Sen. Carl Levin, head of a Senate Homeland Security panel, said that while financial institutions have become better at detecting possibly tainted money, glaring loopholes remain in anti-money laundering law established in the 2001 Patriot Act. He said this has allowed lawyers, real estate agents, lobbyists and others to act as conduits for foreigners seeking to move their wealth into the United States.
A report issued by the Michigan Democrat and Sen. Tom Coburn of Oklahoma, the top-ranking Republican on the panel, detailed how the son of the president of Equatorial Guinea was able to move $110 million in suspect funds into the United States from 2004 to 2008, while an Angolan arms dealer, now in a French jail, maintained 30 U.S. bank accounts handling some $60 million in transactions between 1997 and 2007.
"Laundered money is used to train and provide support for terrorists and terrorism," Levin said. "If we want to credibly lead efforts to stop illegal money abroad, we've got to stop it here at home as well."
The 330-page report concluded that powerful foreign officials and their families, known internationally as "politically exposed persons" or PEPs, have used lawyers, real estate and escrow agents, lobbyists, bankers and university officials to circumvent anti-corruption laws.
It noted that the Treasury Department exempted some industries, such as hedge funds and the real estate industry, from Patriot Act anti-money laundering requirements, and that many of the professionals examined were under no legal obligation to take anti-money laundering precautions when dealing with a foreign official.
The four case studies:
Teodoro Nguema Obiang Mangue, son of the president of Equatorial Guinea, who used U.S. lawyers, bankers, real estate agents and escrow agents to move $110 million into the United States. The report said Obiang, the subject of an ongoing U.S. criminal investigation, used two lawyers who helped him with shell company accounts, two real estate agents who helped him purchase a $30 million home in Malibu, Calif., and an escrow agent who assisted in buying a $38.5 million Gulfstream jet.
The two attorneys, Michael Jay Berger and George Nagler, both of Beverly Hills, declined to answer questions at the hearing, declaring their Fifth Amendment rights not to incriminate themselves.
Neal Baddin, a real estate agent for Obiang, said he was "neither knowledgable nor trained in how to handle matters involving" politically exposed persons, a term he was unfamiliar with. "I believe this is the case for most real estate agents."
Omar Bongo, president of Gabon for 41 years until his death last year, wire transferred more than $18 million into bank accounts held in the name of a U.S. lobbyist's company in an attempt to buy U.S.-built military equipment. The lobbyist, Jeffery C. Birrell of the Grace Group in McLean, Va., also invoked the Fifth Amendment in declining to testify.
A bank in New York closed an account of Bongo's daughter, a student, after discovering she had $1 million in $100 shrink-wrapped bills in her safe deposit box, which she said her father had brought into the United States using his diplomatic status.
Jennifer Douglas, a U.S. citizen and fourth wife of the former vice president of Nigeria, Atiku Abubakar, reputedly helped her husband bring more than $40 million in suspect funds into the United States. Some $25 million of that was wire transferred by offshore corporations into more than 30 U.S. bank accounts opened by Douglas. Two offshore corporations transferred about $14 million over five years to American University in Washington, D.C., to pay for consulting services in setting up a university in Nigeria founded by Abubakar.
Prosecutors last year said former Rep. William Jefferson, D-La., who received a 13-year sentence for accepting bribes, demanded $100,000 from a Virginia businesswoman to pay a bribe to Abubakar. The Nigerian denied any wrongdoing.
Bank of America did not flag the accounts of Pierre Falcone, the Angolan arms dealer, despite numerous suspicious transactions, the report said. From 1999 to 2003, the accounts received multiple wire transfers totaling more than $6 million from unidentified "clients" from such secrecy jurisdictions as the Cayman Islands, Luxembourg, Singapore and Switzerland. The bank closed the accounts in 2007.
In hindsight, "we believe we should have done better," William Fox, the global anti-money laundering and economic sanctions executive at Bank of America, told the hearing. He said that in the past few years "we have dramatically increased staff and spent tens of millions of dollars on sophisticated systems which help us to detect and report suspicious activity to appropriate authorities.
The report recommended that Treasury adopt recent World Bank proposals to strengthen bank controls related to foreign officials and repeal anti-money laundering exemptions. Congress should require that the owners of shell corporations be named, according to the report, and should make acts of foreign corruption a legal basis for denying U.S. entry to the person involved in the corruption and his family.
A Levin aide said one possibility was attaching anti-money laundering provisions to pending legislation to increase oversight of financial institutions.