Financial Crimes in Angola: A Network of Corruption and Hidden Wealth

Angola’s reputation as a hub for financial crimes has been well-documented. According to Transparency International’s Corruption Perceptions Index and the Basel Institute on Governance’s list of countries with strategic deficiencies in anti-money laundering policy, it is no surprise that the country ranks high on these lists. However, what raises eyebrows is the fact that Isabel dos Santos’ network, which spanned 41 countries, managed to operate undetected for so long, despite mostly operating in countries with robust anti-money laundering institutions.

The Paradox of Money Laundering Institutions

An investigation using data from the International Consortium of Investigative Journalists reveals a paradoxical relationship between money laundering institutions and financial crimes. The results show that:

• Jurisdictions with high effectiveness scores on Financial Action Task Force (FATF) evaluations were more likely to host companies linked to dos Santos.
• A one-standard-deviation improvement in a country’s effectiveness score was associated with a 16 percentage point increase in the chance it hosted a dos Santos-linked company.

This paradox suggests that places with robust institutions are actually where people want to keep illicit wealth, as they offer a veneer of legitimacy and respectability.

Implications for Anti-Money Laundering Policy

The results of this investigation have important implications for our understanding of anti-money laundering policy. They suggest that relatively rich, large economies may not be as effective at policing their financial systems as indicators suggest, despite recent scandals such as the Panama Papers and the Danske Bank scandal.

• Regulators will continue to try and stay ahead of the game, but it remains to be seen whether these efforts will improve the ability of the financial system to detect illicit wealth.
• The investigation highlights the negative externality imposed by the ability to safely stash money in more advanced economies and tax havens on developing countries.
• Developing countries are more likely to be punished for not meeting anti-money laundering standards, despite being more likely to be sources of illicit wealth rather than destinations.

Conclusion

Understanding how well our anti-money laundering institutions work is difficult, as the very outcome we care about is hard to observe. However, leak by leak, we are starting to learn where our policies are working well and where they desperately need more attention. By continuing to investigate and expose financial crimes, we can work towards creating a more transparent and accountable financial system.