The complicity of British banks in Nigerian corruption
International Thief Thief
Many foreign companies dey Africa carry all our money go…
- From Fela Kuti’s song ‘International Thief Thief’
Box 1: Corruption in Nigeria
Box 2: How non-conviction based asset recovery works
Section 2: Diepreye Peter Solomon Alamieyeseigha
Box 3: Alamieyeseigha timeline
UBS: An offshore trust, and a $1.5 million payment from a contractor
HSBC: A government contractor buys a house for a politician
Box 4: Other houses bought as bribes for Alamieyeseigha
RBS: State contractor pays bribes directly into an account controlled by a politician
Box 5: Fiduciary International
NatWest: The use of an associate to launder over a million pounds
Box 7: Other accounts controlled by Dariye in London
Section 4: Conclusion and recommendations
British
banks have accepted millions of pounds from corrupt Nigerian
politicians, raising serious questions about their commitment to
tackling financial crime. Our high street banks are quick to penalise
everyday customers who become overdrawn, or to block credit cards at any
hint of unusual activity. But Global Witness’s research suggests that
the same banks are much less concerned about large amounts of corrupt
money passing through their accounts.
Without
access to the international financial system it would be much harder
for corrupt politicians from the developing world to loot their national
treasuries or accept bribes. By taking money from such customers,
British banks are fuelling corruption, entrenching poverty and
undermining international development assistance.
Global
Witness has found that Barclays, HSBC, RBS, NatWest and UBS held
accounts for two former Nigerian state governors, Diepreye
Alamieyeseigha of Bayelsa State and Joshua Dariye of Plateau State. These men funnelled dirty money into the UK, spending their ill-gotten gains on sustaining a luxury lifestyle, in stark contrast to the poverty of ordinary Nigerians.
The Nigerian government took the governors to court in London to recover their illicit assets. The cases were successful and British judges ordered their UK assets
to be returned. Drawing on court documents, this report examines for
the first time in detail the roles played by the British banks which
took money from these two corrupt politicians.
A
particularly disturbing aspect of this story is that Barclays, NatWest,
UBS, and HSBC reportedly took money from the former Nigerian dictator,
Sani Abacha, during the late 1990s. They are supposed to have tightened
up their procedures since then but our investigation suggests they have
not done enough.
The UK regulator,
the Financial Services Authority (FSA) needs to do much more to prevent
banks from facilitating corruption. As yet no British bank has been
publically fined, or even named, by the regulator for taking corrupt
funds, whether willingly or through negligence. This is in stark
contrast to the U.S., where banks have been fined hundreds of millions of dollars for handling dirty money.
The
FSA is due to be abolished next year. Whichever organisation takes over
regulating the banking sector must take corruption seriously. Banks
that accept corrupt funds should be named, and if it is found that they
acted negligently, heavily fined. Banks also needed to be provided with
more information about how to spot corrupt money.
The UK’s
aid to poor countries has been ring fenced against budget cuts.
Meanwhile, banks - themselves propped up by taxpayer’s money - are
getting away with practices that fundamentally undermine the effect of
aid. This is not just illogical, it is immoral. The government must send
a clear signal to the financial sector: 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.
On the third weekend of November 2005 Diepreye Alamieyeseigha skipped bail, allegedly fleeing the United Kingdom dressed
as a woman. He had been charged with laundering £1.8 million of
corruptly acquired funds. Two months previously, in September,
Alamieyeseigha had been arrested at Heathrow airport on money laundering
charges following investigations by the Nigerian Economic and Financial
Crimes Commission (EFCC) and the UK Metropolitan Police’s Proceeds of
Corruption Unit. Almost £1 million in cash was subsequently found at a West End penthouse he owned.[1] At
the same time as Alamieyeseigha was arrested and found with piles of
cash in his luxury flat, 64 per cent of Nigerians were living on less
than $1.25 a day.[2]
Alamieyeseigha was the governor of Bayelsa State in Nigeria’s
oil-rich, and famously corrupt, Delta region. Arriving back in his home
village after his escape, Alamieyeseigha reportedly declared, “today I
am back at my desk, forever committed to serve the people of Bayelsa and Nigeria. I thank the almighty God for his protection”.[3] That protection did not last long. On 9 December, just weeks after fleeing the UK, Alamieyeseigha was impeached by the Bayelsa State Assembly
which stripped him of the immunity from prosecution that he had enjoyed
as governor. In July 2007, he was convicted by a Nigerian court of
thirty-three counts of money laundering, corruption and false
declaration of assets.[4]
Alamieyeseigha
had been able to amass a personal fortune by abusing his elected
position and soliciting millions of pounds of bribes, despite earning a
government salary of only £16,000 to £17,000.[5] Contrary
to the Nigerian constitution’s code of conduct for public officials he
received payments from government contractors and held bank accounts
outside of Nigeria.[6]
However,
he would not have been able to do this without the help of UK-based,
and in one case now government-owned, banks willing to take his dirty
money. Corruption on the scale of that committed by Alamieyeseigha
requires a financial institution to move such large sums of money
around. The governor controlled accounts with RBS, HSBC, Barclays, and
NatWest.
Another Nigerian politician, Joshua Dariye, the former governor of Plateau State, brought millions of pounds of suspect funds into the UK through accounts he controlled with Barclays and NatWest.
Like Alamieyeseigha, Dariye was arrested in London in 2004 before reportedly skipping bail back to Nigeria,
where the Plateau State Assembly started impeachment hearings against
him. However, in November 2006 Dariye simply disappeared again.
According to the Nigerian newspaper Punch the
governor gave security officials the slip while attending a service at
the State House’s chapel. While still in hiding, Dariye made broadcasts
reassuring his supporters that he was still in charge of the state and
would soon return to the capital, Jos. He
deployed his substantial financial resources to fight his impeachment
and was re-instated as governor, shortly before his term of office
ended. Dariye is currently awaiting trial in Nigeria on fourteen money laundering and corruption charges.[7]
The escapades of former governors Alamieyeseigha and Dariye have been well documented by the media, both in Nigeria and in the UK, but the disturbing role of the British high street banks that facilitated his corrupt behaviour has gone largely unnoticed.
We are able to tell these stories because information on the role of these banks emerged in court proceedings in London taken by the Nigerian government to recover the assets controlled by the governors in the UK.
We are telling it now because it raises serious concerns about British
banks which have done business with corrupt politicians.
The
regulations may have evolved since then, but there are still gaps in
the system. By law banks are required to carry out ‘due diligence’ on
their customers.[8] This
has two stages. The first is that banks should know who their customer
is and then assess how high a money laundering risk they pose. For
example, senior foreign politicians – known as ‘politically exposed
persons’ or PEPs – are deemed to be higher risk. This is not because all
politicians are corrupt. It is simply because their control over state
revenues and contracts gives them greater opportunity for corruption.
Secondly, banks have to monitor their customers’ accounts for suspicious
activity. If they are concerned that a customer may be engaging in
money laundering, the bank has to file a ‘suspicious activity report’
(SAR). In the UK these
are currently sent to the Serious Organised Crime Agency (SOCA) and the
bank must wait a certain period for consent to proceed with the
transaction.
At
first glance it may appear that the system worked, at least in part. At
least one of the banks seems to have filed a SAR, and the money was
returned to Nigeria.
However, dig a little deeper and a worrying picture starts to emerge.
The cases of Dariye and Alamieyeseigha demonstrate the vulnerability of
the UK’s financial system to
dirty money. With alarming ease the two men opened numerous bank
accounts, brought millions of suspect pounds into the country and lived
lives of luxury. Global Witness wrote to all the banks named in this
report prior to publication. While some of them replied with general comments
on their approach to fighting financial crimes, none of them would
answer specific questions about their role in taking money from
Alamieyeseigha and Dariye.
This story is particularly concerning given the storm created by the revelation in 2001 that 23 banks in London had
taken £900 million of suspect funds from the former Nigerian dictator
Sani Abacha between 1996 and 2000. The FSA did not identify the banks
involved. However, court documents seen by the Financial Times listed
Barclays, NatWest, UBS, and HSBC among those that had held
Abacha-related accounts (the banks themselves did not confirm this).
These are the same banks that this report will expose as having done
business with Dariye and Alamieyeseigha, in most cases years after the
Abacha scandal.[9] While
the FSA says it demanded changes from the banks it investigated in
2001, including in the way they monitored their customers’ accounts,
none of them have been fined or publically rebuked.
Many
of the resource-rich countries that Global Witness investigates have
been looted by the very politicians who have been entrusted with
developing those economies. According to the World Bank, corruption is
one of the greatest obstacles to reducing poverty. It undermines
development by distorting the rule of law and denies money for public
services.[10] As
well as the direct loss of government revenue, corruption distorts
markets and exacerbates political instability making it more difficult,
more expensive and more risky for companies and banks to operate in
corruption hot spots.
Box 1: Corruption in Nigeria
Nigeria sits
on some of the largest oil reserves in the world, which have been
fuelling corruption since independence. Between 2000 and 2008 alone, it
earned roughly US $370 billion in oil and gas exports, yet in 2007 the
average life expectancy was only 48 years and over half of all Nigerians
are still without access to clean water.[1]
In 2008 Nigeria received $1.3 billion (£900 million) of overseas aid, making it one of the largest recipients of aid from Western countries.[2] Interestingly this is the same amount as Abacha’s suspect funds that had flowed through London banks before 2001. The UK’s bilateral aid to Nigeria is £110.5 million, a significant proportion of this figure.[3] Yet the overall aid figure represents only a small fraction of Nigeria’s economy, at less than one
percent of GDP. Petrodollars add up to 97.5% of export profits and 81% of total government revenues.[4]
Nigeria has
been dogged by political instability and corruption scandals. In the
decades following independence the combination of a burgeoning natural
resources industry and internal conflict has created a fertile ground
for malpractice. In the 1990s President Sani Abacha infamously diverted
over £2 billion from state funds into his family’s personal accounts,
via banks in the UK, Jersey, Switzerland, Luxembourg, Liechtenstein, Austria and the US. Despite foot-dragging from some governments, most notably the UK, Nigeria has been able to recover some of these funds.[5]
Following the Abacha scandal, Nigeria stepped
up its anti-corruption efforts, partly due to pressure from the
Financial Action Task Force (FATF), the inter-governmental group that
sets the global anti-money laundering standards. In 2001 Nigeria was
placed on the FATF’s list of ‘non-cooperative jurisdictions’, ie those
whose anti-money laundering regulations were not up to scratch. The list
was intended to put political and economic pressure on recalcitrant
countries to strengthen the fight against financial crime.[6]
In
2003 the Economic and Financial Crimes Commission (EFCC) was created by
the Nigerian government with a particular focus on tackling corruption.
The EFCC had some notable successes, such as the investigations into
Alamieyeseigha, and it was part of a package of measures that led to Nigeria being removed from the FATF non-cooperative list in 2006.[7] However,
in 2007, the EFCC’s controversial chairman Nuhu Ribadu was sacked only
months after arresting James Ibori, a powerful ally of the recently
deceased Nigerian President Yar’Adua.[8] This
appeared to suggest that some Nigerian politicians might be more
interested in having an anti-corruption commission that exposes the
misdeeds of their predecessors than one which roots out corruption in
the current government.
Despite
other recent initiatives, including participation in the Extractive
Industry Transparency Initiative (EITI) which is meant to improve
transparency over payments of oil revenues to the government, progress
in tackling corruption and increasing transparency is still slow.[9] The most recent Transparency International survey ranks Nigeria 130th on the Corruption Perception Index and the effectiveness of the EFCC is still hotly contested.[10]
Most
forms of corruption require a bank to hold accounts for those involved
and to process the corrupt payments. In order to clamp down on
corruption, it is essential to limit the access that corrupt officials
and politicians have to financial services. This should make it harder
to misappropriate funds, or accept a bribe, in the first place. But it
should also make it harder for modern day kleptocrats to enjoy their
ill-gotten gains. After all, you cannot buy a luxury West End penthouse without the involvement of a British bank.
The
participation of RBS, which also owns NatWest, is particularly
concerning given that it is now 84 % owned by the British government,
which has made much of its commitment to ending global poverty.[21] Given
this, RBS should be setting an example as the bank that refuses to take
money from corrupt politicians who entrench poverty by looting state
revenues that could be used for development.
The fact that Nigeria was
able to recover these funds is a testament to the close cooperation
between the Nigerian authorities and the Metropolitan Police
anti-corruption unit, which is funded by the Department for
International Development (DfID). However, where was the UK regulator,
the FSA? None of the banks discussed in this report were subject to a
public inquiry or sanction for taking Dariye and Alamieyeseigha’s money
and it is unclear whether the FSA investigated these banks, as the
regulator has made no public statement. Perhaps all the banks acted in
accordance with the regulations and there is nothing to punish (in which
case, the regulations are not fit for purpose). The FSA told Global
Witness that it can neither confirm nor deny whether it has taken
enforcement action against the banks discussed in this report.[22] The
FSA needs to send a clear public message that taking corrupt funds is
unacceptable. Only then will banks really take notice.
Box 2: How civil asset recovery works
In 2007 the federal government of Nigeria won a series of civil asset recovery cases against Alamieyeseigha and Dariye at the High Court in London[1]. Nigeria was
able to claim that the governors’ assets were the proceeds of
corruption and therefore the rightful property of the Nigerian
government. Following successful judgments, over £12 million of the two
governors’ assets to Nigeria were ordered to be returned to Nigeria.
Nigeria used
a legal tool called civil asset recovery, which relies on a lower
burden of proof than criminal-based asset forfeiture. This is useful
because in some situations there may be insufficient evidence to prove
beyond a reasonable doubt – the level of proof to get a criminal
conviction – that corruption has taken place.
However,
it may still be possible to show on the balance of probabilities – the
level of proof required in civil courts – that the assets are derived
from illegal sources. This eases the burden on governments and means
that asset recovery can take place, even if a criminal conviction is not
possible.
This
type of recovering looted assets is also useful when corrupt
politicians have stashed assets outside of their own countries. In these
cases it may be very hard to pursue assets via a criminal conviction
due to the difficulties of countries recognising each other’s legal
systems and problems with the exchange of information between countries.
Although
relatively few countries allow civil asset recovery at present, there
is growing support for the process because it is producing results. The
United Nations Convention Against Corruption encourages signatory states
to allow the use of civil asset recovery, especially where a criminal
asset recovery case would be difficult or impossible, for example in
cases of death, flight or other cases. Countries that allow civil asset
recovery include the United States, the United Kingdom and Switzerland.[2]
Section 2: Diepreye Peter Solomon Alamieyeseigha
RBS, HSBC and UBS allowed Diepreye Alamieyeseigha, former governor of Bayelsa State, to receive payments and property from contractors that were working for Bayelsa State. As part of Nigeria’s civil asset recovery actions in the UK,
the High Court ruled that a number of the transactions through HSBC and
RBS were bribes. The judge ordered that all of Alamieyeseigha’s assets
with the two banks be returned to Nigeria. His UBS assets have also been returned to Nigeria following an out of court settlement between UBS and the Nigerian government.[25]
Alamieyeseigha was elected governor of Bayelsa State in
1999 as a member of the ruling People’s Democratic Party of President
Obasanjo, following fifteen years of military and transitional rule in Nigeria. He was re-elected in 2003 amid accusations of vote rigging and violence. The New York Times described how in
one Bayelsa district the official results showed that Alamieyeseigha’s
party won 133,000 votes in an area with just 127,000 registered voters.[26]
Despite
providing the Nigerian government with a statement of his assets, known
as an asset declaration, in 1999 and twice in 2003, Alamieyeseigha did
not reveal that he controlled numerous accounts in London with millions of pounds of deposits. The governor also failed to admit that contractors to Bayelsa State had bought him at least three London properties
while he was in office. These properties were held in the name of
Alamieyeseigha’s front company Solomon and Peters (a name inspired by
his two middle names), which was registered in a British tax haven, the British Virgin Islands.[27]
The
Constitution of Nigeria bans governors from accepting gifts of any kind
from government contractors; the Constitution is also explicit that
governors cannot maintain bank accounts outside of Nigeria.[28] Alamieyeseigha broke both of these provisions and he was able to do so because banks in London were willing to do business with him. Currently, there is no regulation in the UK requiring banks to know whether a country such as Nigeria bans
its PEPs from holding accounts abroad. However, banks should ask
serious questions about why one of their clients might want to break the
law in their own country and such behaviour should raise a serious red
flag for the bank.
In
early 2003 the Nigerian Independent Corrupt Practices and Other Related
Offences Commission (ICPC) started an investigation into Alamieyeseigha
for maintaining and operating foreign bank accounts outside of Nigeria,
as well as other corruption offences. This case seems to have petered
out in the run up to his re-election in April 2003, partly due to
Alamieyesiegha’s assertion of his legal immunity as a governor.[29] However,
the allegations were prominently reported and from at least January
2003 there were numerous press reports and online articles raising
questions about Almieyeseigha’s probity, including accusations that he
and his wife held accounts with NatWest and HSBC in London.[30]
By
law, banks are required to ‘know their customer’; they should be on the
look out for information in the public domain that might suggest that a
PEP customer is involved in corruption. Given the news reports on the
investigation into Alamieyeseigha a quick Google search should have
alerted the banks to the potential corruption risk he posed.
Following Alamieyeseigha’s arrest in London and
flight back home, the Nigerian government began proceedings in early
2006 in the English High Court to try and recover his overseas assets. Nigeria applied
for summary judgment, a motion asking the court to decide the case on
the pleadings and evidence submitted without a trial. Mr Justice Lewison
declined the application and ordered a full trial, but he noted that
Alamieyeseigha “had a lot of explaining to do”.[31] In July 2007 Alamieyeseigha pleaded guilty in Nigeria to numerous charges of money laundering and corruption, some of them related to his British assets. Following this conviction Nigeria successfully sought a second summary judgment and Alameiyeseigha’s assets were ordered to be returned to Nigeria.[32] Sadly there have been recent press reports that these returned funds have themselves gone missing.[33]
Chart: Some of the bank accounts controlled by Alamieyeseigha, despite declaring that he had no cash in bank accounts outside of Nigeria
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$178,947.50 (£110,948) Mar 2003
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Sort code: 20-69-15 A/c: 10659347
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£3 million total Sept 2005 (six accounts in €, £ and $)
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Sort code: 60-13-33 A/c nos: 48003182, 63825546, 63825538
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Box 3: Alamieyeseigha timeline
May 1999: Elected governor of Bayelsa State; first asset declaration
Early 2003: Alamieyeseigha investigated by an ethics tribunal for failing to declare bank accounts outside of Nigeria
April 2003: Re-elected governor; second asset declaration
December 2003: third asset declaration
15 September 2005: Arrested at Heathrow by the Metropolitan Police
November 2005: Skipped bail and returned to Nigeria
9 December 2005: Bayelsa State assembly impeaches Alamieyeseigha by a two thirds majority
December 2005: Worldwide asset freeze by London High Court
17 January 2006: Federal government of Nigeria launches civil asset recovery case against Alamieyeseigha in the London High Court
March 2007: Mr Justice Lewison denies Nigeria’s request for summary judgment, ruling that the case will go forward for a full trial
26 July 2007: Alamieyeseigha pleads guilty in Nigeria to money laundering and making false declarations of assets and sentenced to two years in jail.
27 July 2007: Alamieyeseigha is released as he had already served his jail term while waiting for the trial
3 December 2007: Mr Justice Morgan agrees to Nigeria’s second request for summary judgment following Alamieyeseigha’s guilty plea.
UBS: An offshore trust, and a $1.5 million payment from a contractor
Upon
being elected governor in May 1999 Alamieyeseigha declared total assets
of approximately £286,000 and an annual income of £6,000. On top of
that in his May 1999 asset declaration, and in two further ones
submitted in 2003, Alamieyeseigha made it very clear that he had no cash
in bank accounts outside of Nigeria.[35]
However, in September 1999, three months after taking office as governor, Alamieyeseigha opened an account with UBS at its Mayfair offices on Curzon Street. This account would go on to receive $1.5 million from a contractor for Bayelsa State,
Aliyu Abubakar, referred to in the court documents as Mr Aliyu. A
British High Court judge has found that Aliyu bribed Alamieyeseigha on
at least two other occasions, however, there has been no ruling on the
payments through UBS, as the bank settled the asset recovery action
brought by Nigeria out of court.[36] Global
Witness wrote to UBS asking about these payments, however, the bank
would not answer specific questions about its client Alamieyeseigha.
Global Witness has attempted to contact Mr Aliyu for comment, but
without success.
Michael Peel, a journalist with the Financial Times, has provided a wealth of detail about Alamieyeseigha’s relationship with UBS in his book, A Swamp Full of Dollars.
Shortly after opening his account, Alamieyeseigha told UBS staff that
he anticipated a sharp rise in his deposits from $35,000 to $1.5
million. An “Approval Form” for “Public Functionaries” filled in by UBS
staff on 2 December 1999 noted that Alamieyeseigha was a financier and
fertilizer magnate whose wealth “predates his election and is clearly
unrelated to his political activities”. According to the form,
Alamieyeseigha had “never before held accounts with banks outside
Nigeria, but because of the high social tension currently prevailing in
the area, he is eager to find a solution which will safeguard his
substantial wealth from potential aggressors”.[37] This
comment shows that UBS was aware that Alamieyeseigha was a
recently-elected governor and therefore politically exposed. It also
demonstrates that the bank’s staff had carried out at least a cursory
investigation into Alamieyeseigha’s source of wealth.
From
the documents in Global Witness’ position it does not appear that UBS
ever saw any of Alamieyeseigha’s asset declarations, or even knew that
he was required by the Nigerian constitution to file them. Asset
declarations should be a central part of any bank’s PEP due diligence as
they can provide vital information about a client’s, or potential
client’s, source of funds. For example, there was a substantial
difference between the relatively modest income declared by
Alamieyeseigha and the significantly larger amounts that he was planning
to deposit with UBS shortly after assuming public office. If the bank
had seen Alamieyeseigha’s declarations it could have questioned him
about these discrepancies.
In the spring of 2001 Aliyu paid $1.5 million into Alamieyeseigha’s UBS account. Aliyu was a contractor with Bayelsa State and has been described by Alamieyeseigha as a “close friend”.[38] One
of Aliyu’s companies, A Group Property, had been awarded a contract
worth approximately £19 million to construct the Bayelsa governor’s and
deputy governor’s lodges and their perimeter fences. There is some
confusion over when this contract was actually awarded, with Aliyu
saying it was not until 2002. However, according to Mr Justice Lewison,
who heard Nigeria’s first
application for summary judgment, there are documents to suggest that
Aliyu’s company received a payment equivalent to £3 million in August
2001 under an already awarded contract.[39]
On
25 April 2001 Aliyu deposited the first tranche of $1 million into
Alamieyeseigha’s account with UBS. The following week Aliyu transferred a
further $500,000 into the UBS account. A few days later these funds
were used to buy bonds that were added to Alamieyeseigha’s portfolio.
These payments were made at about the same time that Aliyu was busy
making arrangements to buy Alamieyeseigha a £1.4 million house in
Kilburn, north London (see HSBC case).[40]
Discussing the UBS payments, Mr Justice Lewison, the High Court judge who heard Nigeria’s
first application for summary judgment, before UBS settled out of
court, set out the argument of the lawyer representing Nigeria:
Mr
Davies says that since Mr Alamieyeseigha has not explained the source
of the funds passing into this account except in the very vaguest terms,
and since the amount of the payments in far exceed Mr Alamieyeseigha’s
declared assets, it can only be concluded that these are illegitimate
funds and represent the fruits of corruption.[41]
By
the time of the first Aliyu transaction, UBS had signed up to the
Wolfsberg Principles, an initiative by eleven of the world’s largest
private banks to develop anti-money laundering principles and policies.
UBS has told Global Witness that at the time of the transactions its
internal standards reflected the Principles. The Principles state that
banks will “endeavor to accept only those clients whose source of wealth
and funds can be reasonably established to be legitimate”.[42] The
recommendations are clear that “individuals who have or have had
positions of public trust such as government officials [and] politicians
… require heightened scrutiny”. UBS was aware that Alamieyeseigha was
an elected governor of a Nigerian state and therefore in a position of
public trust. According to the principles it had signed up to it should
have subjected him to enhanced scrutiny.[43]
According to the Financial Times journalist Michael Peel and
court documents, a UBS employee, Nasim Ahmed, prepared a report
explaining how he had “politely” asked the governor about the source of
these payments. Alamieyeseigha’s response to UBS was that he had sold a
palace in Abuja to
Aliyu, a contractor for Bayelsa state, who Alamieyeseigha described as
an “oil businessman”, and that the governor was expecting a further $1
million in relation to this deal. According to Alamieyeseigha, further
deals could lead to $2 million to $3 million being deposited with UBS.
However, no Abuja property
was disclosed in Alamieyeseigha’s 1999 asset declaration and the total
value of his declared properties was just £210,000, significantly less
than Alamieyeseigha was planning to put into his UBS account.[44]
This
shows how important it is for banks to try and independently verify the
information that they receive from their clients, especially when
dealing with senior PEPs in highly corrupt environments such as Nigeria.
It seems from the available documents that in this case UBS took
Alamieyeseigha’s statements about the source of the $1.5 million at face
value.
Ahmed’s
response to the information that Alamieyeseigha planned to deposit
further funds with UBS was to make a sales pitch. “I tried to talk him
into setting up a trust as these funds were meant as a nest egg”.
Alamieseyeigha agreed and UBS’ office in the Bahamas created
a trust called Salo, which in turn owned a company called Falcon
Flights Inc. In January 2002 the bonds bought with the $1.5 million from
Aliyu were transferred to an account set up for Falcon at UBS in London.[45]
Ahmed’s
sales pitch demonstrates the inherent tension within banks between the
desire to make sales, and therefore profits, and the regulatory
requirements to investigate the source of a client’s funds and possibly,
in consequence, turn down a sale. Global Witness has spoken to a number
of people within the industry who talked about these competing
pressures. The anti-money laundering functions within banks may often be
under-resourced and can lack clout within the institution. Even if all
the systems are in place, compliance with financial crime regulations
can often turn into a box-ticking exercise rather than a serious attempt
to turn down undesirable business.[46]
In
his defence during the civil asset recovery process, Alamieyeseigha
claimed that the money in Falcon’s accounts was “contributions from
friends and Political associates towards the education of my children”.
He makes no specific mention of the $1.5 million paid in by his “close
friend” Aliyu.[47]
Explaining
its customer due diligence approach to Global Witness, UBS said that
its challenge is “to gain sufficient level of comfort regarding the
economic source from which the client’s wealth was generated and to
ensure that the transaction activity we are seeing … is plausible in the
light of what we know about them”. UBS concluded that “we are however,
aware that every system and set of controls have their weaknesses and
are not perfect or foolproof”.[48]
By
holding an account with UBS, Alamieyeseigha was violating the
constitutional ban on public officials holding bank accounts outside of Nigeria. From at least 2003, UBS was aware of the possibility of this.
In
a May 2003 email exchange UBS employees discussed Nigerian news reports
that Alamieyeseigha was being investigated by an ethics tribunal for
holding accounts outside of Nigeria.
One of the UBS staff was sceptical about the reports, noting that the
articles were “not hard facts and should always be read between the
lines”. It is unclear whether UBS asked its client, Alamieyeseigha,
about these reports. [49]
Despite
having heard that its client may have committed a crime in his own
country by having an account with the bank, UBS continued to do business
with the governor. Later the same month Alamieyeseigha tried to use the
Falcon account at UBS to buy a luxury flat in one of the most desirable
locations in London – 247 The Water Gardens, in the West End –
for £1.75 million. This time UBS appear to have had serious concerns
about the source of his funds, which Alamieyeseigha initially claimed
were “remittances from Nigeria”.[50]
Ahmed
pushed him, asking him to “put down in black and white with supporting
documentation [sic] proof of the genuineness and sources of these
funds”. From the court documents, it appears that this is the first time
that UBS staff were categorical in their demand for information about
the source of Alamieyeseigha’s funds. Despite saying that he would come
back with a “plausible explanation”, Alamieyeseigha never did and found
another way to buy The Water Gardens flat. UBS kept Falcon’s account
open after this exchange.[51]
By
December 2005 the Falcon account at UBS had a balance of $1.8 million,
while Alamieyeseigha’s personal account had $535,000. This was despite
his declaring assets in late 2003 of only £480,400 and an expected
income of £22,680.[52]
UBS reached a confidential out of court settlement with the Nigerian government in the UK following Nigeria’s
first applications for summary judgment. The funds in Alamieyeseigha’s
personal and Falcon accounts were returned to the Nigerian government.[53]
It is unclear whether the FSA investigated this case. The UK regulator
only goes public after it has concluded an investigation and issued a
penalty notice. The FSA has not issued any penalty notice in relation to
UBS and Alamieyeseigha. The FSA told Global Witness that it was aware
of the High Court judgments against Alamieyeseigha. However, the
regulator refused either to confirm or deny whether it was investigating
the banks involved, citing the potential of undermining any possible
investigation, or harming the commercial interests of the banks.[54]
As well as paying $1.5 million into Alamieyeseigha’s UBS account, Aliyu bought the former governor a London house worth £1.4 million. This transaction was processed by HSBC.
HSBC: A government contractor buys a house for a politician
Government contractors bribed Alamieyeseigha by buying him three houses in London worth
a total of £3.15 million. One of these transactions was processed by
HSBC. The bank was well aware that its client, Aliyu, was willing to pay
for a house on behalf of someone he referred to as “Chief
Alamieyeseigha”. HSBC did not answer Global Witness’s detailed questions
about this transaction. It made some general points
about its anti-money laundering policies and said it recognised “the
contribution we can and should play in the fight against financial crime
including corruption”.[55]
In the spring of 2001 Aliyu became concerned about the state of his friend Alamieyeseigha’s London residence, as he felt that it was too small. Aliyu proceeded to spend £1.4 million to buy 14 Mapesbury Road, in Kilburn in north west London, for Alamieyeseigha. The house was bought in the name of a British Virgin Islands’ shell company called Solomon and Peters which was wholly owned by Alamieyeseigha. As part of Nigeria’s asset recovery action against Alamieyeseigha, the High Court in London concluded that the funds used to buy 14 Mapesbury Road were bribes, “obtained by or on behalf of Mr. Alamieyeseigha from a State contractor”.[56]
According
to documents seen by the High Court, on 14 May 2001 a Mr Patel of HSBC,
who appears to have been Aliyu’s banker, wrote to Simon Lazarus, the
solicitor acting for Solomon and Peters in relation to the purchase:
I
understand that Chief SP Alamieyeseigha wishes to purchase a property
through yourselves at an agreed price of £1.4million. Whilst Chief
Alamieyeseigha is not a client of HSBC Bank plc, I am aware of the above
transaction via my customer Mr Alhaji Aliyu of this purchase. Mr Aliyu
has informed me that he is willing to pay for this transaction on behalf
of the Chief… It is Mr Aliyu’s intention to transfer funds to Chief
Alamieyeseigha later this week, and I am awaiting full instructions in
writing from him.[57]
This
is a very interesting letter. It makes it clear that HSBC was aware of
the relationship between Aliyu and a “Chief Alamieyeseigha”.
Under the money laundering regulations in force in the UK at
the time, if a bank employee had a suspicion that money laundering was
taking place, they had to report it to the designated person within the
bank, who would then pass appropriate information on to the authorities.[58]
Along
with UBS, HSBC was one of the founding members of the Wolfsberg
Principles. The original version of the Principles (they were updated in
2002) stated that “individuals who have or have had positions of public
trust such as government officials … and their families and close associates require heightened scrutiny”, which was ahead of the UK regulations at the time.[59] Banks
needed to be on the look out for any information that might suggest
that one of their clients is a PEP or a close associate of a PEP. Not
everyone who uses the title ‘chief’ in Nigeria meets
the definition of a PEP, but in this case the use of the honorific
‘Chief’ should have prompted HSBC to investigate further.
The
purchase of such an expensive piece of property on behalf of a PEP
should also have raised suspicions of potential corruption. HSBC would
have been wise to investigate the relationship between Aliyu and
Alamieyeseigha. If it had done so the bank may have discovered that
Aliyu was a contractor for the state of which Alamieyeseigha was
governor.
It is unclear whether HSBC’s staff made any of these connections or raised any concerns about the purchase of 14 Mapesbury Road, a transaction that a High Court judge would later describe as a bribe.
There
is an intriguing development to this story. Eight months after Aliyu
bribed Alamieyeseigha by buying him a £1.4 million house using HSBC as a
conduit, Alamieyeseigha himself opened an account with HSBC in December
2001. The account was opened with a deposit of £420,000 from Aliyu.[60]
According
to Alamieyeseigha’s witness statement he had complained to Aliyu about
“the difficulty in paying bills whilst travelling outside Nigeria”.
In response Aliyu opened the HSBC account on behalf of the governor.
Alamieyeseigha described how Aliyu, and Aliyu’s lawyer John Ayeni, both
already banked with HSBC and acted as Alamieyeseigha’s ‘referees’ for
the bank. According to Alamieyeseigha the opening funds from Aliyu “were
unsolicited gifts and had no reference to any intended or existing
business between Bayelsa State and Aliyu”.[61]
However, Aliyu told the EFCC investigators in Nigeria that the payment was made at the request of Alamieyeseigha and that Aliyu did not expect to be repaid because he was working for Bayelsa State.
“He [Alamieyeseigha] has not repaid me and I did not ask for the money
because of my business with the Bayelsa State Government. The
construction of the Bayelsa State governor
and deputy governor’s lodge and the external perimeter fencing was
awarded to my company for about N4.8 billion in the year 2001” (about
£19 million).[62]
These
conflicting explanations for the payment raise the question of what due
diligence HSBC carried out on Alamieyeseigha when it opened an account
for him. Banks need to ensure that they screen all of their new and
existing customers to check whether they are PEPs. As the governor of Bayelsa State,
Alamieyeseigha should have been regarded as politically exposed and
therefore subjected to extra checks, including into his source of funds,
as recommended by the Wolfsberg Principles. Banks also need to ensure
that they draw on relevant internal information. In this case, did the
HSBC staff involved in opening Alamieyeseigha’s account know that Aliyu,
another HSBC customer, had bought the Bayelsa State governor a house only eight months before? HSBC told Global Witness it cannot discuss matters relating to specific accounts.[63]
Under the Nigerian constitution, governors are banned from holding bank accounts outside of Nigeria and
they are not allowed to receive gifts from government contractors. HSBC
has told Global Witness that it is aware of these provisions. Global
Witness asked if the bank was aware at the time of the transactions,
however, the bank replied that “it has not proved possible to isolate a
specific date when we became aware of the legislation to which you
refer”.[64]
If
HSBC had been aware of these provisions in 2001 when Alamieyeseigha’s
account was opened, and if the bank had been aware that Alamieyeseigha
was a state governor, it would raise questions as to why the bank was
willing to aid a customer to break the law in his own country, and why
Alamieyeseigha wanted to hold large sums of money outside of Nigeria
despite a constitutional ban on such behaviour.
HSBC told Global Witness that it was unable to comment on details of the case, however, it
stated that it had established “Group-wide mandatory policies
establishing minimum standards in relation to Anti-Money Laundering
controls since 1994”. The bank said that it had maintained specific
policies on PEPs since 2000 and that these were often in advance of
local regulatory requirements. The bank concluded by stating that “with
over 100 million customers in 86 countries and territories it is not,
however, realistic to expect that even the very best policies and
procedures can detect or prevent all inappropriate activity”.[65]
In total Alamieyeseigha opened six accounts with HSBC between December 2001 and February 2003, all at the same branch.[66]
UBS and HSBC were not the only banks in the UK that
processed suspect payments for Alamieyeseigha. The next case will
examine how RBS, now majority owned by the British government, allowed
the former governor to receive over £1.5 million in bribes.
Box 4: Other houses bought as bribes for Alamieyeseigha
Alamieyeseigha’s taste in London real
estate seems to have become more luxurious as his governorship
progressed. Between 1999 and 2003 he bought increasingly expensive
property, in increasingly prestigious locations.
In December 1999, just eight months after becoming governor, Alamieyeseigha bought Flat 202, Jubilee Heights in Cricklewood, northwest London for £241,000, not cheap by any standards but a starter price for London property.
The flat was bought in the name of Alamieyeseigha’s shell company,
Solomon and Peters and was paid for by a Mr Soberekon, who had received a
contract to repair and overhaul two gas turbines in Bayelsa State. [1]
The
payment was made through the London Trust Bank PLC, which describes
itself as a “non-bank financial institution” and is registered with HM
Revenue and Customs as a money service business. However the company is
also listed by the FSA as an “unauthorised internet bank”, defined as an
entity promoting itself over the internet purporting to be a bank, but
in fact unregulated by the FSA.[2] In
a statement to the Nigerian Economic and Financial Crimes Commission
(EFCC) in September 2005, Mr Soberekon stated that the funds that were
used to buy the flat were:
…from
the profit made from the gas turbine overhaul. The funds transferred …
on behalf of the Governor was in appreciation of the contract award to
my company by Bayelsa State Government.
The High Court in London concluded that the funds used to buy Flat 202 were bribes.[3] Mr Soberekon could not be reached for comment by Global Witness.
Alamieyeseigha’s next purchase was in Mapesbury Road, Kilburn, as described in the main text above.
In 2002 his shell company, Solomon and Peters, purchased 68-70 Regents Park Road in
Golders Green for £1.4 million. According to the court judgment the
money came from Mr Aliyu, Aliyu’s lawyer, and a mortgage, although it is
not clear which bank processed these payments. Explaining his
involvement in the purchase of 68-70 Regents Park Road to
the EFCC, Aliyu said that Alamieyeseigha had asked him for a loan. As
with his payment into Alamieyeseigha’s HSBC account, Aliyu claimed that
he had not asked the governor to repay the loan because “I am doing
business in Bayelsa State”
and then referred to a substantial government contact awarded at the
time. The High Court concluded that the funds used to buy 68-70 Regents Park Road were bribes.[4]
In July 2003 Alamieyeseigha bought a fourth London property
for £1.75 million. The luxury penthouse apartment, 247 The Water
Gardens, was in the heart of the West End, just off the Edgware Road and close to where former UK prime minister Tony Blair bought a £3.5 million house to live in after leaving Downing
Street. The Metropolitan Police found almost £1 million in cash when
they searched the flat after Alamieyeseigha’s arrest. The flat was also
bought in the name of Solomon and Peters but the source of the funds is
unclear. The Water Gardens apartment was declared by the UK court to be Nigeria’s rightful property.[5]
RBS: State contractor pays bribes directly into an account controlled by a politician
Diepreye
Alamieyeseigha used RBS to accept £1.54 million worth of bribes from a
state contractor. These funds were paid into an account at RBS in the
name of an offshore shell company owned and controlled by the governor,
called Santolina. When offered an opportunity to comment, RBS initially
said it would respond to Global Witness’s questions about its customer
Alamieyeseigha. However, Global Witness has yet to receive a reply from
the now majority state-owned bank.
In
2002, in relation to a separate matter, RBS was fined £750,000 by the
FSA for failing to have adequate customer due diligence procedures in
place. By then the statutory requirement to do due diligence had been in
place already for eight years. According to the FSA, RBS took remedial
action and improved its systems. By the time Santolina’s account was
opened in 2004 these improvements were meant to have been in place.[72]
In
September 2003 Alamieyeseigha instructed a London-based firm, Fiduciary
International Limited, to register a company called Santolina
Investment Corporation in the Seychelles. Alamieyeseigha was registered as the sole shareholder and director of Santolina.[73]
Box 5: Fiduciary International
It
is very difficult to find information about Fiduciary International,
described by Alamieyeseigha as his financial advisers, the company that
incorporated his shell company Santolina. Fiduciary was registered as a
private limited company in the Seychelles, a secrecy jurisdiction in the Indian Ocean, where there is no information in the public domain about who owns companies.
However, in 2005 the company formally registered a branch in the UK and
so filed company documents with the UK Companies House. These show that
Fiduciary was formed in 2002. Someone called Anita Testa is registered
as having “full legal and corporate authority to act on behalf of the
company without limitation”.[1]
Global
Witness contacted Ms Testa to ask her to comment on the role of
Fiduciary in setting up Santolina. She replied: “I am quite surprised
that I am again been dragged into the whole scenario again. Fiduciary
was a company that sourced and provided off shore companies to a wide
and varied clientele of which Chief Alamesiyha was one. We were not
financial advisers and we were not involved in the disposal of funds as
alleged.” Ms Testa confirmed that Fiduciary had “sourced the two
companies registered in the Caribbean and Seychelles, and also introduced him to our Bankers to run the bank accounts from in the UK”. She said “Fiduciary provided the same service to all our clients and the ex-governor received no different”.[2]
In Alamieyeseigha’s statement during the asset recovery process, where he is referred to as the “3rd defendant”,
he claimed that before his arrest in 2005 Santolina had “at all
material times [….] been operated in practice by the 3rd Defendant’s
[Alamieyeseigha’s] agents, in particular Fiduciary Limited.” The former
governor also states that Fiduciary had a role in managing Solomon and
Peters, the company which had the legal title to Alamieyeseigha’s London properties and which was registered in the British Virgin Islands.[3]
According
to the Financial Action Task Force, the intergovernmental body that
sets the global anti-money laundering standard, trust and company
service providers, such as Fiduciary, can be a weak point in the fight
against financial crime and can have “varying degrees of awareness of or
involvement in the illicit purposes underlying their client’s
activities”. This is why FATF Recommendation 12 requires countries to
regulate trust and company service providers for anti-money laundering
purposes.[4]
However, trust and company service providers such as Fiduciary were not covered by the UK money
laundering regulations when Santolina was formed in September 2003.
This changed when new Money Laundering Regulations, passed in November
2003, came into force in 2004. These Regulations required trust and
company service providers to carry out customer due diligence on all
their customers.[5]
Although
Fiduciary was not covered by the Regulations at the time, Global
Witness was interested in what, if any, due diligence it carried out on
its client Alamieyeseigha. Ms Testa stated that Alamieyeseigha had
“cleared” Fiduciary’s due diligence checks.
Ms
Testa was keen to stress that “the decision of the banks here to accept
him was solely theirs and not due to any impropriety on our part”. She
also said that “there is no reason to state that we were or did aid the
same [Alamieyeseigha] to loot his country funds”. Finally, Ms Testa told
Global Witness that the former governor had not even paid his fees.[6]
In
January 2004 Santolina opened an account with RBS. The application form
signed by Alamieyeseigha as the owner and director of Santolina
anticipated an annual turnover of £250,000 for the account. An internal
RBS document predicted a turnover of somewhere between £100,000 and
£500,000.[80]
Between
January 2004, when the Santolina account was opened at RBS, and March
2005 it received 26 deposits totalling approximately £2.7 million. In a
witness statement to the High Court in London Alamieyeseigha claimed
that he was not personally involved in the transfers and that “the bulk
of the funds in this account [was] the balance of my 2003 re-election
campaign fund”. On 1 November 2004 a transfer of £949,000 was made out
of this account to pay for the purchase of a penthouse apartment in the
upscale Waterfront development in Cape Town.[81]
Of
this £2.7 million, £1.6 million came through the Nigeria-based Bond
Bank from a state contractor called Temat Associates, which was owned by Ehigie Edobor Uzamere,
who is now a Nigerian senator representing Edo South. Temat had a
contract worth £5.3 million to construct the internal concrete fencing
for the new governor’s and deputy governor’s lodge. Other companies
controlled by Uzamere had been awarded numerous contracts with Bayelsa
state, including Speed Concepts Nigeria Ltd for the design and
construction of Bayelsa State television studio in 2001 and Amboy Nigeria Ltd. for a government gate house in 2003.[82]
Contacted
by Global Witness, Senator Uzamere denied making this payment to
Alamieyeseigha. He told Global Witness that it was a matter between
Alamieyesiegha and the London High Court.[83]
Alamieyeseigha’s July 2007 guilty plea in Nigeria to
several money laundering charges effectively contradicted his assertion
to the British court that the transfers to the RBS Santolina account,
including the funds from Temat, were unspent campaign funds. The judge
who presided over the second asset recovery application brought by Nigeria in London, concluded that:
On
the state of this evidence the correct finding to make … is that the
monies in the Santolina accounts are indeed bribes received by or on
behalf of Mr Alamieyeseigha from State contractors in return for the
awarding of State contracts.[84]
Did RBS realise that one of its customers was using the bank to accept bribes?
Industry
guidance published by the UK Joint Money Laundering Steering Group
(JMLSG) and vetted by the UK Treasury gives financial institutions
additional help with how to fulfil their obligations under the UK’s
anti-money laundering regime. Their “Guidance” has quasi-legal status,
and it has to be taken into account if a bank is accused of failing to
fulfil its anti-money laundering obligations.[85] The
Guidance is regularly updated and in January 2004, when RBS opened an
account for Santolina, the most recent version had been published the
month before in December 2003.
The
JMLSG Guidance suggested that banks identify customers who were PEPs.
Banks were recommended to carry out extra checks on PEP customers,
including by carrying out “close scrutiny of any complex structures (for
example, involving companies, trusts and multiple jurisdictions) so as
to establish that there is a clear and legitimate reason for using such
structures”.[86]
Sometimes
people use shell companies to hide their identity, but in this case
Alamieyeseigha signed the account opening documents as the owner of
Santolina. However, it is not clear if RBS identified Alamieyeseigha as a
PEP. It is also unclear whether RBS knew that he had been investigated
by the ICPC the previous year for operating bank accounts outside of Nigeria.
However, a quick Google search could have revealed that Alamieyeseigha
was a Nigerian governor and that numerous corruption allegations had
been made against him.
If
RBS established that Santolina was controlled by Alamieyeseigha, and if
the bank identified him as a PEP, it should have investigated his
source of wealth. The JMLSG Guidance suggested that banks should take
“reasonable measures to establish the source of wealth (including the
economic activity that created the wealth) as well as the source of
funds to be used in the relationship”. The Guidance also suggested that
“ongoing scrutiny should be applied to any unexplained sources of
wealth, e.g. value of property owned by the client that does not match
the income or initial wealth profile”.[87]
It
is unclear what, if anything, RBS did to investigate the source of
Alamieyeseigha’s funds. In particular, it is unknown whether RBS knew
about, or was able to see a copy of, Alamieyeseigha’s December 2003
asset declaration in which the recently re-elected governor stated
assets of £480,000 and an annual salary of £22,680. This is in sharp
contrast to the £2.7 million that passed through the RBS account between
2004 and 2005. The governor also claimed that he had no bank accounts
outside of Nigeria.[88] If
RBS did see a copy of Alamieyeseigha’s declaration, the discrepancy
between the governor’s stated assets and income and his actual income
should have raised serious concerns.
Even
if RBS did not know any of the above, there was a very simple red flag:
these payments came through a Nigerian bank. At the time, Nigeria had
been placed on the Non-Cooperative Countries and Territories (NCCT)
list by the FATF (see box 1). The JMLSG Guidance required banks to be
aware of which countries were on the list and carry out extra due
diligence on transactions from those countries. Nigeria was not removed from this list until 2006.[89]
RBS was required by law to monitor its accounts for suspicious activity. The bank should have been aware that Nigeria was
on the NCCT list and therefore that large transactions from that
country required heightened monitoring. It would be also reasonable to
expect RBS to question its client Santolina over the source of these
funds. If the bank discovered that the source of at least £1.6 million
of the money flowing into Santolina’s account was Temat, a contractor
with Bayelsa State, this should have raised a serious red flag.
A
final red flag was pointed out by the judge who observed that the
activity on Santolina’s accounts was not characteristic of a functioning
business: “money simply accumulated in the accounts”. With the
exception of £949,000 paid out of Santolina’s RBS account to acquire a
luxury property in Cape Town for Alamieyeseigha, the company appeared to have had no outgoings.[90]
With these apparently numerous red flags did RBS pick up on the unusual activity on Santolina’s account and file a SAR?
A
summary of the case against Alamieyeseigha that appears to have been
produced for a meeting organised by the Nigerian EFCC in relation to a
request for cross-border legal assistance indicates that RBS may have
filed a SAR. According to the document RBS:
…assisted the Metropolitan Police in gathering evidence [and] identified
a suspicious transaction involving a company [which] paid a whopping
sum of money to another company named 'Santolina Investment Corporation'
whose Director and Sole Signatory for the account is Chief D. S. P.
Alamieyeseigha.[91]
If
a bank filed a SAR as soon as it became suspicious and continued to
file SARs whenever further suspicions arose, then it would have a strong
defence against accusations that it was involved in laundering the
proceeds of corruption. SARs are usually confidential and so Global
Witness has not been able to verify whether RBS did in fact file a SAR.
Regardless of this, there remains the ethical question of whether RBS
should have been doing this business in the first place.[92]
Global
Witness asked RBS numerous questions about Alamieyeseigha, but has not
had an answer. However, its website states that the bank operates
“strict controls to prevent and detect attempts to launder money” and
that it does not “permit or condone any form of corruption or bribery”.[93] Given
that RBS is now majority owned by the taxpayer it needs to ensure that
its policies are aligned with, or at the very least are doing no
harm to, the government’s commitment to tackling corruption and to
promoting development.
In August 2010 RBS was fined £5.6 million by the FSA for failing to properly implement UK financial sanctions between 2007 and 2008. This fine was the first imposed under the UK’s 2007 Money Laundering Regulations, the latest tightening of the laws.[94]
The regulator lambasted the bank, which according to the FSA “could
have facilitated transactions involving sanctions targets, including
terrorist financing”.[95] According
to the FSA’s Decision Notice, the RBS Group, which includes NatWest,
“did not consistently record the names of directors and beneficial
owners of their corporate customers”, and where they did “failed to
ensure that such individuals were screened against the Treasury list on
an ongoing basis”.[96]
Understanding
who controls corporate customers is crucial for any anti-money
laundering system. That RBS was failing to properly record the
beneficial owners of some of its customers is deeply concerning. This
problem was compounded by another: RBS and NatWest’s database for
processing card payments for corporate customers only allowed two
beneficial owners or directors to be listed.
Taken
along with its £750,000 fine by the FSA in 2002 and its handling of
Alamieyeseigha’s funds this incident raises serious questions about the
bank’s commitment to fighting financial crime. In a statement RBS said
that it had cooperated fully with the FSA who did not regard the actions
of the bank as deliberate or reckless. RBS said that the bank had
reported the failings to the regulator and had subsequently “taken
appropriate action to remedy these issues”.[97]
In conclusion, RBS, UBS and HSBC helped Alamieyeseigha bring millions of pounds of suspect funds into the UK.
Court documents seen by Global Witness raise serious questions about
the due diligence conducted by these banks on their client
Alamieyeseigha. In one case, that of UBS, the bank appears to have
continued to do business with Alamieyeseigha despite a series of red
flags that should have raised serious concerns about his probity. The
next section will examine how two other high street banks, Barclays and
NatWest, accepted millions from another corrupt Nigerian governor,
Joshua Dariye.
Barclays and NatWest allowed Joshua Dariye, governor of Plateau State in Nigeria, to bring £2.85 million of suspect funds into the UK. While he did declare a million pounds of assets in Nigeria,
he told the Nigerian authorities on two occasions that he had no bank
accounts or property outside the country. He also said: “my wife does
not have any assets of her own”, despite Mrs Dariye having two bank
accounts with NatWest in London. By 2005 these held almost £100,000.[98] Following successful asset recovery proceedings by Nigeria,
as well as a criminal money laundering case against one of Dariye’s
associates, the assets in these banks were returned to Nigeria.[99]
Dariye was arrested on 2 September 2004 by the UK Metropolitan Police on suspicion of laundering millions of pounds through the UK. Dariye was the governor of Plateau State from
1999, although he had been suspended from duty by President Obasanjo
during 2004 following religious violence in the state. Dariye was
accused by Obasanjo of failing to maintain order and allowing “mutual
genocide” to break out between Muslims and Christians. The Metropolitan
Police started to investigate Dariye in July 2003 and had uncovered
millions of pounds in multiple banks accounts. Following his arrest they
also found £80,000 in cash in Dariye’s London home.[100]
Just under £1.17 million of the £2.85 million that Dariye transferred to the UK was
funnelled through the account of Joyce Oyebanjo at NatWest. Oyebanjo
was an associate of Dariye’s and helped to organise his affairs in the UK,
including finding a school for his children. In April 2007 Oyebanjo was
jailed for three years for money laundering. She was ordered to return
£198,045, all that remained of the money transferred to her by Dariye.[101]
Dariye routed the rest of the £2.85 million, much of which was in cash, through accounts with Barclays and NatWest.
During
court proceedings brought by the Nigerian government in London Dariye
failed to provide an adequate explanation for the source of his funds
and the court ordered that his assets be returned to Nigeria. The court dealt separately with Dariye’s property and his bank accounts. He is still awaiting trial in Nigeria on charges of corruption.[102]
Box 6: Dariye timeline
May 1999 Elected governor of Plateau State
April 2003 Re-elected as governor
2 September 2004 Dariye arrested in London and subsequently fled the UK back to Nigeria
February 2006 Nigeria launches civil asset recovery suit to recover London property
November 2006 The Nigerian authorities try, and fail, to arrest Dariye in Jos, capital of Plateau State
January 2007 Nigeria launches second civil asset recovery suit to recover assets in Dariye’s London accounts
4 April 2007 Joyce Oyebanjo is convicted in the UK of laundering money for Dariye
24 May 2007 Mr Justice Pumfrey orders Dariye’s London property to be handed over to Nigeria
29 May 2007 Dariye
steps down as governor and therefore is no longer immune from
prosecution and is charged by the EFCC with 14 counts of money
laundering
7 June 2007 Mr Justice Henderson orders the funds in Dariye’s accounts to be returned to Nigeria
NatWest: The use of an associate to launder over a million pounds
Joyce Oyebanjo, a housing tenancy manager from Waltham Cross, a suburb of London, reportedly met Joshua Dariye while studying for a Masters degree in Nigeria in the early 1990s. She was lavished with gifts, flattered, and welcomed to Dariye’s family home during her visits to Nigeria.
Oyebanjo has claimed that Dariye groomed her for a money laundering
role over years of supposed friendship. In total she helped Dariye bring
£1.17 million into the UK through
her account at NatWest. RBS, which owns NatWest, has not responded to
Global Witness’ questions on the due diligence that NatWest carried out
on these transfers.
In April 2007 Oyebanjo was convicted of money laundering at Southwark Crown Court, London and
jailed for three years. This was the first successful conviction for
the Proceeds of Corruption Unit within the Metropolitan Police.
According to media reports, Oyebanjo sobbed as the judge told her: “that
money should have been used for the benefit of the people of Plateau
state in Nigeria and not for the private benefit of Dariye and his associates”.[103]
Between July 2003 and March 2004 Dariye made seven payments into Oyebanjo’s NatWest account:
- 29 July 2003: £147,000
- 20 August 2003: £147,985
- 27 August 2003: £199,985
- 3 October 2003: £189,970
- 21 October 2003: £404,073
- 8 March 2004: £76,951.87
This comes to a total of £1,165,964.87, or £1,476,934.30 with interest, but by the time of her arrest only £198,045 remained.[104]
Oyebanjo paid hundreds of thousands of pounds to Dariye, writing him cheques of up to £100,000 during his frequent visits to London.
Oyebanjo was made the guardian of Dariye’s children, who were being
educated at an expensive private school chosen on Dariye’s behalf by
Oyebanjo. During her trial she claimed that Dariye:
…asked me to choose a private school in England for his children to go to. I found Dean Close in Cheltenham but
warned him the fees were high. He did not mind at all. He told me he
would wire the money to my account because that way he could avoid a lot
of bureaucracy and that he would refund me.
As
well as school fees the NatWest account was reportedly used to pay
hospital and air ambulance bills on behalf of some of Dariye’s
associates .[105]
In July 2003 when these transactions started, bank staff were required to report any knowledge or suspicion of money laundering.[106] According
to the Guidance produced by the JMLSG, “a suspicious transaction will
often be one that is inconsistent with a customer’s known, legitimate
activities”.[107] The Guidance suggested that bank staff ask the following questions:
- Is the size of the transaction consistent with the normal activities of the customer?
- Is the transaction rational in the context of the customer’s business or personal activities?
It
is important for banks to have a benchmark of normal activity for
different types of customer. For example, Oyebanjo was a housing tenancy
manager and according to salary data collected in October 2009 for the
British government’s careers website, a housing manager can expect to
earn between £20,000 and £35,000 a year. Someone at senior or director
level might expect up to £50,000.[108] However,
over the course of less than a year Oyebanjo’s account at NatWest had
accumulated deposits of over £1 million. This is hardly consistent with
the relatively modest account activity that the bank should have
expected from someone with Oyebanjo’s salary.
Suspicions
over the size of the transfers into Oyebanjo’s account may have led
NatWest to discover that the source of her funds was Dariye, a PEP. In
turn NatWest should have then classified Oyebanjo as a close associate
of Dariye, and a PEP in her own right and thus subjected her to enhanced
due diligence.
Given
that one of Natwest’s clients was convicted of money laundering it
would be surprising if the bank’s regulator – the FSA – did not take an
interest. However, the FSA has refused to confirm or deny whether it
looked into the case and no penalty notice has been issued to NatWest.[109]
This
case highlights how important it is for banks to identify where one of
their customers is a close associate of a politically exposed person
(PEP). The JMLSG Guidance in force at the time suggested that banks
carry out extra checks on associates of PEPs. This is now enshrined in
regulation.[110] As
part of their ongoing monitoring of all their customers, banks should
be on the look out for patterns that may indicate that someone is an
associate of a PEP or is receiving significant, and unusual payments,
from a PEP.
Box 7: Other accounts controlled by Dariye in London
As
well as moving funds through Joyce Oyebanjo’s NatWest account, Dariye
held personal accounts with both Barclays and NatWest while his wife,
Valentina Dariye, held two NatWest accounts. A number of these accounts
were opened before Dariye was elected.
Between
September 1999 and January 2004, i.e. in the years after he took
office, £1.69 million flowed through these accounts, much of it in
deposits of tens of thousands of pounds of cash. This is despite
Dariye’s declaration to the Nigerian authorities after his election in
1999 and re-election in 2003 that “I have no bank account outside of Nigeria”. In 2003 Dariye further declared that “my wife does not have any assets of her own” and claimed total assets in Nigeria of only £1 million.[1]
In his defence in the High Court during the asset recovery case brought by Nigeria, Dariye’s lawyer sought to explain his client’s actions:
There
were some omissions in his declarations of assets but [he] contends
that these were on the basis of his understanding that it was not wise
to disclose his entire net worth in order not to attract undue attention
to himself especially since most of the sources of his income were
informal.[2]
One
of Dariye’s Barclays account received significant sums of cash over a
four and a half year period: between 1999 and 2004 Dariye deposited
almost half a million pounds. Individual deposits included £55,000 on 9
October 2000, £34,000 on 3 September 2001 and £20,000 on 18 December
2003. In 2001, the JMLSG Guidance warned banks that large volumes of
cash deposits, especially from non-UK customers, posed a high money
laundering risk.[3]
According to UK regulations
at the time, Barclays and NatWest should have carried out due diligence
checks on Dariye and his wife when they opened their accounts. The
banks should have been on the look out for potentially suspicious
activity such as the large volume of cash deposits paid into one of
Dariye’s accounts. Although this was not the case in 1999, the current
regulations require banks to be aware when their customers become PEPs.
After
being interviewed by the Metropolitan Police following his arrest in
2004, Dariye was informed that he risked committing a money laundering
offence if he moved any of his funds. Ignoring this advice he spent
£220,000 out of his Barclays account.[4] Was Barclays aware of the police’s warning to Dariye? If so why did the bank allow its customer to spend funds?
Barclays
did not answer these specific questions. However, the bank told Global
Witness that it “is a regulated financial institution and must therefore
comply with legal requirements designed to prevent money laundering and
bribery and corruption … Barclays is committed to applying high
standards of honesty and integrity across our global operations and in
all our business dealings”.
RBS
initially said it would respond to Global Witness’s questions about its
customer Dariye. However, Global Witness has yet to receive a reply
from the now majority state-owned bank.
The funds in these accounts were ordered to be returned to Nigeria by the British court.[5]
[1] Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye, paras. 12-13; ‘Schedule A’, in Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye
[2] ‘Defence of the First Defendant [Dariye]’ in Nigeria vs Dariye, undated, para. 55
[3] ‘Schedule A’, in Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye; JMLSG Guidance, 2001, para. 1.12
[4] Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye, para. 42
[5] Barclays letter to Global Witness, 14 January 2010; Order of Mr Justice Henderson, in Nigeria vs Dariye, 7 June 2007
Section 4: Conclusion and recommendations
Two corrupt Nigerian politicians were able to bring millions of pounds into the UK using
major British high street banks, despite a complex anti-money
laundering regulatory framework. This suggests that the systems designed
to stop corrupt funds entering the UK’s financial system, and thus to stop the UK facilitating corruption, are flawed.
What is particularly troubling is that these cases happened shortly after the Abacha scandal. According to the Financial Times the
banks involved included Barclays, NatWest, UBS, and HSBC – some of the
same as those named in this report as having done business with Dariye
and Alamieyeseigha.
The FSA’s investigation concluded that 15 of the 23 London banks through which £900 million of Abacha’s stolen funds passed had “significant control weaknesses”.[116] For
some of the banks – the FSA has not specified which ones – these
weaknesses included inadequate senior management oversight at account
opening of high risk customers; weaknesses in identifying the beneficial
owner of companies; and inadequate understanding of the source of
customers’ wealth.[117] They
are supposed to have fixed these weaknesses following the FSA’s
investigation. The FSA told Global Witness that eight of these banks
corrected the weaknesses and seven were set strict deadlines for
corrections following the investigation.[118]
An ordinary person might imagine that following the Abacha scandal, UK banks would be much more alert to the possibility of corrupt funds coming from Nigeria.
Banks should not simply turn down all potential customers who are
Nigerian politicians. However, banks need to ask difficult questions
about the source of funds of these types of customers.
This
report has raised serious questions about whether Barclays, NatWest,
UBS and HSBC were able to identify the beneficial owner of shell
companies, and whether they adequately understood the source of their
customers’ funds, two key concerns that were highlighted by the FSA in
2001.
In
a letter to Global Witness the regulator referred briefly to its
investigation of the banks that took Abacha-related money. However, the
cases discussed in this report have raised serious questions about
whether banks – or the FSA – have learnt the lessons of Abacha. The FSA
told Global Witness that since 2002 it has taken enforcement action on
several cases relating to financial crime.[119] It
pointed Global Witness to its website, which lists 101 penalty or
supervisory notices in relation to money laundering since 2002. Of those
only one was related to corruption and this was a financial institution
that paid bribes itself rather than a bank handling the proceeds of
corruption.[120]
While
the transactions highlighted in this report took place more than five
years ago, this story of the banks that took Alamieyeseigha and Dariye’s
money is still relevant today because the problems that it highlights
with the anti-money laundering system still exist. Global Witness
believes that banks can play an active and positive role in stopping
corruption and promoting development by refusing to take politicians’
dirty money. Our March 2009 report Undue Diligence: How banks do business with corrupt regimes included
a number of practical recommendations for banks and policy makers on
how to make it more difficult for corrupt money to enter the financial
system.[121]
Given the UK government’s
laudable commitment to international development and tackling
corruption, as well as its ownership of 84% of RBS, it should put the
bank at the forefront of efforts to curb the flow of corrupt funds
through the UK’s financial system. RBS should take a lead by implementing the recommendations of this report.
Global Witness has identified four key problems that allow banks to continue to do business with corrupt politicians.
The
first issue is the ethical question of whether the banks should have
been doing business at all with Nigerian politicians who were banned in
their own country for holding accounts abroad. Banks are not obliged to
accept a customer if they do not want to, especially if they are aware
of suspicious or unusual activity. For example, in the case of UBS, bank
staff had information that suggested that their client, Alamieyeseigha,
was holding an account outside of Nigeria, in contravention of the constitutional provision banning such behaviour.
Global
Witness asked the banks that handled the two former governors’ assets
whether they were aware of these provisions. Only HSBC replied, saying
that it did know about the ban on certain PEPs holding accounts outside
of Nigeria, although it
could not identify when it became aware of this information. Its head of
compliance said that these days “awareness across the industry on this
point is now entrenched”, following “substantive discussion on this
issue involving BBA [British Bankers’ Association] and a number of
institutions as to how best to respond to the requirements of this law”.[122]
The
fact that a bank’s client is prepared to break the law in their own
country, especially one designed to prevent the laundering of the
proceeds of corruption, does not necessarily mean that they are corrupt
or that their money is tainted. However, realistically it should set off
very loud alarm bells within the bank, particularly if the client is a
politician. So far this issue has been only partially recognised by the
regulations, for example the most recent version of the JMLSG Guidance
states that: “firms should also be aware that some jurisdictions impose
restrictions on their PEPs’ ability to hold foreign bank accounts or to
hold other office or paid employment”.[123] Global
Witness believes that this does not go far enough to address this
problem; it should be a statutory requirement to turn down such
customers.
Recommendation:
Banks should keep lists of countries that ban specific PEPs from
holding account abroad. Banks should not accept any of these PEPs as
customers. The regulator should ensure that this happens, and help banks
by providing information on which countries have such a ban in place.
Secondly there is the regulatory issue. Global Witness believes that the current anti-money laundering framework in the UK is
not good enough at stopping dirty money entering our financial system.
This view is supported by other organisations such as Transparency
International.[124]
The UK anti-money
laundering regime has been constantly evolving in response to external
developments. In 2007 the government issued updated Money Laundering
Regulations to bring the UK into line with the latest standard from Brussels,
the Third EU Money Laundering Directive. The effect of the 2007
Regulations was to put much of what was already in the JMLSG Guidance on
a statutory footing. For the first time the Regulations, rather than
just the Guidance, required banks to carry out enhanced due diligence on
PEPs, including taking adequate measures to establish their source of
wealth and funds. However, at the time of the transactions described in
this report, the basic principle that banks need to identify their
customers, and to be on the look out for suspicious activity were
already in place.
It
is impossible to know exactly what the banks knew about their customers
Alamieyeseigha and Dariye and to what extent they investigated the
governors’ sources of income. The current Money Laundering Regulations
require banks to “take adequate measures to establish the source of wealth and source of funds” of their PEP customers. This is
similar to the language in the JMLSG Guidance from 2001 and 2003 that
advised banks to take “reasonable measures to establish the source of
wealth (including the economic activity that created the wealth) as well
as the source of funds to be used in the relationship”.[125]
Global
Witness believes that for senior PEPs, where there is a significant
corruption risk, banks should ask their customers to prove that their
funds are legitimate, otherwise they should not accept them.
Recommendation:
Regulation should require that banks only accept funds from senior
political figures, their family members and known associates, if the
bank has strong evidence that the source of funds is not corrupt.
A
further issue is the role that shell companies played in these cases.
Alamieyeseigha used two companies, Santolina and Solomon and Peters, to
funnel money into the UK, and in the case of Solomon and Peters, to own expensive London property. Both companies were registered in secrecy jurisdictions: Santolina in the Seychelles and Solomon and Peters in the British
Virgin Islands. Both jurisdictions promote themselves as centres of
financial secrecy, where very little information is disclosed about who
is behind companies such as Santolina and Solomon and Peters. It is
unclear whether the banks dealing with these two companies, RBS and
HSBC, were able to identify Alamieyeseigha as their owner. It is worth
noting that it is not just those countries traditionally thought of as
tax havens that peddle corporate secrecy. The UK and
US are both popular destinations for individuals who want to hide their
identity behind a combination of companies and trusts.
Lack
of transparency over who owns shell companies – referred to in the
jargon as the beneficial owner – is a major weakness in the fight
against serious crime. Global Witness and other organisations such as
the OECD and the World Bank have repeatedly shown how organised
criminals, corrupt politicians and terrorists can use the secrecy
provided by corporate vehicles to hide their identity and therefore
their illicit funds.[126]
Recommendation: Every country, including the UK and its Overseas Territories and
Crown Dependencies, should publish an open list of the beneficial
owner/controller of all companies and trusts, and subject institutions
that register them to know your customer due diligence requirements.
Banks
constantly complain that they do not have enough information on how to
identify PEPs and spot corrupt activity. A recent World Bank study on
PEPs found that most banks interviewed “requested further support on how to identify corruption-related trends through typology reviews”.[127] Another study by the Asia-Pacific FATF regional group found that “aside
from deliberate collusion, firms may not be sensitised to report
transactions that are suspicious from a corruption-related point of
view.”[128]
Recommendation:
The international community and national regulators must provide more
information to banks on corruption-related money laundering. Part of
this means publishing money laundering case studies, often referred to
as typologies, so that banks can educate their staff how to spot
corrupt, or potentially corrupt, money. This needs to happen through
both national regulators and financial intelligence units, such as the
FSA and SOCA, and international bodies such as the Financial Action Task
Force (FATF).
Supervision and enforcement problems
In the UK banks
are currently regulated by the FSA. The British coalition government
has promised to break up the FSA, moving some of its functions to the
Bank of England, while creating a Consumer Protection and Markets
Authority and an Economic Crime Agency. It is unclear as yet which of
these bodies will be responsible for enforcing the anti-money laundering
laws.
At
the moment the FSA is responsible for ensuring that banks have adequate
systems in place to prevent the laundering of the proceeds of
corruption. In the case of the banks that did business with
Alamieyeseigha and Dariye, we do not know whether the FSA did its job
properly. The FSA has told Global Witness that it is aware of the court
judgments against both Dariye and Alamieyeseigha, however it will not
say more.[129]
There
has been no public enforcement action against any of the banks in
relation to the two former governors, although the FSA does have the
option to issue private warnings to financial institutions, and this may
have happened in these cases.
The
FSA should have gone into the banks after the Metropolitan police
arrested Alamieyeseigha and Dariye for money laundering, and certainly
after the High Court asset recovery case, to see if these examples were
indications that the banks’ systems were not working. The court cases
should have prompted the FSA to check that the banks’ anti-money
laundering systems, in particular those designed to stop corrupt funds,
were up to scratch. The FSA says it can’t comment on the specifics.
Of course, if the FSA did investigate the banks, which we don’t know, it could have found that any of five potential options that might have happened.
- The worst option: there was collusion from within the bank.
- The systems were not adequate to detect suspicious activity.
- Adequate systems were in place, but due to human error no suspicion was raised.
- Adequate
systems were in place, but the activity of Dariye and Alamieyeseigha
was so sophisticated that no customer due diligence system could
realistically catch it.
- The
banks filed SARs each time they had a suspicion and were given consent
to proceed each time, and so were in compliance with their regulatory
obligations.
The consequences of any of these options, however, is that the funds have entered the UK, and their passage through a bank has already enabled corruption to take place.
Millions
of pounds of suspect funds from personal accounts at Barclays, UBS,
HSBC, NatWest and RBS were declared by a British court to be the
rightful property of Nigeria.
At least some of these assets were found to have been bribes. Perhaps
the banks in question filed SARs to bring these suspect funds to the
attention of law enforcement every time they suspected something and
were allowed to proceed every time. However, even in this best case
scenario, the money has still entered the UK and
corruption has been facilitated. With alarming ease two corrupt
politicians were able to exploit the British financial system to sustain
their luxurious lifestyles. What are we doing to ensure that this is
not still happening?
Belatedly, the FSA may be starting to show its teeth. Over the last year the regulator has issued fines against UK institutions
for these kinds of failures. For example in January 2009 it made the
insurance company Aon pay £5.25 million for having inadequate
anti-bribery procedures in place.[130] In
August 2010 it fined RBS £5.6 million for failing to check whether its
customers were on the UK terrorist sanctions list for failing to
consistently record the names of directors and beneficial owners’ of its
corporate customers. The FSA boasted that this was “the biggest fine
imposed by the FSA to date in pursuit of its financial crime objective”.[131]
However, these penalties pale into insignificance compared to some of the fines dished out in America. Lloyds, Credit Suisse, RBS and Barclays have recently paid over $1.7 billion between them to the U.S. authorities for deliberately stripping information from wire transfers originating in countries on the U.S. sanctions lists including Iran, Sudan and Libya.[132] That
is a lot more than £5.25 million. It is enough to make the banks’
senior management and shareholders sit up and take notice.
Whichever organisation is responsible for anti-money laundering under the new system in the UK,
it must not shy away from naming banks that take money from corrupt
politicians, especially if the bank has failed to carry out appropriate
due diligence measures. After the Abacha scandal the FSA hid behind a
wall of secrecy, refusing to talk about the individual banks that helped
the former Nigerian dictator to loot his country. This is unacceptable.
The
regulator must make the financial and reputational cost high for banks
that are prepared to do business with corrupt politicians.
Recommendation:
In line with its new proactive supervisory stance, the FSA, and its
successor bodies, should ensure that the banks it regulates are carrying
out meaningful customer due diligence, especially in relation to PEPs.
The FSA should use proactive methods, such as mystery shopper
techniques, in order to identify banks that are failing to implement
their own policies. The FSA should name and shame those banks that take
corrupt funds and are found to have inadequate systems in place.
Access to the UK was
highly prized by Dariye and Alamieyeseigha. They were able to splurge
millions on high end property, as well as healthcare and private
education. Part of what makes corruption so attractive to kleptocrats is
the ability to sustain luxury lifestyles in cosmopolitan cities such as London.
In order to do this, corrupt politicians need to be able to get both
their money and themselves into the country. The recommendations above
would significantly curb access to the British financial system by
individuals such as Dariye and Alamieyeseigha. However, this needs to be
matched with measures to restrict their ability to travel to the UK.
The US has
already recognised that a travel ban can be an effective sanction
against those involved in corruption. A measure introduced by President
Bush in 2004 and still in operation instructed the US State Department
to deny visas to foreign officials where there is “credible evidence”
that they are involved in corruption.[133] A
Nigerian anti-corruption group has also recently called on the British
government to deny visas to a group of Nigerian officials that the group
claims are involved in corruption.[134]
Recommendation: The UK should deny a visa to foreign officials where there is credible evidence that they are involved in corruption.
[1] ‘Nigerian governor arrested in UK’, BBC, 16 Sept 2005; Rory Carroll, ‘Nigerian state governor dresses up to escape £1.8m charges in UK’, The Guardian, 23 November 2005
[2] World Bank, World Development Indicators, Poverty headcount ratio at $1.25 a day (PPP) % of population, figure for 2004
[3] Rory Carroll, ‘Nigerian state governor dresses up to escape £1.8m charges in UK’, The Guardian, 23 November 2005
[4] Paul Ohia and John Iwori, ‘Alamieyeseigha Impeach, Arrested’, This Day (Nigeria), 9 December 2005; ‘Nigeria federal court sentences ex-Bayelsa State governor to two years in jail’, The Guardian (Nigeria), 27 July 2007
[5] ‘Third Witness Statement of Colin Stuart Joseph’, in The Federal Republic of Nigeria vs Santolina Investment Corp & others, [2007] EWHC 3053 (QB), para. 56.1
[6] Fifth Schedule: Code of Conduct for Public Officers, to the Constitution of the Federal Republic of Nigeria, paras 3, 7.b
[7] Senan Murray, ‘Profile: Joshua Dariye’, BBC, 24 July 2007; Jude Owuamana, ‘Dariye on the run ... after impeachment at dawn, EFCC declares him, Fayose wanted’, Punch (Nigeria), 14 November 2006; Economic and Financial Crimes Commission (EFCC) website, ‘EFCC On-going High Profile Cases’, http://efccnigeria.org/index.php?option=com_content&task=blogsection&id=9&Itemid=72
[8] The Money Laundering Regulations 2007
[9] FSA, ‘FSA publishes results of money laundering investigation’, 8 March 2001; John Mason and John Willman, ‘City banks “handled dictator’s fortune”, Financial Times, 9 March 2001; Greg Morsbach, ‘ “Abacha accounts” to be frozen’, BBC, 3 October 2001
[11] IMF,
‘Article IV Consultation: Staff Report’, reports from 2002, 2004, 2005,
2007 and 2009; UNDP, Human Development Reports 2009: Nigeria, http://hdrstats.undp.org/en/countries/country_fact_sheets/cty_fs_NGA.html
[12] ‘Table 25: ODA Receipts and Selected Indicators for Developing Countries and Territories’, in OECD, Statistical Annex of the 2010 Development Co-operation Report, 2010, http://www.oecd.org/document/9/0,3343,en_2649_34447_1893129_1_1_1_1,00.html
[15] ‘Late Nigerian Dictator Looted Nearly $500 Million, Swiss Say’, New York Times, 19 August 2004; ‘London implicated in Abacha probe’, BBC, 20 October 2000; Elizabeth Olson, ‘But Critics Label the Report a “Whitewash”: Swiss Rebuke Banks In Abacha Inquiry,’ International Herald Tribune, 5 September 2000; ‘Swiss banks returning Abacha cash,’ BBC News, 9 September 2005
[16] Financial
Action Task Force (FATF), ‘Review to Identify Non-Cooperative Countries
or Territories: Increasing The Worldwide Effectiveness of Anti-Money
Laundering Measures’, 22 June 2001
[17] FATF, ‘Annual Review of Non-cooperative Countries and Territories, 2005-2006’, 23 June 2006
[18] ‘Nigeria corruption tsar sidelined’, BBC, 28 December 2007
[19] See the Nigeria page of the EITI website, http://eiti.org/Nigeria
[21] RBS,
‘Announcement on the APS and State Aid Discussions’, 3 November 2009;
the new coalition government has stated its commitment to the target of
giving 0.7% of GDP in aid by 2010. See HM Government, The Coalition: Our Programme for Government, May 2010 p. 22
[22] FSA letter to Global Witness, 27 April 2010
[23] The Federal Republic of Nigeria vs Santolina Investment Corp & others, [2007] EWHC 3053 (QB); The Federal Republic of Nigeria vs Joshua Chibi Dariye & others
[24] Edwards,
Angell, Palmer & Dodge, ‘Recovering Stolen Assets: A Case Study’,
24-25 April 2008; Federal Republic of Nigeria, ‘Particular of Claims’,
in The Federal Republic of Nigeria vs Joseph Dagwan; Order of Mr Justice
Henderson, in Nigeria vs Dariye, 7 June 2007; United
Nations Convention Against Corruption, Article 54, para. 1(c). For more
information civil asset recovery see Theodore S. Greenberg, Linda M. Samuel, Wingate Grant, and Larissa Gray, Stolen Asset Recovery: A Good Practices Guide for Non-Conviction Based Asset Forfeiture, World Bank, 2009
[25] Email with a lawyer involved in the case, 25 November 2009
[26] Somini Sengupta, ‘Turbulence Stalks Further Nigeria Elections’, The New York Times, 19 April 2003; Michael Peel, A Swamp Full of Dollars: Pipelines and Paramiliataries at Nigeria’s Oil Frontier, 2009, pp. 107-108; ‘Bayelsa: Sadness and Joy of An Election’, Vanguard, 7 May 2003
[27] Federal Republic of Nigeria, ‘The Particulars of Claim’ in Nigeria vs Santolina, 17 January 2006, paras 18-20; Nigeria vs Santolina, approved judgment of Mr Justice Lewison, para. 8; Nigeria vs Santolina, approved judgement of Mr Justice Morgan, paras. 42, 46, 49
[28] Fifth Schedule: Code of Conduct for Public Officers, to the Constitution of the Federal Republic of Nigeria, paras 3, 7.b
[29] Chris Ajaero And Psaro Yornamue, ‘Up Against the Storm’, Newswatch (Nigeria), 2 February 2003; ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 37.8
[30] ‘Nigerian
state governor to face corruption probe’, AFP, 20 January 2003; Somini
Sengupta, ‘Turbulence Stalks Further Nigeria Elections’, The New York Times, 19 April 2003; Lemmy Ughegbe, ‘FG Drags Alamieyeseigha to Ethics Tribunal’, Vanguard (Nigeria), 12 April 2003
[31] Lewison J judgment, para. 73.
[32] Morgan J judgment, para. 53; ‘Nigeria federal court sentences ex-Bayelsa State governor to two years in jail’, The Guardian (Nigeria), 27 July 2007
[33] Onwuka Nzeshi, ‘Group Petitions EFCC Over Alamieyeseigha's Loot’, This Day, 19 March 2010
[34] UBS: Nigeria, ‘Particulars of Claim’ in Nigeria vs Santolina, para. 41.1; RBS: Nigeria, ‘Particulars of Claim’ in Nigeria vs Santolina, para. 41.4; HSBC: ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, paras. 37-37.6; HSBC: ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, paras. 38; Barclays: ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 47; ‘Particulars of Claim’ in Nigeria v Santolina, para 41.6; Barclays Cyprus: ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 46; NatWest: ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 48; Particulars of Claim’ in Nigeria v Santolina, para 41.7
[35] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, paras. 18-20
[36] Lewison
J judgment, paras. 38-42; Morgan J judgment, paras. 46 and 49; email
with a lawyer involved in the case, 25 November 2009
[37] Peel, A Swamp Full of Dollars, p. 110; ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 26.1
[38] ‘Exhibit “DSPA 1” to the First Witness Statement of Dieprey Solomon Peter Alamieyeseigha’, undated, in Nigeria vs Santolina, p3
[39] Lewison J judgment, para 40; ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 26.7
[40] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, paras. 29, 41.1
[41] Lewison J judgment, para. 42
[42] ‘Wolfsberg
Principles: Global Anti-Money-Laundering Guidelines for Private
Banking’, October 2000, para. 1.1; UBS letter to Global Witness, 4
January 2010
[43] ‘Wolfsberg
Principles: Global Anti-Money-Laundering Guidelines for Private
Banking’, October 2000, para.2.5; UBS letter to Global Witness, 4
January 2010
[44] Peel, A Swamp Full of Dollars, pp. 110-111; ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, paras. 35.4 – 35.5
[45] Peel, A Swamp Full of Dollars, pp. 110-111; Lewison J judgment, para. 38
[46] See ‘Chapter 2: Who is your customer’, in Global Witness, Undue Diligence: How banks do business with corrupt regimes, March 2009
[47] Exhibit to Alamieyeseigha’s Witness Statement, in Nigeria vs Santolina, pp. 3, 7
[48] UBS letter to Global Witness, 4 January 2010
[49] Peel, A Swamp Full of Dollars, p. 111
[50] ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 42 and 42.10
[52] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, paras. 20, 41.1
[53] Email with a lawyer involved in the case, 25 November 2009
[54] FSA letter to Global Witness, 27 April 2010
[55] HSBC letter to Global Witness, 30 November 2009
[56] Lewison J judgment, paras 8 and 43; ‘Defence of Alamieyeseigha’, in Nigeria vs Santolina, para. 19; ; Exhibit to Alamieyeseigha’s Witness Statement, in Nigeria vs Santolina, p. 4; The Federal Republic of Nigeria vs Santolina Investment Corp & others, [2007] EWHC 3053 (QB), approved judgement of Mr Justice Morgan, para. 49
[57] Lewison J judgment para. 43; ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, paras. 36.2 - 36.3
[58] Statutory Instrument 1993 No. 1933, ‘The Money Laundering Regulations’, regulation 14
[59] ‘Wolfsberg Principles’, October 2000, para. 2.5
[60] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, para. 41.3
[61] Defence of Alamieyeseigha, in Nigeria vs Santolina, para. 45; Exhibit to Alamieyeseigha’s Witness Statement, in Nigeria vs Santolina, p. 6
[62] Witness statement of Mr Aliyu to the EFCC quoted in ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 37.2
[63] HSBC letter to Global Witness, 30 November 2009
[64] HSBC letter to Global Witness, 30 November 2009; HSBC email correspondence with Global Witness, 1 December 2009 – 8 January 2010
[65] HSBC letter to Global Witness, 30 November 2009
[66] ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, paras. 37-38
[67] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, paras. 25-28; Morgan J judgment, para. 40-42
[69] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, paras. 25-28; Morgan J judgment, para. 40-42
[70] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, paras. 33-36; Lewison J judgment, para. 14.ii; Morgan J judgment, paras. 43-46
[71] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, paras. 37 and 41.8; interview with lawyer involved in the case , 7 April 2010
[73] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, para. 23; First Witness Statement of Dieprey Solomon Peter Alamieyeseigha’, undated, in Nigeria vs Santolina, para. 11.1
[74] Companies House document, ‘Registration of a branch of an overseas company: Fiduciary International Ltd.’, 15 April 2005
[75] Letter from Ms Anita Testa to Global Witness, 25 May 2010
[76] Defence of Alamieyeseigha, in Nigeria vs Santolina, paras. 11.1-11.3
[77] The
FATF, ‘The Misuse Of Corporate Vehicles, Including Trust And Company
Service Providers’, 13 October 2006, p. 1; The FATF, Recommendation 12
[78] The Money Laundering Regulations 1993, Regulation 4; The Money Laundering Regulations, Regulation
[79] Letter from Ms Anita Testa to Global Witness, 25 May 2010
[80] ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, paras. 15 and 43;
[81] Lewison J judgment, para. 57; Exhibit to Alamieyeseigha’s Witness Statement, in Nigeria vs Santolina, p. 1; ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 45.22
[82] Lewison J judgment, paras. 14.iv and 57; ‘Third Witness Statement of Colin Stuart Joseph’, in Nigeria vs Santolina, para. 45.14
[83] Telephone interview with Senator Uzamere, 14 May 2010
[84] Morgan J judgment, para. 38-39
[85] Joint Money Laundering Steering Group (JMLSG), Guidance Notes – Prevention of Money Laundering Guidance Notes for the UK Financial Sector, 2003.
[86] JMLSG, Guidance, 2003, paras. 2.28-2.32
[87] JMLSG, Guidance, 2003, paras. 2.28-2.32 - IBID
[88] Nigeria, ‘Particulars of Claim’, in Nigeria vs Santolina, para. 20
[90] Morgan J judgment, para. 33
[91] Purportedly: EFCC, ‘The Case Against DSP Alamieyeseigha’, 22 November 2005
[92] Proceeds of Crime Act 2002, section 333
[94] FSA, ‘FSA fines Royal Bank of Scotland Group £5.6m for UK sanctions controls failings’, 3 August 2010
[95] FSA, ‘FSA fines Royal Bank of Scotland Group £5.6m for UK sanctions controls failings’, 3 August 2010
[96] FSA, ‘Decision Notice’, 3 August 2010, paras. 2.2 and 4.16
[97] RBS
press release, ‘RBS agrees settlement with Financial Services Authority
in relation to breaches of the Money Laundering Regulations 2007’, 3
August 2010
[98] Federal Republic of Nigeria, ‘The Particulars of Claim’, 25 January 2007, in The Federal Republic of Nigeria vs Joshua Chibi Dariye and others, paras. 11-13, 44.5, 44.6, 45
[99] Order of Mr Justice Henderson, in Nigeria vs Dariye, 7 June 2007; ‘UK returns stolen funds’, This Day, 29 April 2009
[100] ‘Ex-Nigerian Leader Quizzed in Money Laundering Probe’, Press Association, 3 September 2004; Dulue Mbachu, ‘Nigerian state governor arrested in London on money laundering suspicions’ AFP, 3 September 2004; Declaration of Emergency Rule in Plateau State of Nigeria by President Olusegun Obasanjo, 18 May 2004
[101] Estelle Shirbon, ‘Court convicts Nigerian over stolen public funds’, Reuters, 5 April 2005; ‘Woman is jailed for Nigeria cash scam’, Hertfordshire Mercury, 5 April 2005; ‘Stolen funds to be returned’, Voice Online, June 2007; ‘Particulars of Claim’, in Nigeria vs Dariye, para. 25
[103] Estelle Shirbon, ‘Court convicts Nigerian over stolen public funds’, Reuters, 5 April 2005; ‘Woman is jailed for Nigeria cash scam’, Hertfordshire Mercury, 5 April 2005;
[104] Order of Mr Justice Henderson, in Nigeria vs Dariye, 7 June 2007, para. 3; ‘Schedule A: Payments into accounts owned or controlled by Mr Dariye in England’, in Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye; ‘Stolen funds to be returned’, Voice Online, June 2007
[105] Estelle Shirbon, ‘Court convicts Nigerian over stolen public funds’, Reuters,
5 April 2005; 'Woman guilty of laundering cash for corrupt governor',
The Guardian, 23 February 2007; ‘Woman is jailed for Nigeria cash scam’, Hertfordshire Mercury, 5 April 2005; ‘Stolen funds to be returned’, Voice Online, June 2007
[106] The Money Laundering Regulations 1993, Regulation 14.
[107] Joint Money Laundering Steering Group (JMLSG), Guidance Notes, December 2001, paras. 5.8-5.9
[109] FSA letter to Global Witness, 27 April 2010
[110] Statutory
Instrument 2007 No. 2157, ‘The Money Laundering Regulations 2007’,
Regulation 14; Joint Money Laundering Steering Group (JMLSG), Guidance Notes, December 2001, para. 2.28
[111] Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye, paras. 12-13; ‘Schedule A’, in Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye
[112] ‘Defence of the First Defendant [Dariye]’ in Nigeria vs Dariye, undated, para. 55
[113] ‘Schedule A’, in Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye; JMLSG Guidance, 2001, para. 1.12
[114] Nigeria, ‘Particulars of Claim’, in Nigeria vs Dariye, para. 42
[115] Barclays letter to Global Witness, 14 January 2010; Order of Mr Justice Henderson, in Nigeria vs Dariye, 7 June 2007
[116] John Mason and John Willman, ‘City banks “handled dictator’s fortune”, Financial Times, 9 March 2001
[117] FSA, ‘FSA publishes results of money laundering investigation’, 8 March 2001
[118] FSA letter to Global Witness, 27 April 2010
[119] FSA letter to Global Witness, 27 April 2010
[121] Global Witness, Undue Diligence: How banks do business with corrupt regimes, March 2009
[122] Email correspondence with David Bagley, Head of Group Compliance, HSBC, January 2010
[123] JMLSG Guidance Part I, 2009, para 5.5.28
[124] Transparency International UK, Combating Money Laundering and Recovering Looted Gains: Raising the UK’s Game, June 2009
[125] The Money Laundering Regulations 2007, Regulation 14; JMLSG 2001 2.30, JMLSG 2.32.
[126] Global Witness, Undue Diligence: How banks do business with corrupt regimes, March 2009; Global Witness, The Secret Life of A Shopaholic: How an African dictator’s playboy son went on a multi-million dollar shopping spree in the U.S., November 2009; OECD, Behind the Corporate Veil: Using Corporate Entities for Illicit Purposes, November 2001; World Bank, Politically Exposed Persons: A Policy Paper on Strengthening Preventative Measures, 2009
[127] Theodore Greenberg, Larissa Gray, Delphine Schantz, Michael Latham and Caroline Gardner, Politically Exposed Persons: A policy paper on strengthening preventive measures, World Bank/StAR Initiative, 2009, p. 72
[129] FSA letter to Global Witness, 27 April 2010
[130] FSA, ‘FSA fines Aon Limited £5.25m for failings in its anti-bribery and corruption systems and controls’, 8 January 2009
[131] FSA,
‘FSA fines Royal Bank of Scotland Group £5.6m for UK sanctions controls
failings’, 3 August 2010; FSA, ‘Decision Notice’, 3 August 2010, para.
4.16
[132] Lloyds
paid $350 million: U.S. Department of Justice, ‘Lloyds TSB Bank PLC
Agrees to forfeit $350 million in connection with violations of the
International Emergency Economic Powers Act’, 9 January 2009; ABN Amro,
now part of the RBS group, paid $500 million: U.S. Department of
Justice, ‘Former ABN Amro Bank N.V. Agrees to Forfeit $500 Million in
Connection with Conspiracy to Defraud the United States and with
Violation of the Bank Secrecy Act’, 10 May 2010; Credit Suisse paid $536
million: U.S. Department of Justice, ‘Credit Suisse Agrees to Forfeit
$536 Million in Connection with Violations of the International
Emergency Economic Powers Act and New York State Law’, 16 December 2009;
Barclays paid $298 million, ‘Barclays Bank PLC Agrees to Forfeit $298
Million in Connection with Violations of the International Emergency
Economic Powers Act and the Trading with the Enemy Act’, 18 August 2010
[133] This measure was enacted in law by Congress in 2008 and was renewed in 2009. Federal Register, Vol. 69, No. 9, 14 January 2004, http://edocket.access.gpo.gov/2004/pdf/04-957.pdf;
White House Fact Sheet and President’s Statement: National Strategy to
Internationalize Efforts Against Kleptocracy, 10 August 2006, http://georgewbushwhitehouse.archives.gov/news/releases/2006/08/20060810-1.html;
Public Law 110-161, the “Consolidated Appropriations Act, 2008”, Sec
699L (a) and (b) respectively, p530; Public Law 111-8, the “Omnibus
Appropriations Act, 2009”, Sec 7086 (a) and (b) respectively, p389
[134] Abiodun Oluwarotimi, ‘Impose Travel Ban on Obasanjo, IBB, Waziri, Others’, Leadership, 25 July 2010
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