LAWMAKERS PUSH TO CLOSE " DIRTY MONEY" LOOPHOLES / THE FINANCIAL TIMES

Lawmakers push to close ‘dirty money’ loopholes

By Stephanie Kirchgaessner in Washington

Published: February 4 2010 01:10

US lawmakers are seeking to expand the reach of anti-money laundering regulations after a Senate investigation found that hundreds of millions of dollars in suspect foreign funds have been able to land in the US.

The funds, from allegedly corrupt foreign officials, have entered the US with the help of American lawyers, lobbyists, bankers and real estate agents, according to the inquiry.

Carl Levin, the Democratic senator from Michigan who previously spearheaded investigations into Riggs Bank and UBS, said that while US banks had become more vigilant, legal loopholes were allowing other sectors to facilitate the flow of “dirty money” into the country.

A Senate report to be released on Thursday details how foreign officials from Equatorial Guinea, Gabon, Nigeria and Angola – some of whom are under investigation in the US – allegedly took advantage of legal gaps, poor due diligence and inadequate controls to move funds from shell companies and bank accounts in London and elsewhere into the US.

Mr Levin plans a renewed effort to close loopholes with legislation implementing recommendations in a recent World Bank study that would force banks to strengthen controls on accounts held by current or former political officials.

In a move likely to come under criticism, Mr Levin is also pushing the US Treasury to issue an anti-money laundering rule that would require banks to obtain certification from attorneys that open accounts with them on behalf of their clients.

The certification would state that the bank would not be used by the law office to circumvent money laundering controls and also require enhanced monitoring of such accounts.

Another fix Mr Levin is pushing would require the US Treasury Department to revoke exemptions it granted real estate and escrow agents in the Patriot Act. Reversing the exemptions would force individuals handling real estate closings and escrow agents selling cars and aircraft from having money laundering programmes and safeguards in place and would force them to report suspicious activity.

One case investigated by the Senate involves the late Omar Bongo, who was president of Gabon until his death last year. The report details how Mr Bongo, the subject of an earlier congressional investigation who has been mentioned in connection to corruption complaints in France, used a US lobbyist, Jeffrey Birrell, to purchase 6 amoured vehicles from Saudi Arabia for his own purposes. As part of the transaction, funds were wired from Gabon to bank accounts held in the name of the Grace Group, Mr Birrell’s corporation. An attorney for Mr Birrell said “every transaction was transparent and Mr Birrell had received government approvals for the deals.” He said Mr Birrell would appear at the Congressional hearing on Thursday but declined to comment when asked of his client would refuse to testify in order not to incriminate himself.

In one case, the report alleges Citibank was so concerned about corruption involving the then head of the Angolan Central Bank that after two attempts to transfer $50m in government funds to US private accounts were blocked, the bank in 2003 closed all accounts it held for Angolan officials and shut its office there.

In contrast, congressional investigators say HSBC “may be providing the [Angolan] Central Bank with offshore accounts in the Bahamas” and continued to provide banking services to the bank in Angola and London. HSBC declined to comment on the allegations but said it “takes compliance matters very seriously” and its record demonstrated “commitment to vigorous enforcement”.

Copyright The Financial Times Limited 2010.