Senate report says millions in ‘dirty money’ entering US despite anti-laundering laws

Senate report: ‘Dirty money’ still entering US

WASHINGTON — Foreign dictators, high-living bureaucrats and arms dealers are still able to funnel millions of dollars in potentially corrupt money into the United States despite post-Sept. 11 laws cracking down on money laundering, according to a Senate investigation.

The son of the president of Equatorial Guinea moved $110 million in suspect funds into the United States from 2004 to 2008 while an Angolan arms dealer, now in a French jail, was able to pay $9.6 million for an Arizona home in 2000 and maintained U.S. bank accounts handling some $60 million in transactions between 1999 and 2007, the report found.

The Senate Homeland Security subcommittee on investigations, which wrote the report, has summoned several of the U.S. lawyers, real estate agents and bankers involved in the financial transactions to a hearing Thursday.

The subcommittee chairman, Sen. Carl Levin, D-Mich., said that while banks are doing better in blocking dirty money because of anti-money laundering safeguards in the 2001 Patriot Act, there are still “so many vehicles in our system where corrupt money can flow.” The findings of the report, which focused on four case studies, are “infuriating,” he said.

The 330-page report concluded that powerful foreign officials and their families, known internationally as “politically exposed persons” or PEPs, have used lawyers, real estate and escrow agents, lobbyists, bankers and university officials to circumvent anti-corruption laws.

It noted that the Treasury Department exempted some industries, such as hedge funds and the real estate industry, from Patriot Act anti-money laundering requirements, and that many of the professionals examined were under no legal obligation to take anti-money laundering precautions when dealing with a foreign official.

The four case studies:

—Teodoro Nguema Obiang Mangue, son of the president of Equatorial Guinea, who used U.S. lawyers, bankers, real estate agents and escrow agents to move $110 million into the United States. The report said Obiang, the subject of an ongoing U.S. criminal investigation, used two lawyers who helped him with shell company accounts, two real estate agents who helped him purchase a $30 million home in Malibu, Calif., and an escrow agent who assisted in buying a $38.5 million Gulfstream jet.

—Omar Bongo, president of Gabon for 41 years until his death last year, employed a U.S. lobbyist to buy six U.S.-built armored vehicles and obtain U.S. government permission to buy six U.S.-built C-130 military cargo aircraft from Saudi Arabia.

A bank in New York closed an account of Bongo’s daughter, a student, after discovering she had $1 million in $100 shrink-wrapped bills in her safe deposit box, which she said her father had brought into the United States using his diplomatic status.

—Jennifer Douglas, a U.S. citizen and fourth wife of the former vice president of Nigeria, Atiku Abubakar, reputedly helped her husband bring more than $40 million in suspect funds into the United States. Some $25 million of that was wire transferred by offshore corporations into more than 30 U.S. bank accounts opened by Douglas. Two offshore corporations transferred about $14 million over five years to American University in Washington, D.C., to pay for consulting services in setting up a university in Nigeria founded by Abubakar.

Prosecutors last year said former Rep. William Jefferson, D-La., who received a 13-year sentence for accepting bribes, demanded $100,000 from a Virginia businesswoman to pay a bribe to Abubakar. The Nigerian denied any wrongdoing.

—Bank of America did not flag the accounts of Pierre Falcone, the Angolan arms dealer, despite numerous suspicious transactions, the report said. From 1999 to 2003, the accounts received multiple wire transfers totaling more than $6 million from unidentified “clients” from such secrecy jurisdictions as the Cayman Islands, Luxembourg, Singapore and Switzerland. The bank closed the accounts in 2007.

The report recommended that Treasury adopt recent World Bank proposals to strengthen bank controls related to foreign officials and repeal anti-money laundering exemptions. Congress should require that the owners of shell corporations be named, according to the report, and should make acts of foreign corruption a legal basis for denying U.S. entry to the person involved in the corruption and his family.

A Levin aide said one possibility was attaching anti-money laundering provisions to pending legislation to increase oversight of financial institutions.