Piggy Banks

On top of all the bad news surrounding international banking we can add to the list the findings of a just published report ( Undue Diligence : How Banks Do Business With Corrupt Regimes) from the anti-corruption NGO Global Witness.

The report, although dealing with somewhat dated material, nevertheless paints a devastating portrait of how some of the largest and formerly most prestigious international banks have been complicit in laundering the ill-gotten gains of the some of the world’s most unsavory regimes. Despite the existence of a whole host of regulations and public commitments to social responsibility on the part of institutions like Citibank, Deutsche Bank, HSBC, etc. the report condemns these institutions for doing the minimum amount of due-diligence and exploiting every loophole to avoid turning down lucrative deposits.

In my posting last week I made some comments about Equatorial Guinea which were responded to at length by someone from the EG Embassy in London. Although my Spanish is hardly fluent I was able to discern that I was being accused of slandering and perpetuating negative stereotypes about EG.

Lo and behold, but who should top the list of Global Witnesses’ list- of- shame but Equatorial Guinea and their partners in crime, first the now-defunct Riggs Bank, and more recently Barclays.

Management of the country’s vast oil wealth remains a ‘state secret’ according to President Teodoro Nguema Obiang. He has ruled since 1979 when he executed his brutal uncle to seize power, and has maintained his power through repression and human rights abuses. Members of Obiang’s family control key government ministries. Opposition parties are banned, and political prisoners are beaten and tortured in custody.

Meanwhile, the ruling family continues to enrich itself. At the end of 2006 Global Witness revealed that the president’s playboy son had bought a new $35 million dollar home in California. He has been reported as earning a $4,000 a month salary as the country’s Minister of Agriculture and Forestry.

But not to appear as unfairly picking on EG, it should be noted that Gabon, Republic of Congo, Angola, Charles Taylor’s Liberia, Turkmenistan and their cohort of international deposit-takers also make the list.

The main recommendation of the report is that now that the world seems to be getting serious about regulating shameless bankers it should also close all the loopholes and address all the convenient ambiguities which allow resource riches from desperately poor countries to find their way into international bank accounts - now matter how desperately these shattered institutions might need them.

(First Published March 22, 2009 in Harvard International Review)