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October 11, 2010
UK Banks Complicit in Nigerian Corruption
    by Robert Kropp

A report by Global Witness finds that even after the public outcry in 2001 over money laundering by former Nigerian dictator Sani Abacha, UK banks continued to accept deposits from corrupt Nigerian officials.

Considering the role of financial institutions in the financial crisis, it's not surprising to find that those concerned with the rights of investors have focused their attention on the corporate governance of those institutions. In the last month alone, NYSE Euronext described "corporate polices which encourage excessive risk-taking for the sake of short-term increases in stock price performance" as "inconsistent with sound corporate governance," and Eurosif called for mandatory disclosure by financial institutions as an "essential aspect of avoiding future financial crises caused by short-termism, inadequate use of governance powers by investors, poor shareholder engagement, unenforced regulation, misaligned compensation and/or incentive systems and a lack of transparency."

Global Witness, a UK-based nonprofit organization, has added yet another voice to the call for better corporate governance by banks, in a report entitled International Thief Thief.

Based on court documents describing the efforts of the Nigerian government to compel the return of funds stolen by former Nigerian governors and brought to the UK, the report found that between 1999 and 2005, British banks helped "fuel corruption and entrench poverty in Nigeria" by accepting deposits totaling millions of dollars from those officials, according to Global Witness.

Especially alarming is the fact that the revelations surfaced after it was discovered in 2001 that former Nigerian dictator Sani Abacha had deposited over a billion dollars into UK banks between 1996 and 2000, a discovery which led to demands from the Financial Services Authority (FSA) that banks improve their monitoring of customers' accounts. However, none of the banks investigated by the FSA were fined or even named, although it has since been learned that the 23 banks involved included Barclays, NatWest, UBS, and HSBC.

At the time, the FSA found "significant control weaknesses" at 15 of the 23 banks, including "inadequate senior management oversight at account opening of high risk customers; weaknesses in identifying the beneficial owner of companies; and inadequate understanding of the source of customers’ wealth," according to Global Witness.

However, Global Witness found that since then, the four above-named banks held accounts for the two former Nigerian state governors. One of the governors, Diepreye Alamieyeseigha, from oil-rich Belaya state, was convicted in Nigeria of money laundering, corruption, and false declaration of assets. The other, Joshua Dariye, is currently awaiting trial.

The Nigerian government was successful in its legal effort to recover the illicit assets.

"While the transactions highlighted in this report took place more than five years ago," Global Witness wrote, "The problems that it highlights with the anti-money laundering system still exist." Included among the recommendations in the report are improved regulations to ensure that sources of funds are not corrupt, increased transparency through the publication of the beneficial owners of all companies and trusts, and more information to help banks identify corruption-related money laundering.


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