Angola’s Dos Santos: How Global Money Laundering Hubs Failed to Spot a Dangerous Network

Angola, known for its oil production and a long-standing network of corruption and hidden wealth, is a surprise to few. With a Corruption Perceptions Index ranking of 165th out of 180 by Transparency International and a designation as one of the top 25 riskiest countries for money laundering by the Basel Institute on Governance, Angola’s international reputation is well-known. Yet, large institutions failed to detect the extensive network of Isabel dos Santos, which reached into 41 countries.

Know Your Customer (KYC) Requirement Disregarded

The question remains: why did large institutions fail to detect the dos Santos network? One of the fundamental principles of anti-money-laundering (AML) policy is the Know Your Customer (KYC) requirement. Banks and financial institutions are supposed to have in-depth knowledge of their clients, their sources of wealth, and their activities. However, this requirement seemed to have been disregarded, as evidenced by the data released by the International Consortium of Investigative Journalists (ICIJ) on the location of dos Santos and her husband Sindika Dokolo’s shell companies.

An Evaluation of Jurisdictional Effectiveness

To better understand the relationship between jurisdictional effectiveness in combating money laundering and the location of dos Santos’ companies, I examined the findings of recent evaluations by the FATF’s regional bodies. These so-called “mutual evaluation reviews” assess a country’s progress in implementing best practices in preventing and identifying money laundering.

A Concerning Trend

An analysis of this data reveals a concerning trend: high-scoring countries, those with strong AML institutions, were more likely to host companies linked to dos Santos. This relationship remained consistent even after controlling for a country’s Gross Domestic Product per capita and technical compliance with FATF recommendations. A one-standard-deviation improvement in a country’s effectiveness score was associated with a 16 percentage point increase in the likelihood that it hosted a dos Santos-linked company. Few of the jurisdictions implicated in the sprawling web of dos Santos holdings were ever placed on the FATF’s watchlist. Only seven out of the 41 jurisdictions involved in dos Santos’ network have been on the list in the last decade.

Lessons Learned

These findings are not unique to the Angolan case. A study of a massive Eastern European money laundering scheme, known as the “Troika Laundromat,” shows that it also mainly operated within jurisdictions considered robust in their AML policies. This paradox highlights the need to question the true effectiveness of AML institutions in wealthier countries, despite indicators suggesting that their policies are in place and functioning. As the European Union moves to strengthen its AML regimes through the 5th and 6th EU Money Laundering Directives, it will be essential to assess whether these upgrades significantly enhance the ability to detect and seize illicit wealth.

Second, the Angolan case underscores the impact of advanced economies and tax havens on the developing world. Financial penalties on countries that do not meet AML standards can be significant, and many of those targeted are poorer nations. This can hinder economic development and impose undue hardships on the population. Moreover, there is evidence that a substantial amount of illicit financial flows originate in developing countries and flow to wealthier ones, making it disproportionately impactful for the former to be subjected to stricter AML scrutiny.

As we continue to uncover complex money laundering schemes, it will be essential to stay vigilant and continue the conversation about where and how improvements need to be made.