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 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.

/Ends

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.