Title: Angola’s Money Laundering Scandal: How the Dos Santos Network Evaded Detection in “Robust” Financial Institutions
Angola’s Corruption and Money Laundering: A Common Problem
In a world where Angola’s rampant corruption and offshore wealth are not surprising revelations, it’s the fact that a vast money laundering network linked to former President José Eduardo dos Santos and his wife, Sindika Dokolo, went undetected for so long that should raise eyebrows (Transparency International, 2022). With Angola ranking 165th out of 180 on Transparency International’s latest Corruption Perceptions Index and a top 25 position on the Basel Institute on Governance’s money laundering risk list, Angola seems like a prime candidate for housing illicit funds. Moreover, the country has been on the Financial Action Task Force (FATF) “strategic deficiencies” list for five out of the last ten years.
Operating Under the Radar in Developed Countries
What is concerning, however, is that dos Santos’ network, which spanned 41 countries, managed to operate under the radar in mostly developed countries with robust anti-money laundering (AML) institutions. These jurisdictions, with their strong AML policies and supposed commitment to preventing, identifying, and eradicating illicit cash, have failed to keep their systems secure.
Paradoxical Money Laundering Institutes: Wealthy Economies at Risk
According to recent FATF mutual evaluation reviews, countries with high efficiency scores were more likely to harbor dos Santos-linked companies (FATF, 2022). Contrary to popular belief, jurisdictions with strong AML policies become prime targets for money launderers looking to hide their assets under a veil of legitimacy. These countries offer the allure of nicer things and the opportunity to enjoy a certain level of respectability that developing nations cannot match.
Analyzing the Effectiveness of AML Institutions in Developed Economies
An analysis of the effectiveness data from FATF mutual evaluation reviews, combined with the location of companies in the dos Santos network, reveals a puzzling relationship. Despite their effective AML policies, these jurisdictions were more inclined to host dos Santos-linked shell companies. A one-standard-deviation improvement in a country’s effectiveness score is associated with a 16 percentage point increase in the likelihood of that country hosting a dos Santos-linked company (Stata code available here). Surprisingly, few of the jurisdictions in dos Santos’ network have ever appeared on FATF’s watch list. Only seven out of the 41 jurisdictions have been on the list in the last decade.
Financial Secrecy Levels and the Dos Santos Network
Similarly, when we look at other indicators commonly associated with illicit financial flows, such as financial secrecy levels (as measured by the Tax Justice Network and Transparency International’s Corruption Perceptions index), the same pattern unfolds. Countries in dos Santos’ network had lower levels of financial secrecy and corruption (Tax Justice Network, 2021; Transparency International, 2022).
Conclusion
These findings highlight the paradox of money laundering institutions: These places, with their strong AML policies and attractive living standards, are often the prime targets for money laundering activities. Money laundering institutions offer the luxury and respectability that developing nations cannot provide. Once inside these exclusive circles, it’s unlikely that anyone will ask for the origination of the funds (Sindika Dokolo, 2022).
Given these recent scandals, such as the Panama Papers, Danske Bank, and the dos Santos scheme, increased scrutiny of the effectiveness of AML institutions in wealthy, advanced economies is needed. Moreover, with developing countries suffering the consequences of FATF watchlist designations, a more balanced approach to addressing illicit financial flows that recognizes the need for systemic improvements across all economies, not just the developing world, is essential.