Friendly Dealings With Dictators

[struggle4progress]

Embarrassed US Congress pressed to tighten anti-corruption laws in wake of oil scandal
This report is being distributed by Transparency International

U.S. lawmakers are considering tightening anti-corruption laws after a Senate report this month found that a prominent Washington bank helped top officials of the West African nation of Equatorial Guinea steal hundreds of millions of dollars in oil revenues. The Senate Permanent Subcommittee on Investigations has been probing the corruption case involving Equatorial Guinea and its oil revenues for much of the past year.

The panel's report found that Riggs Bank helped government leaders in Equatorial Guinea siphon oil revenues to accounts set up for them in Washington.
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Beginning in 1995 until earlier this year, Riggs oversaw as many as 60 accounts containing as much as $700 million, making Equatorial Guinea its largest single customer. Some were government accounts, while others were the private accounts of President Teodoro Obiang Nguema, other government officials, and their families.

The Senate report says millions of dollars in the government accounts, which should have gone to help impoverished Equatorial Guineans, were instead funneled to off-shore tax shelters, with help from Riggs officials.
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http://www.progress.org/2004/oil13.htm

[struggle4progress]

1. Statement of Norm Coleman

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Until recently Riggs held approximately $750 million dollars worth of accounts connected to Equatorial Guinea. A State Department report on Equatorial Guinea identified poor fiscal management, a lack of transparency, and little evidence that the country’s oil wealth has been used for the public good. In fact, most of the oil wealth appears to be concentrated in the hands of top government officials. Despite these concerns, Riggs serviced these accounts with little attention to the bank’s anti-money laundering obligations. This resulted in the withdrawal of $35 million from the Equatorial Guinea oil account to various companies, some believed to be owned by the Equatorial Guinea President. Furthermore, Riggs failed to record effective account opening information, a requisite for accurate anti-money laundering reporting. As a result, currency transaction reports for cash deposits of $11.5 million over a two-year period failed to identify the owner as a high-ranking Equatorial Guinea government official.

In 1994 Riggs began a significant banking relationship with the former dictator of Chile, Augusto Pinochet. For eight years, Riggs officials did not verify the source of his wealth, nor did they disclose the existence of these accounts to the OCC despite an OCC request for a list of accounts held by politically exposed persons. Verification of a legitimate source of wealth is fundamental to ensure that the U.S. banking system is not used to facilitate the movement of funds stemming from illegal activity.

Poor internal controls apparently made it easy for Simon Kareri, the Account Manager for Equatorial Guinea to embezzle $1.2 million from that account.

Since, 1997, Riggs has been cited by the OCC for failure to ensure sound internal controls, inadequate training to identify and monitor suspicious activity, and a lack of independent audits to ensure Bank Secrecy Act Compliance. In fact, ten different examinations between 1997 and 2002 raised these issues over and over again. I am concerned whether bank managers understand the importance of anti-money laundering compliance.
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http://www.senate.gov/~gov_affairs/index.cfm?Fuseaction=Hearings.Testimony&TestimonyID=641&HearingID=189