Angola’s Money Laundering Scandal: A Paradox of Corruption and Financial Institutions
Luanda, Angola - The fact that a network of corruption and hidden wealth originated in Angola is no surprise to many experts. With a ranking of 165 out of 180 on Transparency International’s latest Corruption Perceptions Index and the Basel Institute on Governance placing it among the top 25 riskiest countries for money laundering, it is clear that Angola has struggled with these issues.
A Country with “Strategic Deficiencies”
For five of the past 10 years, Angola was listed as having “strategic deficiencies” by the Financial Action Task Force (FATF), an international standard setter for anti-money-laundering policy. Despite this, a network linked to dos Santos and her husband, Sindika Dokolo, managed to go undetected for so long.
An Investigation into Shell Companies
Using data released by the International Consortium of Investigative Journalists on the location of shell companies controlled by dos Santos and Dokolo, an investigation found that certain types of jurisdictions were more likely to be part of the network than others. Specifically, jurisdictions with high scores on FATF effectiveness were more likely to host companies linked to dos Santos.
The Paradox of Money Laundering Institutions
This finding reflects the paradox of money laundering institutions: places that score well on these indicators are actually where people want to keep illicit wealth. They offer a sheen of legitimacy and respectability, allowing money launderers to hide the origin of their assets. This raises questions about how effective relatively rich, large economies really are at policing their financial systems.
A Warning Sign for Regulators
Recent scandals like the Panama Papers and the dos Santos scheme are making it harder to claim that everything is working as it should be. Regulators will continue to try and stay ahead of the game, but what remains to be seen is whether these regimes really improve the ability of the financial system to detect illicit wealth or if they just put more pressure on stopping it from getting in.
The Negative Externality
The ability to safely stash money in advanced economies and tax havens imposes a negative externality on developing countries. Developing countries are more likely to be punished for not meeting anti-money-laundering standards, while being less likely to be destinations for illicit wealth.
Conclusion
Understanding how well our anti-money-laundering institutions work is difficult because the very outcome we care about is hard to observe. However, as we continue to learn from these scandals, it becomes clear that understanding where our policies are working and where they need more attention is crucial. Leak by leak, we’re starting to uncover the truth behind money laundering schemes like Angola’s.
Key Findings
- Jurisdictions with high scores on FATF effectiveness 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.
- The places that score well on anti-money-laundering indicators are actually where people want to keep illicit wealth.