Kenya Insights

Tag: Accountability

  • LUANDA LEAKS: Isabel dos Santos ordered to return to Angola $500 million in shares ‘tainted by illegality’

    LUANDA LEAKS: Isabel dos Santos ordered to return to Angola $500 million in shares ‘tainted by illegality’

    Isabel dos Santos, at one time the wealthiest woman in Africa, must surrender one of her last remaining major assets, a stake in the Portuguese energy company Galp worth an estimated $500 million, an international tribunal in the Netherlands has ruled.

    In its 2020 Luanda Leaks investigation, the International Consortium of Investigative Journalists revealed that dos Santos and her husband Sindika Dokolo had obtained the stake for just a $15 million initial deposit, in a controversial deal made with Angola’s state oil company — overseen at the time by dos Santos’ father, Angola’s then-president Jose Eduardo dos Santos.

    The deal “cannot be explained but for grand corruption by the daughter of a head of state and her husband,” the tribunal ruled, declaring it “null and void.” The ruling, made public last week, was first reported by Dutch newspaper and ICIJ partner, Het Financieele Dagblad.

    Luanda Leaks reporting showed how insider deals, political connections and an army of Western enablers helped dos Santos amass a fortune. The exposé revealed how the billionaire and her allies benefited from lucrative deals in diamonds, telecommunications, banking and real estate.

    The investigation had a profound impact on the dos Santos family. Angolan and Portuguese authorities froze dos Santos’ assets and bank accounts and launched criminal investigations. The business empire was largely dismantled.

    The inside dealmaking that led to the acquisition of the Galp shares, revealed in part through leaked documents, was featured in the Luanda Leaks reporting.

    In 2006, Angola’s state oil company, Sonangol, sold 40% of its interest in joint venture company Esperaza to Exem Energy, a Dutch firm owned by Dokolo. Sonangol then sold to Dokolo’s company a $99 million stake for an initial $15 million deposit. That same stake is now worth more than $500 million.

    The deal was “tainted by illegality, enabling Ms dos Santos directly or through her husband Mr. Dokolo, while using her position as daughter of the Angolan President … to reap an extraordinary financial gain to the detriment of … Angola,” according to the ruling.

    “This is a landmark decision,” Yas Banifatemi, one of Sonangol’s attorneys told ICIJ. “It is not something you see often that a tribunal like this recognizes embezzlement and corruption. They called a spade a spade.”

    Banifatemi said that the Luanda Leaks investigation was critical to the case, making critical information public. “I’m thankful for the Luanda Leaks,” Banifatemi said. “It allowed us to fight corruption.”

    In a statement, Exem Energy’s London representatives said that the company will appeal. Its attorney, Dan Morrison, noted that the panel is not a court and said that it failed to comment on Exem Energy’s evidence. “The political narrative clearly superseded the legal analysis,” Morrison said.

    In separate cases related to the transaction, a Dutch court froze Exem Energy’s assets last year and removed a key dos Santos ally from the board of the joint venture company. Dutch prosecutors also launched a criminal probe into the deal. Dos Santos is also facing criminal charges in Angola.

    Dos Santos denies wrongdoing and has previously claimed that legal actions against her amount to a “witch hunt.” Dokolo also denied wrongdoing. He died in a scuba diving accident last year.

  • MONEY LAUNDERING: ‘A Kleptocrat’s dream’: US real estate a safe haven for billions in dirty money, report says

    MONEY LAUNDERING: ‘A Kleptocrat’s dream’: US real estate a safe haven for billions in dirty money, report says

    At least $2.3 billion has been laundered via U.S. real estate transactions in the last five years, according to a new report by a Washington, D.C.-based think tank.

    By using a database of over 100 publicly reported real estate money laundering cases in the U.S., United Kingdom and Canada, Global Financial Integrity says the U.S. has become a preferred destination for those looking to use real estate to stash illicit funds — making it a “Kleptocrat’s dream.”

    Public officials and their associates, known as politically exposed persons, were involved in more than half of the U.S. cases that GFI reviewed. Those PEPs include Genaro García Luna, a former Mexican security minister who bought millions of dollars of U.S. property while accused of taking bribes from the Sinaloa cartel, and the stepson of former Malaysian Prime Minister Najib Razak, who was arrested in 2019for his alleged role in the 1MDB scandal.

    “[Real estate] provides a really easy way to hide ill-gotten gains with little oversight and few questions asked,” GFI policy director Lakshmi Kumar told the International Consortium of Investigative Journalists. “If you’re a criminal, why would you not choose a method that allows you to flaunt your wealth openly, but also hide its illicit nature?”

    The U.S. was once considered at the regulatory forefront when it came to preventing money laundering through real estate, adding “persons involved in real estate closings and settlements” to the Bank Secrecy Act’s definition of financial institutions in 1988. But over time, Kumar says, the country lost ground to its peers in the U.K. and Europe.

    “This is clearly a systemic issue globally,” Kumar said. “Everyone’s discovering how easy it is to use and abuse the real estate sector. The difference is that everyone else seems to have charted a path forward. They have put in legislation they’re trying to figure it out. In the U.S., we’re still held back.”

    One of the biggest issues that the report cites is the use of geographic targeting orders as the U.S.’s primary tool to identify potential money laundering events. GTOs impose reporting requirements on real estate purchases, but only in narrowly targeted scenarios — large cash purchases by legal entities in specific geographic areas.

    More than 60% of the U.S. cases examined in the report involved properties in at least one county not covered by a targeting order, which GFI says highlights the inadequacy of the system.

    “A lot of the money laundering cases we saw reported in the U.K. and Canada were really concentrated in what you’d call real estate hubs in the country,” Kumar said. “In the U.S., that was not the case. It was spread far and wide.”

    Another concern the report outlines is that the U.S. anti-money laundering regime is focused on residential purchases, when a significant portion of the cases GFI reviewed involve commercial real estate transactions.

    The FinCEN Files, an investigation on global dirty money flows by ICIJ and BuzzFeed News, examined the impact of large-scale money laundering on middle America.

    ICIJ found that Ukrainian oligarch Ihor Kolomoisky, whose case is cited in GFI’s report, amassed a Midwest real estate empire with his associates, at one time becoming Cleveland’s largest commercial landlords, and leaving behind a trail of unpaid property taxes, unemployed workers and dangerous factory conditions. Kolomoisky has since been sanctioned by the U.S. State Department.

    Kumar said that because commercial deals often involve several parties and complex financing arrangements, they are an easy way to stash illicit money.

    “When you talk about residential real estate, the heart of it is identifying who is the beneficial owner, [because] if you find out who the beneficial owner is, it also tells you who the criminal is,” Kumar told ICIJ. “In a commercial real estate investment, you don’t have to own the majority stake to be a criminal. You can own 2% of a $500 million property, and you are [still] laundering millions through it.”

    The report also delves into the involvement of “gatekeepers” in real estate transactions and the direct role of real estate agents, lawyers and accountants in facilitating illicit transactions. But GFI also points to regulating private investment advisers as a more under-the-radar way of tackling real estate money laundering.

    “Investment vehicles are one of the key methods in which to invest in commercial real estate in this country,” Kumar said. “And private equity, venture capital [and] hedge funds have no [anti-money laundering] requirements — so that becomes a black box, because you don’t know who is bringing what money into this country and how.”

    The report proposes major overhauls to the U.S.’s anti-money laundering program to fill these gaps, including replacing GTOs with more stringent reporting requirements on real estate transactions across the country, robust implementation of the beneficial ownership registry passed this year as part of the Corporate Transparency Act, and urging the U.S. Treasury to issue specific regulations regarding purchases by foreign PEPs.