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The European Banking Authority (EBA) has published the findings of its assessment of national competent authorities’ responses to the 2020 Luanda Leaks, claiming that regulators either went beyond what was necessary or did the opposite.
In a report delving into whether the EU’s member states had been tainted by the Luanda Leaks corruption scandal, the EBA has found that competent authorities across the EU adopted significantly different approaches for identifying and tackling money laundering and terrorist financing risks highlighted by the leaks.
These approaches varied beyond what the EBA would have expected under a risk-based approach.
Although examples of good practice were noted by the EU’s banking supervisor, it found that competent authorities’ approaches to identifying and tackling ML/TF risks highlighted by the Luanda Leaks differed significantly across national competent authorities (NCAs).
Furthermore, the EBA’s findings suggest that not enough of the EU member state authorities took advantage of existing cooperation channels to exchange information and improve their understanding of the risks to which their sector was exposed.
“This means that the risk of institutions laundering the proceeds from corruption by third-country PEPs is not currently managed effectively in all member states,” the report concludes, adding that persons of “questionable integrity” or against whom serious and longstanding allegations of corruption exist may continue to own or control credit and financial institutions, adding that these risks are not specific to the Luanda Leaks.
Nonetheless, to date, no domestic regulators have issued warnings, opened a further investigation or fined any institutions for anti-money laundering/counter-terrorism financing (AML/CTF) systems and controls failings in connection with the Luanda Leaks, even if assets have been frozen in Portugal and the Netherlands.
What are the Luanda Leaks?
In January 2020, the International Consortium of Investigative Journalists (ICIJ) published hundreds of leaked documents that focused on the financial affairs of Isabel dos Santos.
Dos Santos is the daughter of a former president of Angola, José Eduardo dos Santos, who ruled the country as a dictator from 1979 to 2017.
She was considered Africa’s richest woman, according to Forbes magazine, and the ICIJ investigated various companies and individuals linked to her.
Three days after the leaks, in a concerning turn of events, her personal wealth manager and private banking director, Nuno Ribeiro da Cunha, was found dead in the garage of his house.
In July of the same year, the European Parliament called on the EBA to conduct an inquiry into the Luanda Leaks revelations as part of its response to the European Commission’s AML action plan.
What did the EBA find?
The EBA expected authorities that it supervises to investigate whether their sector was exposed to the risks of economic crime that were highlighted in the leaks.
This included the risk that dos Santos or her associates owned or controlled credit or financial institutions in their jurisdiction and used those institutions to launder the proceeds from corruption.
The risk that companies that were beneficially owned or controlled by dos Santos or her associates may be customers of credit and financial institutions registered in their jurisdiction, and used to launder the proceeds from corruption, was another concern of the EBA.
Of the 33 regulators that responded to the banking watchdog’s questionnaire, more than half indicated that they had carried out an assessment to understand their sector’s exposure to the Luanda Leaks.
The vast majority indicated that they had assessed whether any of the individuals named in the leaks had links to their jurisdiction and whether any of the financial institutions mentioned in the Luanda Leaks fell under their supervision, the EBA’s report says.
However, nearly one-third of supervisors said that they had not taken any action.
Some told the EBA that they did so because their jurisdictions were not named in the leaks or because there was no explicit indication that the institutions implicated in the Luanda Leaks were under their supervision.
Others, meanwhile, indicated that they took no action because they considered that their existing supervisory processes were sufficiently effective to identify and mitigate emerging risks, including those associated with the Luanda Leaks.
For example, one authority indicated in its questionnaire that it had recently strengthened its AML/CTF requirements and that it was confident that this would ensure that financial institutions under its supervision were sufficiently prepared to mitigate risks arising from the leaks.
However, the EBA noted, this was in spite of the fact that, according to the ICIJ, its member state was host to a construction company that was owned by Isabel dos Santos.
The report survey found that of the half of all competent authorities that did take action, they did so regardless of whether their jurisdictions or institutions under their supervisory remit were mentioned in the ICIJ leaks.
Of these, several subsequently identified institutions that had links with Isabel dos Santos and her associates, in spite of the fact that these institutions had not been explicitly mentioned by the ICIJ.
This suggests that there is a risk that relevant risk exposures in member states whose competent authorities took no action may not have been detected.
EU exposure
The information provided by the competent authorities suggests that although dos Santos and her associates owned or controlled a number of institutions in the EU, there were other risks that arose from the investigation.
The EBA felt that there were inadequate AML/CTF systems and controls in credit and financial institutions. Because of this, there was a failure to identify, assess and mitigate the ML/TF risks associated with high-risk politically exposed persons (PEPs) who were customers or beneficial owners.
The watchdog also noted that although some indicated that they had cooperated with their domestic counterparts, the financial intelligence unit (FIU) or law enforcement, outreach was not as systematic or common as the EBA would have expected.
Often, collaboration on a cross-border basis was also unfounded, the EBA cautioned, stating that this would have been expected considering the international element of the Luanda Leaks.
This failure to communicate and exchange information may have hampered the competent authorities’ risk assessment efforts, it warned.
