Angolan Money-Laundering Scandal: Jersey Court Fines Accountants and Economists for Ignoring Red Flags in Multi-Million Dollar Investment
LGL Trustees Ltd Fined for Breaches of Money Laundering Laws
A Jersey court has imposed a hefty fine of over $835,000 on LGL Trustees Ltd, a team of accountants and economists, for their role in a money-laundering investigation linked to the Angolan government. The firm was penalized for two breaches of the Channel Island’s anti-money laundering laws.
Facilitating Management of Angola’s Sovereign Wealth Fund (2010-2016)
From 2010 to 2016, LGL Trustees earned more than $1 million in fees by facilitating the management of Angola’s sovereign wealth fund. Despite the obvious risks of possible corruption and embezzlement, the court found that the firm failed to acknowledge these signs, despite questionable business practices and a prior conviction.
Questionable Business Practices and Prior Conviction
The fund, which saw large-scale investments overseen by Jean-Claude Bastos de Morais, raised concerns due to large fees paid to him, reluctance of banks to work with him, and a prior conviction. Bastos is a close associate of José Filomeno “Zénu” dos Santos, who managed Angola’s wealth fund, and who, along with Bastos, was arrested in 2018 over embezzlement allegations. Bastos denied any wrongdoing and reached a settlement with Angolan authorities, while dos Santos is serving a five-year sentence for an unrelated case.
Bastos’ Financial Gains Exposed (2017)
The International Consortium of Investigative Journalists (ICIJ), the BBC, and Tages Anzeiger exposed Bastos’ personal financial gains via leaked financial records revealing more than $41 million in dividends over 20 months.
LGL Trustees’ Ineffective Approach to Compliance
The Jersey court found that LGL Trustees “effectively opened the gateway” to potential money laundering. Prosecutors criticized the firm’s “ineffective” approach to compliance, which allowed the possible diversion of tens of millions of dollars from a poor nation to its corrupt leaders and associates.
Red Flags Ignored
- The large fees paid to Bastos
- His previous conviction
- The refusal of banks to work with him due to corruption concerns
Financial Regulation Expert’s Concerns
Mathew Beale of St. Helier, Jersey expressed shock and concern over LGL Trustees’ actions. As Jersey is marketed as an international financial center with rigorous regulatory standards, particularly concerning anti-money laundering, Beale also expects to see more similar cases emerge in the jurisdiction.
“It’s a tough place to do business,” he warned.
Business Partnership in 2010
In 2010, a Jersey law firm asked LGL Trustees to create a limited partnership for the Angolan government on behalf of Quantum Global. Despite rating the business as “very high risk,” LGL Trustees proceeded, citing no evidence of money laundering or wrongdoing within Quantum Global’s business partnerships.
HSBC’s Rejection (2011)
In 2011, global banking giant HSBC turned down Bastos’ business due to media reports regarding potential corruption. However, LGL Trustees continued to work with Bastos and Quantum Global. They opened an account with Standard Bank instead, but there was no response from Standard Bank regarding the allegations or whether these concerns were addressed.
Despite a pattern of concerns and investigations, including an internal investigation at Appleby’s Jersey office which rejected the business partnership in 2011, LGL Trustees refused to abandon the investment opportunity.
LGL Trustees’ Response and Consequences
A LGL Trustees spokesperson conceded the breaches but insisted that there was no suggestion of money laundering and no financial losses for any party. The firm has since taken steps to implement enhanced controls and new management.
Since then, Appleby’s Mauritius office welcomed Bastos’ business, only to face suspension of its license and an ICAC investigation following publication of the Paradise Papers in 2017. The ICAC spokeswoman announced the probe’s closure in 2019, after Angola received restitution of funds and lifting of freezing orders on Bastos’ and Quantum Global’s bank accounts and operating licenses. However, critics argue that Mauritius’ actions fall short of Jersey’s enforcement measures to combat such financial scandals.
Bastos’ Financial Gains Exposed (2017)
The ICIJ, the BBC, and Tages Anzeiger exposed Bastos’ personal financial gains via leaked financial records revealing more than $41 million in dividends over 20 months. Bastos and Quantum Global denied any wrongdoing, pointing to a 2018 England court decision that dismissed Angola’s allegations and found “no evidence” of illegal structures or purposes. A spokesperson for Quantum Global also stated that they had created significant profit for Angola during this time.
LGL Trustees’ Ineffective Approach to Compliance
The Jersey court found that LGL Trustees’ ineffective approach to compliance allowed the possible diversion of tens of millions of dollars from a poor nation to its corrupt leaders and associates. Prosecutors criticized the firm for failing to acknowledge the obvious risks and red flags, such as large fees and a prior conviction.