Stop proceeds of crime being banked in Britain: Open letter to the UK government

Here is the text of an open letter sent by the undersigned organisations to the British Government trying to give voice to the story silenced by the abrupt end of the Ibori trial: the relationship between British banks and corrupt officials from foreign governments.

Tuesday 20th March 2012

TO:

Secretary of State for International Development, Rt Hon Andrew Mitchell MP

The Home Secretary, Rt Hon. Theresa May MP

Commissioner Bernard Hogan-Howe, Metropolitan Police Service

Adair, Lord Turner, Chairman & Hector Sants, Chief Executive Officer, Financial

Services Authority

Rt Hon. Malcolm Bruce MP, Chair, International Development Select Committee

Rt Hon. Meg Hillier MP, Chair, All-Party Parliamentary Group on Nigeria

We, the undersigned, would like to congratulate the Crown Prosecution Service and the Metropolitan Police Service’s Proceeds of Corruption Unit (POCU) on the successful prosecution of James Onafene Ibori, former Governor of Delta State, Nigeria. We welcome the support for this action from the British government, and particularly the Department for International Development.

Mr Ibori was convicted on seven separate charges of money-laundering; one charge of conspiracy to commit money-laundering; one charge of conspiracy to defraud; one

charge of conspiracy to make false instruments; and one charge of property transfer by deception. For these charges he could expect to face ten years in prison.

Mr Ibori’s trial has documented the huge sums of money which prosecutors at Southwark Crown Court testified to have been stolen from the public exchequer over the period ofhis terms in public office; £35 million of UK assets traced to him were frozen in 2007, and in total he may have laundered as much as £160 million, according to prosecutors.

Alongside that, the trials of Ibori and his associates show that he amassed luxury cars and a property portfolio in two continents including a London mansion bought for £2.2 million in cash.

Corruption is a huge drain on the economies of developing nations such as Nigeria.

This type of prosecution, consistent with Articles 43-50 of the UN Convention Against Corruption, is enormously important in that it sends a signal that breaking domestic and international laws by stealing public money and using it for private gain and accumulation overseas will not be tolerated. Such international law-enforcement

cooperation is essential if the fight against corruption in Nigeria, and in other developing nations, is to move forward.

Equally, it is important to British taxpayers, who fund the UK’s commitments as a

longstanding and core development partner in Nigeria. It is also important for the UK to show that investments from proceeds of corruption in other parts of the world are not welcomed.

The UK has made progress on this issue in the five years since the Financial Action Task Force listed the UK as only partially compliant on customer due diligence in financial services, with important new money laundering regulations coming into force in 2007.

However, there are serious concerns about how well banks are actually implementing

these rules. In the banking sector, too many financial institutions seem to be paying little heed to their obligations under know-your-customer and anti-money-laundering legislation. A June 2011 report by the Financial Services Authority found that:

• Three-quarters of banks sampled failed to take adequate measures to establish

the legitimacy of the source of wealth and source of funds to be used in the

business relationship;

• More than half failed to apply meaningful Enhanced Due Diligence (EDD)

measures in higher risk situations and did not identify or record adverse

information about the customer or the customer’s beneficial owner;

• More than a third of banks visited failed to put in place effective measures to

identify customers as Politically Exposed Persons (PEPs).

In addition, James Ibori’s huge property portfolio points us to the key role of the realestate sector and estate agents in helping to prevent money-laundering. The attractive location and prices of the UK property market continue to attract international investment, which sadly includes laundered money.

Following the EU’s Third Money-Laundering Directive (2005/60/EC), implemented in the UK as the Money Laundering Regulations 2007, other economic actors in nonfinancial activities and professions, including lawyers, notaries, accountants, estateagents, have a responsibility to require 'enhanced due diligence' measures for new and existing customers that are 'politically exposed persons'.

Crucially, these require identification of beneficial owners and the verification of the

beneficial owner's identity. Yet the Ibori conviction raises questions about the checks

taken to comply with these regulations by many of the financial intermediaries that he dealt with, including real-estate agents. How did these institutions ensure that the funds they were handling were not the proceeds of corruption?

The Ibori case has also revealed how corrupt politicians can use shell companies to hold their assets, and in some cases hide their identity. For example, IborI’s lawyer, Badresh Gohil, who has also been convicted of money laundering, helped Ibori buy a $20 million Bombadier private jet through a number of shell companies.

We therefore urge the British government, financial services regulators, law enforcement and anti-corruption bodies, financial, legal and real-estate professional associations, and private-sector financial bodies, vendors, agents and purchasers of real-estate, to take note of these issues and implement actions including:

• Devoting more law-enforcement time and investigative efforts to prosecutions

such as that of James Ibori;

• Educating real-estate and financial services actors as to their legal obligations as

regards money-laundering;

• Working with professional associations in the real-estate, legal and financial

services sector to establish, disseminate and train on best-practice in combating

risk from money-laundering;

• Continuing to monitor market actors’ implementation of anti-money-laundering

controls, especially as regards politically exposed persons, and sanctioning those

who do not take compliance efforts seriously;

• Rigorously enforcing the anti-money laundering regulations by carrying out spot

checks on the regulated sector, and where wrongdoing is identified undertaking

prosecution, including in the most serious cases, for an imprisonable offence;

• Introducing greater transparency over the ownership of shell companies by

requiring companies to disclose their ultimate (or beneficial) owner to Companies

House so that this information is in the public domain;

• Support the Nigerian Government to strengthen its anti-corruption institutions and

prosecution systems to ensure that future cases of money laundering do not slip

through its system.

We feel that such measures will underline Britain’s seriousness in combating the

globalised menace of corruption and money-laundering, and send a strong deterrent

signal across the world.

Yours sincerely,

Centre for Democracy and Development, Abuja, Nigeria

Christian Aid, London, UK

Civil Society Legislative Advocacy Centre, Abuja, Nigeria

CLEEN Foundation, Lagos, Nigeria

Constitutional Reform Dialogue Mechanism (CRDM), Abuja, Nigeria

Global Call to Action Against Poverty (GCAP) Nigeria

Global Witness, London, UK

Kayode Ogundamisi, Nigeria Democratic Forum, UK

Modupe Debbie Ariyo, OBE, Africans Unite Against Child Abuse, London/Manchester,

UK Nigerians in Diaspora Organisation, Europe

Nigerian Gender Budget Network, Abuja, Nigeria

Oliver Owen, St Cross College, Oxford, UK

Paul Okojie, Department of Law, Manchester Metropolitan University, UK

Platform, London UK

Revenue Watch Institute, New York, USA

Richard Wild, Department of International Development, University of Oxford, UK

Stakeholder Democracy Network, Port Harcourt, Nigeria/London, UK

Tax Justice Network, London, UK

Tearfund, London, UK

The Corner House, Dorset, UK

Transparency International UK, London, UK

Youth Action Initiative Africa (YAIA), Jos, Nigeria