said.
BAI opened a correspondent
account with HSBC in New York. HSBC tried to find out who owned the
bank, which is required by the 2002 U.S. Patriot Act. But 19 percent of
the stock was owned by shell companies. And they were being "held" by
the bank's president until purchasers could be found.
could not determine the true owners, HSBC dropped the matter, said the
report. BAI used HSBC to gain access to its wire transfer system so
clients could send and receive U.S. dollar transfers across U.S.
In a Nigeria case, the report described how Jennifer
Douglas, the fourth wife of Atiku Abubakar, who was vice-president of
that country, helped him bring 40 million dollars in suspect funds into
the U.S. Some of it was bribe payments made by Siemens, the German
electronics company that paid some two billion dollars in global bribes.
Weidenfeld, Douglas's lawyer, received funds from offshore accounts and
told the committee that he assumed that it was Abubakar's money. Under
the law, he was not required to inquire further.
president of Gabon, Omar Bongo, hired a U.S. lobbyist, Jeffrey Birrell,
to arrange to buy an armoured car from a Utah company and to purchase a
U.S.-made C130 transport aircraft from Saudi Arabia.
He got U.S.
permission for the aircraft deal – required because U.S. military sales
require permission for resales – and had no trouble moving money from
shell companies for the deal. Along the way Birrell was sending out
wire transfers directed by Bongo and his advisors, some to accounts in
Brussels, Paris and Malta.
The committee aide said after the
plane deal fell through, "President Bongo asked him to send 9.2 million
dollars to an account in his name not in Gabon but in Malta. The
lobbyist says okay. That was money from Ayira in Gabon and he sent 9.2
million dollars to the president in Malta. If that isn't a suspicious
transaction, I don't know what is."
Birrell, who used his own
accounts as conduits for the funds and would not tell the committee
what Ayira was, will testify before the committee.
who has been investigating and holding hearings on offshore corruption
for at least a dozen years, said at a press briefing Tuesday that
corruption "corrodes the rule of law, undermines economic development,
it eats away at the fabric of civil society, it destabilises
communities, it helps lead to failed states."
He said that
even though banks have become more vigilant, "Foreign officials still
get access to our financial system at times because U.S. professionals
aid and abet their actions."
He said the U.S. Treasury
Department should revoke exceptions granted in the Patriot Act in that
exempted escrow agents and real estate from knowing their customers and
turning away suspect clients.
He noted that the American Bar
Association had promised eight years ago that it would take action to
require attorneys to adhere to anti-money laundering standards. He
said, "It's time they did."
He endorsed World Bank proposals for controls on accepting funds from politically exposed and powerful persons.
Komisar is an investigative journalist who writes about the offshore
bank and corporate secrecy system. Her articles are posted at www.thekomisarscoop.com.