Global Witness testifies in US Congress
"Some of the world’s major banks, including Barclays and Citibank, have been facilitating corruption and undermining development in some of the worst-governed countries in the world."
And their testimony notes, by way of background:
"For a decade and a half, our investigations into conflict diamonds, illegal logging and corruption in oil, gas and mining have been the catalyst for international initiatives and policies to promote transparency and ensure that natural resources do not fuel conflict. Our work has been a key driving factor behind the Kimberley Process, to control the trade in conflict diamonds, and the Extractive Industries Transparency Initiative, to encourage disclosure of payments made by extractive companies and received by governments.
But with all of these investigations into various natural resource trades, there was a missing link: the route for the money behind these corrupt or conflict-fuelling transactions. So we started to look into it. And in each of these cases of corruption, there was inevitably a bank involved."
Their testimony goes into some detail:
"Overall, our research has shown that the key factors that are allowing banks to do business with corrupt regimes, and thus to help perpetuate poverty, are also precisely those which have allowed banks to destabilize the U.S. and other major economies. These are, on the part of the banks, a failure of the culture of due diligence, and on the part of the regulators, a failure of inconsistent national-level regulations to get to grips with global flows of money."
More specifically, they give examples:
"Banks are required to identify whether their customers are PEPs and, if so, to conduct enhanced due diligence on them. Based on our investigations, Global Witness has concluded that one of the reasons this bank did not do this is because it is not subject to meaningful regulatory standards that require it to conduct sufficient due diligence to avoid its processing the proceeds of corruption. The existing standards are not meaningful, because in practice, a bank faces little threat of sanctions should it take the proceeds of corruption – a very different outcome than if it took terrorist funds. So Bank of East Asia ran Mr Sassou Nguesso’s name through the terrorist lists to check that he was not a terrorist, but did not, apparently, even check Google, let alone one of the specific PEP databases, to see if its customer was a family member of the head of state as well as being a senior official of a corrupt oil-producing country. Instead, the bank went on to arrange for payment, out of an account of a company that it knew to trade in Congolese oil products, of the personal credit card bills of the president’s son."
Now we think this is a fantastic piece of work by Global Witness, but perhaps we'd have added a little more detail to their testimony. They focus heavily on the kinds of dirty money that relates to corruption. That is one (smaller) form of dirty money that harms developing (and other) countries. That is fine, and respects their mandate - though we would have added more emphasis than they do on tax, for it is simply not possible to tackle the proceeds-of-corruption angle while ignoring tax. As Raymond Baker put it so well in his book
“Laundered proceeds of drug trafficking, racketeering, corruption, and terrorism tag along with other forms of dirty money to which the United States and Europe lend a welcoming hand . . . These are two rails on the same tracks through the international financial system.”
One of his main points was that if you're not serious about tackling tax and the structures deliberately set up for tax evasion, you'll not have a chance of tackling the kind of shocking things that Global Witness digs up.