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Businessman Buys Own Bank For Laundering Money

“By virtue of this acquisition, other members of the conspiracy, including senior politicians from multiple countries receiving bribe payments, could open bank accounts and receive transfers without the risk of raising attention.”

Last week, the US Department of Justice announced charges against a Venezuelan businessman, Raul Gorrin Belisario, for his suspected role in a billion-dollar corruption scheme.

Two other Venezuelans involved, Gabriel Arturo Jimenez Aray and Alejandro Andrade Cedeno, pleaded guilty and provided details of how bribe payments were made and money was laundered.

Gorrin owns Globovision, a private news network in Venezuela that once was very critical of the Venezuelan government.

Gorrin purchased the channel in 2013 and since then, according to reporters, the news network has become much friendlier to Maduro’s administration.

According to the indictment, between 2008 and 2017 Gorrin paid more than US$150 million in bribes to officials in Venezuela’s treasury, including former national treasurer Alejandro Andrade for access to currency deals.

Through allegedly illegal payments, Gorrin got permission to carry out the US dollar to bolivar exchange process with the Venezuelan National Treasury which allowed him to obtain substantial profits on the exchange transactions.

The funds used to bribe officials were allegedly wired to accounts in the US from Swiss accounts held by three Panamanian shell companies that were owned by Gorrin.

The businessman also allegedly used his personal account at HSBC Private Bank (Suisse) SA to wire money to the US.

None of the banks used have been accused of wrongdoing by US authorities.

With these funds, Gorrin allegedly purchased and paid expenses related to private jets, yachts, multiple champion horses, watches, luxury cars and real estate in the US.

So far the scheme seems “dirty business as usual”, right? Multiple shell companies, multiple offshore bank accounts, purchases of luxury goods in foreign countries using funds from different bank accounts.

But there was something new in this scheme.

According to the US Department of Justice, around 2010, Gorrin, Jimenez and others bought a bank in the Dominican Republic — Banco Peravia — for the purpose of laundering money and paying bribes to Venezuelan officials.

A number of Peravia’s executives have been under investigation since 2015 for allegedly defrauding the bank.

While buying a bank with the primary aim of using it to launder money seems something extreme, it is not the first time it has happened — and probably won’t be the last if supervision and control remain lax.

Another bank in a small Caribbean island was purchased by the Brazilian construction company Odebrecht and reportedly used to move dirty money and pay bribes to officials in at least 12 different countries.

In the end of 2010, two of the Odebrecht’s executives responsible for running the “unofficial” international operations of the company decided to buy 51 per cent of the Antigua branch of the Austrian Meinl Bank AG that at the time was largely inactive.

They reportedly paid US$4 million for it and agreed with Odebrecht they would still get a commission of two per cent on the transactions carried out on behalf of the company through the bank.

According to information provided by the executives in their plea agreements with Brazilian authorities, they were running the bank from São Paulo and most (if not all) of the transactions made by the bank were related to Odebrecht.

As highlighted in Odebrecht’s plea agreement with United States, Brazilian and Swiss authorities, “[By virtue of this acquisition, other members of the conspiracy, including senior politicians from multiple countries receiving bribe payments, could open bank accounts and receive transfers without the risk of raising attention.

“By acquiring the bank, members of the conspiracy, including Odebrecht Employee 4 and others, willfully facilitated the illegal payment scheme.”

Money was transferred from Meinl Bank Antigua to other banks such as the Andorra Private Bank (BPA), allegedly mainly to pay bribes to politically exposed persons, according to Odebrecht’s former lawyer.

There is no sign that authorities in the country (or in Austria, where Meinl Bank is located) asked questions or investigated the bank at any time during the period Odebrecht used the Meinl Bank Antigua for money laundering.

Only in December 2017 did the Antiguan Financial Services Regulatory Commission revoke Meinl Bank Antigua’s license.

These cases add to the recent examples where poor supervision has reportedly allowed millions to be laundered. (See my blog post on Why Danske Bank Estonia appears in so many money laundering scandals).

National supervisory bodies have a duty to ensure banks operating within their territory maintain sound anti-money laundering risk management so they are not misused by criminals, but also to protect the integrity of the financial system as a whole.

Supervisors need to assess financial institutions’ anti-money laundering policies, procedures and controls on a regular basis through off-site and on-site inspections.

It is also vital that licensing, registration and other controls implemented by supervisors prevent individuals involved in criminal activities or their associates from holding or controlling a management function in financial institutions.

Effective supervision should lead to dissuasive and proportionate sanctions to punish misconduct by a specific bank and also deter them and others from wrongdoing.

To fulfill this purpose, supervisors should seek to publicise the names of banks that are found to have money laundering failings, spell out what the bank did wrong and how the amount of the fine was determined.

More importantly, in addition to administrative fines, banks and senior managers involved in money laundering should also face appropriate criminal investigation and prosecution.

Otherwise, be it a small or a big bank, fines may become just another cost of doing business while crime continues to pay.

First published by Transparency International as “Need help laundering money? What about buying your own bank?

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