This month the UK-based NGO Global Witness issued a new report asserting that major international banks perpetuate corruption in the world’s most fragile countries. This is not a new assertion by any means, but in these times when the nefarious impact of unbridled greed has put the global economy in jeopardy, it is a particularly urgent message. The demand by shareholders for corporate responsibility is growing, but it still has a long way to go.
“The same lax regulation that created the credit crunch has let some of the world’s biggest banks facilitate the looting of natural resource wealth from poor countries,” said Gavin Hayman, Global Witness Campaigns Director. ‘If resources like oil, gas and minerals are to truly help lift Africa and other poor regions out of poverty, then governments must take responsibility to stop banks doing business with corrupt dictators and their families.”
Global Witness’s report, Undue Diligence: How banks do business with corrupt regimes, highlights the following examples:
- Barclays kept open an account for the son of the dictator of oil-rich Equatorial Guinea long after clear evidence emerged that his family were heavily involved in substantial looting of state oil revenues.
- Citibank facilitated the funding of two vicious civil wars in Sierra Leone and Liberia by enabling the warlord Charles Taylor, now on trial for war crimes in the Hague, to loot timber revenues.
- HSBC and Banco Santander hid behind bank secrecy laws in Luxembourg and Spain to frustrate US efforts to find out if Equatorial Guinea’s oil revenues had been looted and laundered.
- Deutsche Bank assisted the late president Niyazov of Turkmenistan, a notorious human rights abuser, to keep billions of dollars of state gas revenues under his personal control and off the national budget.
Global Witness presents the following action plan:
- Banks must change their culture of ‘due diligence’ – the process by which they check that a customer is legitimate. This isn’t about box ticking. Banks should only take the business if they have identified an ultimate beneficiary who does not pose a corruption risk. Other business should be turned away.
- Governments must ensure that anti-money laundering laws in each jurisdiction are absolutely explicit that banks must do this due diligence properly, and financial regulators must actively enforce these laws.
- Cooperation between governments has to improve to ensure that national bank regulations become globally compatible, accountable and transparent, and are not hindered by bank secrecy laws. This must begin with reforms to the intergovernmental body that oversees the anti-money laundering regime, the Financial Action Task Force.
- Governments must ensure that new global rules are put in place to help banks avoid corrupt funds. The most important change is to ensure that every country produces full public online registers of the ultimate beneficial ownership of all companies and trusts under its jurisdiction, to help banks identify and avoid business with a corruption risk.
“The G20 leaders must act on their promises to help the world’s poor. A key element of making poverty history is to stop the money being stolen or kept off-budget in the first place. Ducking this issue now leaves the global financial system open not only to further corrupt money flows, but to the destabilizing influences that have caused such damage to the developed world’s economies,” said Hayman. “The developing world cannot afford a return to business as usual.”
Global Witness exposes the corrupt exploitation of natural resources and international trade systems to drive campaigns that end impunity, resource-linked conflict, and human rights and environmental abuses. Global Witness was co-nominated for the 2003 Nobel Peace Prize for its leading work on conflict diamonds and awarded the 2007 Commitment to Development Ideas in Action Award, sponsored jointly by Washington DC based Center for Global Development and Foreign Policy magazine.
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