London, Jun 22 2011
Global Witness welcomes today's
recognition by the Financial Services Authority (FSA) that the majority of
Britain's banks are failing to do enough to identify corrupt money from abroad
and that it is ‘likely that some banks are handling the proceeds of corruption'.
The campaigning NGO has repeatedly called for a new approach by the
regulator to identify and punish those banks that fail in their requirements to
identify their customers and their source of funds, particularly customers who
are senior officials of other countries, known in the industry as ‘politically
exposed persons' (PEPs).
‘Many of the failings identified by the FSA are the same as those it
found ten years ago after £1 billion stolen from Nigeria
by Sani Abacha came through London
banks. This reflects terribly on the FSA's softly-softly approach over the last
decade, and makes it very clear why Egypt is now seeking the
return of corrupt Mubarak funds from the UK.
Neither dictatorship nor corruption can occur without banks willing to help,'
said Anthea Lawson, head of the banks campaign at Global Witness.
‘For too long Britain's
banks have been happy to accept money stolen from developing countries by
corrupt rulers and their families. This review shows we need a radical new
approach from the banks, and a strong commitment from the FSA to ongoing
monitoring and punishment which acts as a proper deterrent; they cannot wait
another ten years then do a review of what's gone wrong,' said Lawson.
Last year Global Witness revealed that HSBC,
Barclays, Natwest, RBS and UBS had accepted millions of pounds for two Nigerian state governors who had been
accepting bribes. British aid to Nigeria is set to double by
2014; Global Witness believes the impact of this UK taxpayers' money is
undermined if British banks are facilitating corruption and the loss of Nigeria's
Most recently, Barclays was revealed to have
allowed Teodorin Obiang, son of the
president of Equatorial Guinea,
to purchase 18 million Euros of art auctioned from the estate of the late Yves
St Laurent, through an Obiang-controlled company account held with the bank. Teodorin
earns a salary of about $6,000 a month as a minister in his father's government
yet is renowned for his luxurious tastes, including a $35m mansion in California.
The FSA's findings
- Three quarters of banks reviewed are not doing enough to establish
the legitimacy of their customers' source of wealth - some in situations
where they had adverse information about their customer's integrity;
- At least two banks have been referred to
enforcement with ‘serious weaknesses' in their systems
and controls for managing high-risk customers, including PEPs;
- A third of banks are failing to do enough to
- Half of banks are not reviewing their high risk
and PEP relationships regularly;
- A third of banks dismissed serious allegations
about their customers without adequate review;
- A third of banks do not keep adequate records of
their high-risk and PEP customers, impeding their ability to assess money
- Some banks had inadequate safeguards to mitigate conflicts of
interest on the part of their relationship managers;
- Many relationship managers are rewarded primarily on the basis of
profit and new business, regardless of their performance on anti-money
- There is inadequate handling of the risks presented by
correspondent banking relationships.
Contacts: Anthea Lawson, +44 (0)7872 620855, firstname.lastname@example.org; Robert
Palmer, +44 (0)7545 645406, email@example.com; Oliver Courtney +44 (0)207 492
In order to ensure that the
money held is clean, banks and regulators must apply three key principles:
1) If a bank cannot get its senior politician
customers to explain their wealth, then it should turn down the money. Senior officials should be able to explain how their assets were earned
legitimately, especially if there is a significant difference between their
official salary and their actual wealth. If they cannot explain there should be
a presumption that that their funds are the proceeds of corruption. This
concept of "illicit enrichment" is already recognised in international treaties
such as the United Nations and the Inter American conventions against corruption.
2) Banks and other investment managers should
disclose full details of state assets that they manage. In a dictatorship where one individual, or a small cabal, exercises
almost complete power over the state, there is a very thin dividing line between
state and personal investments. For example, it appears that Gaddafi has
significant personal control over the state funds invested in the Libyan
Investment Authority, which Global Witness recently revealed to be managed by
major international banks.
3) Such measures should be accompanied by
national registries that list the ultimate owner or controller of companies and
trusts. Corrupt politicians hide their identity, and
therefore their assets, behind complex webs of front companies and legal
structures. This can make it very difficult for banks, or law enforcement, to
find out who actually controls assets.
Global Witness investigates
and campaigns to prevent natural resource-related conflict and corruption and
associated environmental and human rights abuses