Category Archives: GLOBAL WITNESS

Global Witness – Action urgently needed to stop off budget financing to Mugabe’s regime

The international community must act to prevent off budget financing of Mugabe’s feared secret police, said Global Witness in a report published today.

The report, Financing a Parallel Government?, reveals that Zimbabwe’s Central Intelligence Organisation (CIO) appears to have received off budget financing from a Hong Kong-based businessman at the same time that the CIO is alleged to be engaging in a campaign to discredit key members of Zimbabwe’s opposition.

CIO members exercise joint control over Sino Zimbabwe Development (Pvt) Ltd, a diamonds, cotton and property company in Zimbabwe. Their partner is businessman Sam Pa, a prominent member of the Queensway Syndicate, a network of companies with a track record of negotiating opaque resource for infrastructure deals across the African continent.

The report also exposes how a Zimbabwean military lawyer owns half of Anjin Investments (Pvt) Ltd, the biggest diamond company in Zimbabwe’s controversial Marange diamond fields, on behalf of Zimbabwe’s Ministry of Defence.

“Given the violent reputation of the CIO and military, we fear that this money could fund human rights abuses during the forthcoming election,” said Nick Donovan of Global Witness. “Off-budget financing of the security sector undermines Zimbabwean democracy by subverting civilian control over key organs of the state. The international community should investigate the activities of Sam Pa, Sino Zimbabwe Development (Pvt) Ltd, and Anjin Investments (Pvt) Ltd to see whether their actions justify imposing targeted sanctions such as asset freezes.”

Information given to Global Witness by sources within the CIO suggests that Sam Pa provided funding and material to the organisation in return for access to Zimbabwe’s diamond, cotton and property sectors. One CIO document put this support at $100 million and 200 pick-up trucks. Two sources also told Global Witness that the money has been allocated by the CIO towards Operation Spiderweb, covert activities designed to discredit Prime Minister Tsvangarai, Finance Minister Biti, and Industry Minister Ncube, although Global Witness cannot confirm the existence of these programmes.  We gave Mr Pa an opportunity to comment on our findings but he has not responded.

Anjin Investments claims to be the world’s biggest diamond miner. Previous research by Global Witness revealed how Anjin’s Executive Board members include senior serving and retired military and police officers, and the Permanent Secretary at the Ministry of Defence. In the report published today, Global Witness reveals that 50% of Anjin’s shares are owned by Brigadier General Charles Tarumbwa, the Judge Advocate General at the Ministry of Defence, acting through Matt Bronze (Pvt) Ltd, a front for the Zimbabwean military.

“Since ZANU PF lost control of the Ministry of Finance, they appear to have engaged on a hunt for off-budget financing for the military and secret police,” said Donovan. “Zimbabwe’s civilian government must exercise democratic control over the budgets of security forces. If not, there is a real danger of a shadow security state emerging, with both a monopoly on violence and secret sources of funding.”

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Global Transparency – Culture of secrecy around global land deals must be lifted

A new report today reveals how opening up the process around large-scale land deals in developing countries would benefit local communities, governments and business, and provides direction on how this can be achieved.

The report, Dealing with Disclosure, published by Global Witness, the International Land Coalition and the Oakland Institute, looks at why it is vital to transform the secretive culture behind large scale land  deals, and for the first time shows how it might be done. At present decisions are being made in secret, with basic information unavailable even to those affected. The report argues that all contractual information must be made publicly available unless investors or governments can prove that this would harm commercial competitiveness or public interest – a principle it calls “if in doubt, disclose”.

The rush for land in developing countries has rapidly intensified since 2008, but the sector remains largely unregulated. Concerns are growing over the impact of big, secretive deals between governments and investors on communities and the environment. As more and more land is taken away from local communities, growing numbers of people are losing access to the resources they have relied on for generations, and ecosystems are being destroyed.

Decisions and negotiations around land deals are frequently conducted in secret, without the knowledge, let alone consent, of affected communities.  Without access to basic information such as contract terms or pre-project impact assessment studies, local communities and other parties cannot make informed decisions about the suitability of proposed investments.

This lack of information hampers efforts to hold governments or investors to account, making human rights and environmental abuses more likely. It also undermines governance and democratic processes and fosters high-level corruption, discouraging companies willing to operate responsibly.

Megan MacInnes, Senior Land Campaigner at Global Witness said “Far too many people are being kept in the dark about massive land deals that could destroy their homes and livelihoods. That this needs to change is well understood, but how to change it is not. For the first time, this report sets out in detail what tools governments, companies and citizens can harness to remove the shroud of secrecy that surrounds land acquisition. It takes lessons from efforts to improve transparency in other sectors and looks at what is likely to work for land. Companies should have to prove they are doing no harm, rather than communities with little information or power having to prove that a land deal is negatively affecting them.”

But it’s not only communities who would benefit from the changes the report proposes, as Frederic Mousseau Policy Director at the Oakland Institute explains. “Evidence increasingly points to the significant benefits for governments and business from improved transparency and ongoing public consultation. Whilst investors would benefit from a level playing field as well as reduced risks of corruption and expensive and damaging conflicts with communities, greater transparency would enable governments to make more informed decisions and negotiate better deals when allocating commercial rights to land.”

 

Global Witness – Sentencing of former Nigerian politician highlights role of British and US banks in money laundering

Global Witness calls for a thorough investigation into HSBC, Barclays, Citibank and Abbey National (now owned by Santander) for their roles in the laundering of millions of pounds by James Ibori, former governor of Nigeria’s oil-rich Delta State. Ibori pleaded guilty to ten counts of money laundering and fraud in relation to an estimated $250 million of stolen state assets on 27 February; today was the first day of his sentencing hearing.

“By doing business with Ibori and his associates, these banks facilitated his corrupt behaviour and allowed him to spend diverted state assets on a luxury lifestyle, including a private jet and expensive London houses, while many Nigerians continue to live in poverty,” said Robert Palmer, a campaigner with Global Witness.

Today, the prosecution provided an overview of Ibori’s crimes, and in particular any aggravating factors. The details of how Ibori and his accomplices stole government funds and moved them into the UK are only coming out now, as a reporting restriction was in place until his guilty plea. His wife, sister and mistress have already been convicted of money laundering as have a string of professional intermediaries including a lawyer, a fiduciary agent and a corporate financier.

Ibori, who was governor of Delta State from 1999 to 2007, inflated government contracts, accepted kickbacks and even directly stole funds from state coffers.

His official salary was £4,000 a year and his formal asset declaration stated that he had no cash or bank accounts outside of Nigeria. Despite this he managed to buy several houses around the world, including one in the UK valued at £2.2 million, luxury cars (a Bentley, Range Rover and Maybach) and a $20 million Challenger private jet.

According to the prosecutor, Sasha Wass QC, Ibori and his associates used multiple accounts at Barclays, HSBC, Citibank and Abbey National to launder funds. Millions of pounds passed through these accounts in total, some of which were used to purchase expensive London property.

In one case US$4.8 million was transferred from a Barclays account belonging to a company of which Ibori was formally a director to another account at Barclays controlled by Ibori’s lawyer, Badhresh Gohil. The funds passed through two Swiss accounts, including one at a branch of Schroders in Zurich, and were used as part payment for the private jet. In another case, Ibori and others were able to cream $37.8 million off from the sale of Delta state shares in the telecoms company V Mobile.

Ibori had numerous Barclays accounts. The prosecutor described how in one case between 1999 and 2006 Ibori deposited £1.5 million in a Knightsbridge branch of Barclays, much of this was in rolls of banknotes.

In America Ibori held two accounts at Citibank and ran up a $920,000 American Express credit bill between 2003 and 2006. He bought a $1.8 million house in Houston, as well as moving at least $500,000 through his lawyer’s client account at the now-defunct AIDT bank in Denver, Colorado.

Banks and lawyers have a legal obligation to identify their customers and carry out ongoing checks to identify any suspicious transactions which they have to report to the authorities. In particular, they are supposed to identify customers who are senior politicians or their family members and close associates, who could potentially represent a corruption risk, and do extra checks on their funds.

This case raises serious questions about the due diligence that Barclays and the other banks carried out on Ibori and his associates. What checks did these banks do to ensure that the funds they were handling were not the proceeds of corruption?

A 2011 review by the UK bank regulator, the Financial Services Authority (FSA), revealed that British banks were systematically failing to carry out the required anti-money laundering checks – particularly when dealing with senior foreign politicians. The FSA has said that it will take a tougher line in future and will start doing more intensive supervision. For example, last month Coutts bank was fined £8.75 million for failures uncovered during the regulator’s 2011 review. But compared to the £1.9 billion in profits made by Coutts’ parent bank RBS, this fine can be seen as simply a cost of doing business, especially as RBS has been fined more than once in the past for similar failures.

“It’s welcome that the FSA has said it will do more to target banks that fail to tackle financial crime. But unless they issue penalties that really hurt, nothing will change,” said Palmer. “And we now need an investigation into how Ibori was able to move so much money through these British banks for so long and whether or not sufficient checks were carried out.”

The case also shows how money launderers such as Ibori are able to use shell companies spread across different countries to move and conceal their assets. At present it can be incredibly difficult for law enforcement and others to identify the actual person who controls and benefits from a company. Global Witness is calling for all countries to use their company registers to publish details on the real, ‘beneficial’ owner of all companies.

Barclays and HSBC declined to comment on the specific allegations due to client confidentiality. They said they had robust anti-money laundering and anti-corruption policies that applied across their global holdings. Santander declined to comment.

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Contact: Robert Palmer on +44 (0)20 7492 5860 or +44 (0)7545 645406, rpalmer@globalwitness.org.

Notes to editors:

1. In 2010 Global Witness’s report International Thief Thief revealed that HSBC, Barclays, Natwest, RBS and UBS had accepted millions of pounds for two other Nigerian state governors who had been accepting bribes.

2. The FSA’s report from June 2011 was deeply critical of banks for the handling of corrupt risk, for example it found that a third of banks did not have information on the ultimate, or beneficial, owner, despite this being a legal requirement.

3. RBS was fined £5.6 million in 2010 for failing to check whether its customers were on the UK terrorist sanctions list and £750,000 in 2002 for inadequate customer due diligence procedures.

Lord of War’s Sentencing and his global network of shell companies

The Southern District of New York sentenced Viktor Bout, also known as the Merchant of Death, to 25 years in prison, finally putting an end to his notorious career as a weapons trafficker. In November of last year, a jury convicted Bout on terrorism charges, including conspiring to kill Americans and conspiring to provide material support to terrorists.

While this case was narrowly focused on Bout’s conspiracy to sell weapons to the FARC in Colombia, it is effectively an indictment on his career as a gunrunner, fuelling conflict around the world and using shell companies to hide his activities as he did so. The U.S. Department of the Treasury has described Bout’s network as “one of the largest illicit arms-trafficking networks in the world.”

“Bout was able to hide his identity behind anonymous companies created in the U.S. and abroad to further his efforts to traffic weapons to conflict zones,” said Stefanie Ostfeld, Global Witness Policy Advisor. “He exploited the same loophole used by terrorists, corrupt dictators, drug traffickers and tax evaders to legally hide their identities to access the U.S. financial system.”

Bout used a global network of shell companies to advance his illicit activities. To date, twelve American shell companies, incorporated in Texas, Florida and Delaware, have been identified as linked to him.

Investigations continue to expose how easy it is for individuals to mask their identity behind U.S. shell companies so they can stash their ill-gotten gains in American banks or commit other crimes. Global Witness’ research has revealed that corrupt foreign politicians and pariah regimes such as Iran exploit the secrecy provided by anonymous American shell companies to access the U.S. financial system. A recent World Bank report found that the U.S. was the favorite destination of corrupt politicians trying to set up such shell companies.

Corporate secrecy fundamentally undermines U.S. laws to combat money laundering and tax evasion, as well as U.S. efforts to tackle global corruption. Congress has introduced a bill that would shed light on this problem by requiring companies to disclose their ultimate owners.

“Congress must pass the Incorporation Transparency and Law Enforcement Assistance Act, which would make it much harder for arms traffickers like Bout, and other criminals, to hide their identities and illicit activities behind U.S. shell companies. Once corrupt and other dirty money has been moved through an anonymous corporate vehicle into the financial system, it is much harder to track it down,” said Ostfeld.

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Contacts:

Washington, DC: Stefanie Ostfeld, +1 202 577 5858

Washington, DC:  Robert Palmer, +44 7545 645 406

Notes to editors

1. On August 2, 2011, Senators Levin and Grassley introduced the bipartisan Incorporation Transparency and Law Enforcement Assistance Act (S. 1483). Representatives Maloney, Lynch and Frank introduced a companion bill (H.R. 3416) on November 14, 2011. These bills would require companies to disclose information about the real people who own or control them (often called the “beneficial owners”) at the time they are created. Multiple law enforcement organizations including the Fraternal Order of Police and Federal Law Enforcement Officers Association have endorsed the bill. The Obama Administration, through the U.S. Open Government Partnership Action Plan and its Strategy to Combat Transnational Organized Crime, also supports legislation to stop states from allowing secretive shell companies to be set up.