Thursday, February 4, 2010

US Senate Investigates Money Laundernig Loopholes in the US financial system

United States Senate Committee on Homeland Security and Government Affairs : Hearings

The Subcommittee hearing will examine how some politically powerful foreign officials, their relatives, or close associates – referred to in international agreements as “Politically Exposed Persons” or PEPs – have used the services of U.S. professionals and U.S. financial institutions to bring millions of dollars in suspect funds into the United States to advance their interests. Four case histories will illustrate how some PEPs have used U.S. lawyers, realtors, escrow agents, lobbyists, bankers, and others to circumvent U.S. anti-money laundering and anti-corruption safeguards. It will also look at how some U.S. professionals have actively helped PEPs avoid bank scrutiny or facilitated suspect transactions with no questions asked. The hearing will also examine whether U.S. policies and practices to combat foreign corruption and money laundering need strengthening. Witnesses will include government agencies, including the State Department, Immigration & Customs Enforcement (ICE), and Financial Crimes Enforcement Network (FinCEN), as well as lawyers, a realtor, and representatives of financial institutions.

The hearing was accompanied by a staff report. Its findings and recomendations are as follows:

This Report makes the following findings of fact.
(1) Lawyers. Two U.S. lawyers helped Teodoro Obiang, son of the President of Equatorial Guinea, circumvent anti-money laundering and PEP controls at U.S. banks by allowing him to secretly use a series of attorney-client, law office, and shell company accounts to be used as conduits for his funds.
(2) Realtors. Two realtors helped Mr. Obiang buy and sell multi-million-dollar residences in California, and a real estate escrow agent facilitated his purchase of a $30 million property by handling millions of dollars wire transferred from Equatorial Guinea, without verifying the source of the funds, since they had no legal obligation to do so.
(3) Escrow Agents. After one U.S. escrow agent, as an AML precaution, refused to complete the purchase of a Gulfstream jet without obtaining information on the
source of $38.5 million to be paid for the aircraft, another U.S. escrow agent stepped in and completed the transaction with no questions asked. The escrow agents had no legal obligation under current law to inquire about the source of the funds.
(4) Lobbyist. A U.S. lobbyist helped President Omar Bongo of Gabon obtain six U.S.- built armored cars and U.S. government permission to buy six U.S.-built military cargo aircraft from Saudi Arabia to support his regime, while allowing his U.S. bank accounts to be used as a conduit for $18 million in suspect funds in connection with those transactions, with no questions asked.
(5) Offshore Corporations. Jennifer Douglas, a PEP through her marriage to Atiku Abubakar, former Vice President of Nigeria, used a series of U.S. bank accounts to bring over $25 million in suspect funds into the United States via wire transfers from offshore corporations.
(6) University. A U.S. university accepted over $14 million in wire transfers from unfamiliar offshore shell corporations to pay for consulting services related to development of a university in Nigeria founded by Mr. Abubakar.
(7) Personal Accounts. Pierre Falcone, a PEP through his close association with the President of Angola and appointment as an Angolan Ambassador, was able to use personal, family, and U.S. shell company accounts at a U.S. bank in Arizona to bring millions of dollars in suspect fundinto the United States and move those funds among a worldwide network of Falcone accounts, despite his status as an arms dealer and a long history of involvement in criminal proceedings in France.
(8) Government Accounts. Dr. Aguinaldo Jaime, using his authority as head of the Angolan Central Bank, attempted without success, on two occasions in 2002, to transfer $50 million in government funds to a private account in the United States. (9) Correspondent Accounts. Banco Africano de Investimentos, a $7 billion private
Angolan bank that caters to PEPs, is not treated as a PEP client subject to enhanced monitoring by its U.S. correspondent bank.
(10) Vendor PEP Lists. Some vendors relied on by U.S. financial institutions to screen clients for PEPs used incomplete and unreliable PEP lists.
This Report makes the following recommendations.
(1) World Bank PEP Recommendations. Congress should enact a law and the U.S. Treasury Department should promulgate rules implementing the key recommendations of a recent World Bank study to strengthen bank controls related to Politically Exposed Persons (“PEPs”), including by requiring banks to use reliable PEP databases to screen clients, use account beneficial ownership forms that ask for PEP information, obtain financial declaration forms filed by PEP clients with their governments, and conduct annual reviews of PEP account activity to detect and stop suspicious transactions.
(2) Real Estate and Escrow Agent Exemptions. Treasury should repeal all of the exemptions it has granted from the Patriot Act requirement for anti-money laundering (AML) programs, including the 2002 exemption given to real estate and escrow agents handling real estate closings, and sellers of vehicles, including escrow agents handling aircraft sales, and use its existing statutory authority to require them to implement AML safeguards and refrain from facilitating transactions involving suspect funds.
(3) Attorney-Client and Law Office Accounts. Treasury should issue an AML rule requiring U.S. financial institutions to obtain a certification for each attorney-client and law office account that it will not be used to circumvent AML or PEP controls, accept suspect funds involving PEPs, conceal PEP activity, or provide banking services for PEPs previously excluded from the bank; and requiring enhanced monitoring of such accounts to detect and report suspicious transactions.
(4) U.S. Shell Corporations. Congress should enact legislation requiring persons forming U.S. corporations to disclose the names of the beneficial owners of those U.S. corporations.
(5) Immigration Restriction. Congress and the Administration should consider making significant acts of foreign corruption a legal basis for designating a PEP and any family member inadmissible to enter, and removable from, the United States.
(6) Visa Restriction. The State Department should strengthen its enforcement of the law and Presidential Proclamation 7750 denying U.S. visas to foreign PEPs involved with corruption, and law enforcement agencies should increase the assistance they provide to State Department investigations of PEPs under review.
(7) Professional Guidelines. Professional organizations, including the American Bar Association, National Association of Realtors, American League of Lobbyists, and American Council for Education, should issue guidance to their members prohibiting use of any financial account to accept suspect funds involving PEPs, conceal PEP activity, facilitate suspect transactions involving PEPs, or circumvent AML or PEP controls at U.S. financial institutions.
(8) FATF Recommendations. The United States should work with the international Financial Action Task Force on Money Laundering to amend its existing 40+9 Recommendations to strengthen anti-corruption and PEP

1 comment: