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Global Witness, Undue Diligence: People in the world’s richest countries are rightly angry at the increasing job losses and house repossessions. What is less understood is that for much longer, failures by banks and the governments that regulate them have caused untold damage to the economies of some of the poorest countries in the world.
By doing business with dubious customers in corrupt, natural resource-rich states, banks are facilitating corruption and state looting, which deny these countries the chance to lift themselves out of poverty and leave them dependent on aid.
This is happening despite a raft of anti-money laundering laws that require them to do due diligence to identify their customer and turn down illicitly-acquired funds. But the current laws are ambiguous about how far banks must go to identify the real person behind a series of front companies and trusts. They fail to be explicit about how banks should handle natural resource revenues when they may be fuelling corruption. And if a bank has filed a report on a suspicious customer as required by the law, but then the authorities permit the transaction to go ahead, the bank can legally take dirty money. So it may be possible for a bank to fulfil the letter of its legal obligations, yet still do business with these dubious customers.
By accepting these customers, banks are – directly or indirectly – assisting those who are using the assets of the state to enrich themselves or brutalise their own people. Corruption is not just done by the dictator who has control of natural resource revenues. He needs a bank willing to take the money. It takes two to tango.
This report presents a series of case studies about bank customers in Equatorial Guinea, Republic of Congo, Gabon, Liberia, Angola and Turkmenistan. In these countries, the national resource wealth has or had been captured by an unaccountable few, whether for personal enrichment, to maintain an autocratic personality cult that violated human rights, or to fund devastating wars.
The banks doing business with these customers include Barclays, Citibank, Deutsche Bank, and HSBC. Nearly all of the banks that feature in this report are major international banks and all of them make broad claims about their commitments to social responsibility. Yet there is a grotesque mismatch between rhetoric and reality. Their customers are heads of state or their family members, state-owned companies used as off-budget financing mechanisms by their parent government, central banks in states that have been captured by one individual, and companies trading natural resources out of conflict zones. Banks should have been extremely wary about doing business with any of them.
Why does it matter? Read the full Global witness report here
