Banks’ Blind Spots: How Angolan Fraudsters Evaded Detection

A Network of Corruption and Hidden Wealth

A recent investigation has revealed a shocking case of corruption and hidden wealth originating from Angola. Despite being ranked 165 out of 180 in Transparency International’s Corruption Perceptions Index and featuring on the Financial Action Task Force (FATF) watchlist for five years, the dos Santos network managed to evade detection for an astonishing period.

A Global Web of Companies

The investigation found that companies controlled by Isabel dos Santos and her husband, Sindika Dokolo, were registered in 41 countries worldwide. A closer look at these jurisdictions revealed a disturbing trend: countries with strong anti-money laundering (AML) institutions and high scores on FATF effectiveness reviews were more likely to host companies linked to the dos Santos network.

The Paradox of Money Laundering

In fact, a one-standard-deviation improvement in a country’s effectiveness score was associated with a 16 percentage point increase in the chance of hosting a dos Santos-linked company. Moreover, only seven out of 41 jurisdictions implicated in the network had ever been placed on FATF’s watchlist in the past decade.

The Problem with AML Institutions

This paradox highlights the problem with money laundering institutions: places with robust AML policies are often where illicit wealth seeks to hide. These countries offer a veneer of legitimacy and respectability, making it easier for criminals to conceal their assets.

Questions About AML Regimes

The findings raise important questions about the effectiveness of AML regimes in wealthy economies. Recent scandals such as the Panama Papers, Danske Bank, and now the dos Santos scheme have cast doubt on claims that everything is working as it should be. Regulators must continue to improve their systems to detect illicit wealth after it enters the economy.

The Negative Externality

Furthermore, the ability of advanced economies to stash money safely imposes a negative externality on developing countries. These poorer nations are more likely to be punished for not meeting AML standards, while richer ones still struggle with financial transparency.

Lessons Learned

As we uncover these leaks and analyze our policies, we begin to understand where they work well and where they need improvement. The case of the dos Santos network serves as a stark reminder that even in countries with strong AML institutions, corruption and money laundering can still thrive.

Recommendations

• Regulators must continue to improve their systems to detect illicit wealth after it enters the economy.
• Advanced economies must take responsibility for their role in perpetuating financial secrecy and work towards greater transparency.
• Developing countries must be given support and resources to meet AML standards, rather than being punished for not meeting them.