London Games: Financial Services Authority Investigation Into UK Banks Helping Abacha Launder Money

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Sanni Abacha
Sanni Abacha

London cemented its reputation as the money laundering capital of the World and as corrupt Nigerian politicians’ laundry place of choice in 2001 when the UK’s financial services regulator, the Financial Services Authority (FSA), announced that UK banks helped the former Nigerian head of state, late Sanni Abacha, his family members, and close associates to launder $1.3 billion between 1996 and 2000.

Despite its public statements, the British government has always been reluctant to crack down on UK banks engaged in money laundering because of the benefits that accrue to its economy from this criminality. As Dr Patrick Darling put it whilst giving evidence to the House of Commons Africa All Party Parliamentary Group, “With one hand, the West has pointed its finger at corrupt African leaders, whilst, with its other hand, its bankers, lawyers, accountants, art dealers, health authorities, universities, estate agents and embassies have been actively or passively encouraging wealth out of Africa into the West’s economies.”

Recently, a British newsmagazine quoted a top British official as boasting that the government’s “light touch” regulation is one of the City of London’s strengths (New Statesman, ‘London Tops the Poll’, October 4, 2007).  In fact, the Mayor of London, Mr. Alderman Lewis, recently blamed Nigeria for not opening up its banking system to foreign competition during his recent visit to the country.

In view of this background, it did not come as a surprise to anti-corruption analysts that the British authorities failed to investigate the financial activities of Abacha and members of his family until the Swiss Federal Banking Commission (SFBC) implicated UK banks when it released the report entitled “Abacha Funds at Swiss Banks” on September 4, 2000. With the publication of the SFBC report, the FSA had no choice but to begin an investigation into the allegations that UK banks had not followed adequate anti-money laundering procedures in handling accounts connected to Abacha.

The FSA announced the conclusion of its investigation on March 8, 2001. It reported that its investigation identified 42 personal and corporate accounts linked to Abacha family members and close associates in the UK. These accounts were held at 23 banks which included UK banks and branches of foreign banks.  The total sum that went through these 42 accounts amounted to US$1.3 billion for the four years between 1996 and 2000. The FSA also reported that 98% of the US$1.3bn went through 15 banks, which according to it had “significant control weaknesses”.

However, unlike the SFBC and indeed the US authorities that publicly denounced their own banks that handled Abacha money, the FSA failed to name and shame the UK banks involved.

None of monies that found their way into the British bank accounts belonging to the Abachas was ever returned to Nigeria. The British authorities argued that the $1.3billion was the amount that “went through” UK banks and that the amount that remained in the UK was significantly less. However, legal sources have informed Saharareporters that under the legal principle of constructive trust, the banks that handled the monies would have been liable for the full amount of monies they received or dealt with had the Nigerian government brought a civil claim against them.

According the British newspaper, The Guardian of 4 October 2001, Geneva’s chief prosecutor, Bernard Bertossa, told the Swiss broadcasting corporation in September 2001, “We would have expected the British authorities to have been a little more active in prosecuting the case. It’s public knowledge that a lot of money – more than we found in Switzerland – passed through the British financial market.”

The Guardian newspaper fingered the Barclays Bank as the biggest player in the money laundering. According to the October 4, 2001 edition of the paper:

“Barclays Bank has handled more than $170m (£110m) of funds suspected to have been looted from the Nigerian Treasury by the Abacha regime. Barclays had one of the largest group of UK transactions: evidence they were among those privately rebuked by the FSA. The Guardian has now succeeded, however, in identifying the bulk of the transactions and the banks. According to authorities in Switzerland, where vigorous investigations have been going on and $561m (£365m) has been frozen, Barclays in London made transfers totalling $36.8m (£25m) to a bank in Geneva during 1996 and 1997. Investigators suspect this came from accounts controlled by the Abacha family. Another $52.8m (£35m) was moved by Barclays from London to Zurich, to a numbered account at Credit Suisse, between 1996 and 1998. This came from Barclays accounts of a Nigerian businessman involved in arms deals: the new regime suspect it was used to pay bribes to the Abachas. A final batch of payments totalling $83m (£56m) went out of the Central Bank of Nigeria to Barclays accounts in New York owned by a “fixer” for the Abacha family, according to Nigerian indictments.” See http://www.guardian.co.uk/uk/2001/oct/04/world

Moreover, the FSA failed to disclose details of the “significant control weaknesses” it uncovered. In carefully worded language, the FSA only announced that: “The following deficiencies were found at one or more of the 15 banks: Inadequate senior management oversight of the account opening process for customers who could be classified as higher risk; Weaknesses in the verification of the identity of beneficial owners of companies; Over reliance on introductions by existing customers; Inadequate understanding of the source of the customers wealth; Shortfalls in following industry guidance on reporting suspicious transactions to the National Criminal Intelligence Service; Weaknesses in record retrieval and retention.”

As required by law, the FSA passed its full report to the Serious Frauds Office (SFO), which has responsibility for prosecuting financial crimes in the UK. However, the SFO decided that criminal proceedings for money laundering against the banks and individuals involved in the scandal were not justified. Since the full details of the FSA report has never been disclosed by any media organization anywhere in the world, it has not been possible for the public to have their say on whether the SFO were correct in their decision as to whether prosecution was justified or not.

But Saharareporters have obtained a copy of the secret FSA report. The report shows that the FSA noted that the combined effect of the relevant UK money laundering legislation makes it an offence for any person to provide assistance to a criminal to obtain, conceal, retain or invest funds if that person knows or suspects (or in certain circumstances should have known or suspected) that these funds are the proceeds of criminal conduct. The term ‘criminal conduct’ includes any conduct wherever it takes place which would constitute an indictable offence in the UK.

In view of these extensive provisions, it is remarkable that the British authorities took the view that no criminal proceedings should be brought despite the serious breaches of money laundering legislation detailed in the full FSA report.

According to the FSA:

“Our findings identify common weaknesses arising across many of the banks in anti-money laundering systems and controls, which, if corrected at the time, might have resulted in the banks, concerned either: declining to open accounts with customers which might be linked to Abacha; declining to accept funds from sources which might be linked to Abacha; or identifying and reporting suspicious transactions on a timelier basis to National Criminal Investigation Service (NCIS)”

“It is a requirement of the 1993 [Money Laundering] Regulations that banks and building societies seek satisfactory evidence of identity of a prospective customer at the time of opening an account or entering into a new business relationship. We have seen some instances where prospective customers were introduced to the banks concerned by existing account holders at that bank without full identification taking place.”

“The 1993 Regulations place a statutory obligation on all staff in the regulated financial sector to report suspicions of money laundering. We have seen little evidence that banks seek to verify fully their understanding of a customer’s business and the level of expected transactions on the account. Consequently, it is questionable how effectively a bank is able to decide whether a transaction is suspicious or not. We have identified many instances where the bank received internal suspicious reports, but made the decision not to report the suspicion to NCIS. ”

“The 1993 Regulations require that the bank retain records for at least five years from the date of completion of the business. In the case of documents supporting customer identification, these should be retained until five years from the date of the relationship ceasing to exist. Two of the banks have been unable to locate the account opening documentation in respect of account relationships which they have reported to the FSA, despite these accounts still being open today. It is unclear in these cases whether the information to support the customer’s identity has, in fact, ever been obtained.”

In 2002, the UK government did strengthen anti-money laundering laws by introducing the Proceeds of Crime Act, which made money-laundering laws stricter but the effort was barely enough because of the lack of seriousness attached to it. For instance, the first unit set up to deal with proceeds of crime was a relatively small command tagged “Specialist on Economic Crime Command, which later mutated to the “Africa Desk” before the UK Department of International Development (DFID) funded what is now known as the Proceeds of Corruption Unit (POCU) which recently moved to the Scotland Yard proper.

The Proceeds of Corruption Unit is only composed of 12 officers drawn from the Metropolitan Police in London.

A source told Saharareporters anonymously that POCU is swamped by Suspicious Transactions Reports (STRs) that sometimes remains untreated long after laundered cash may have found their way out of the UK banking system.
This led the unit to pick and choose which investigations or prosecution to embark upon, even though their mandate covers the entire globe. The source cited the case of James Ibori, whose criminal money laundering activities attracted POCU’s attention since 2004. The investigations, and trials are still ongoing 4 years after, with new spin-offs and discoveries that may take longer time to resolve.

To their credit, the POCU has tried to bring a few Nigerian state governors and Politically Exposed Persons (PEPs) to trial after they were found to have laundered money through UK banks, but that has not translated into punishing British banks involved in money laundering as was the case of Barclays Bank in London through which James Ibori in conjunction with Chevron laundered substantial cash between 1999 and 2007 before a British High Court placed a freeze on James Ibori assets worldwide.

Saharareporters spoke to sources within the London Metropolitan Police who told us that the unit has made substantial efforts to go after offshore entities, fiduciary bodies and beneficial owners used as conduit for money laundering but agrees that a lot still needs to be done. Asked why no UK banks have been sanctioned in the case of Abacha, one of our sources quipped that it is the duty of the FSA who has been further empowered within the ambit of the 2002 Act to punish banks engaged in money laundering. He added that Proceeds of Corruption Unit could prosecute Nigerian banks with FSA issued license.

The Proceeds of Corruption Unit has faced increasing resistance from the Yar’adua government since the government came to power in May 2007 through flawed elections. Yar’adua’s Attorney General, Michael Aondaokaa, has refused to cooperate with the UK Scotland Yard due to the influence exerted by former governors who funded Yar’adua elections, especially James Ibori.

The Nigerian government has refused to sign any new Mutual Agreement Treaty (MAT) requests since 2007.  Saharareporters sources said the Mets in London does not require any new MATRs to prosecute and conclude Ibori’s case.
They said they were optimistic about the meetings they had with Mrs. Farida Waziri, who has extended an invitation to them for a meeting in Abuja in August 2008 after the London meetings two weeks ago.

But Mrs. Waziri may be coy with the Scotland Yard –based POCU squad, as her first official action as soon she returned from the meetings in London was to fire police officers trained by the Mets within the Economic and Financial Crimes Commission (EFCC).

Financial analysts who specialized in the methodologies of African corruption have expressed fresh concerns about the declining economic fortunes of Western countries and how that may erode the gains made so far in the anti-corruption fight. As one of them put it, “With a noticeable decline in the economies of the Western countries, they might be forced to reopen their vaults to wealth looted from poor African nations by corrupt leaders by relaxing or totally abrogating their anti-money laundering obligations.

Sources: SR