HSBC, Bank of America Moved ‘Suspect’ Angola Funds, Senate Says

By David Voreacos and Catherine Dodge

Feb. 4 (Bloomberg) -- Bank of America Corp. didn’t raise enough questions about how an Angolan arms dealer now in prison moved millions of dollars in “suspect” funds to the U.S., says a Senate report on corrupt foreign money entering the country.

HSBC Holdings Plc also gave an Angolan bank, Banco Africano de Investimentos, “ready access to the U.S. financial system” during the past decade although the bank failed to identify all of its owners and couldn’t provide written anti-money-laundering policies, the report said. Angola, Africa’s second-largest oil producer after Nigeria, has a history of corruption.

The report described weaknesses in the U.S. anti-money- laundering system that requires banks to raise red flags when foreign officials and their relatives and associates move money. It analyzed how such “politically exposed persons,” or PEPs, from four oil-rich African nations circumvented safeguards. One was Pierre Falcone, the Angolan arms dealer now in prison in France.

“Although aware of his status as an arms dealer, Bank of America did not treat Mr. Falcone as a PEP, did not designate his accounts as high-risk, and maintained the Falcone accounts with few questions asked,” said a 325-page report by the Senate Permanent Subcommittee on Investigations.

The subcommittee will hold a hearing on the report in Washington today.

The report said banks generally have become “more vigilant” since the U.S. enacted the 2001 Patriot Act that requires additional scrutiny of such banking accounts.

Central Bank of Angola

For example, the study said banks resisted when Aguinaldo Jaime, former head of the Central Bank of Angola, Banco Nacional de Angola, tried to move $50 million in government funds to a private account in the U.S. in 2002.

Citigroup Inc., Bank of America, Wells Fargo & Co. and HSBC all rejected or reversed the transfers, according to the report. It also cited an HSBC compliance officer who analyzed the transaction and wrote that it might be “part of some elaborate scam to defraud the Central Bank of its securities.”

Bank of America spokeswoman Shirley Norton, in an e-mail, described the matters investigated by the committee as “historical instances.” She said the bank now uses “substantially more rigorous and sophisticated money-laundering detection procedures.”

Falcone sold arms to Angola during its civil war in the 1990s. He was imprisoned in France for a year starting in 2000 and was sentenced to six years in prison last October for illegal arms dealing, tax fraud and money laundering, the report said.

Patriot Act

The Patriot Act requires banks to set up anti-money- laundering programs and get customer identification data for each account.

Falcone and his family used 29 accounts at Bank of America in Scottsdale, Arizona, from 1989 to 2007 “to bring millions of dollars in suspect funds” into the U.S. to “advance their business interests,” according to the report.

The committee traced $60 million in “suspect account activity” from 1999 to 2007, the report said. During that period, the Falcone accounts at Bank of America “engaged in numerous suspicious transactions,” it said.

Bank of America missed red flags about Falcone, who lived in a $9.6 million house in Paradise Valley, Arizona, the report said. It cited a 2005 probe by a bank investigator after a Falcone family member made four suspicious cash withdrawals at two branches in one day.

“Although Mr. Falcone appears to have been involved in the dealing and sale of arms, the activity for the accounts at Bank of America show activity that is normal for this type of high- profile customer,” the investigator wrote.

Accounts Closed

Bank of America, based in Charlotte, North Carolina, closed the Falcone accounts in 2007 after the Senate panel asked about them, the report said.

The report faulted London-based HSBC for its handling of accounts involving BAI, a $7 billion Angolan private bank whose largest shareholder is Sonangol, the state-owned oil company. BAI set up accounts at HSBC Bank USA, which also issued dozens of credit cards to BAI employees.

“BAI is exactly the type of foreign national institution that the Patriot Act intended to subject to enhanced monitoring, not only to prevent terrorists and criminals from misusing the U.S. financial system, but also corrupt foreign officials,” according to the report.

Ownership Question

BAI resisted repeated attempts by HSBC in the past decade to determine the exact ownership structure of the bank, according to the report. In all, HSBC couldn’t determine the owner of 19.5 percent of BAI’s shares, according to the report.

“HSBC takes compliance matters very seriously,” said spokeswoman Juanita Gutierrez in an e-mailed statement. “HSBC’s record demonstrates a commitment to vigorous enforcement and continuous enhancement of anti-money-laundering policies and practices.”

HSBC also conducted a business venture with Falcone in Angola through their joint ownership from 1997 to 2004 of Triang Ltd., a trucking operation that transported fuel for the Angolan diamond industry, according to the report.

--Editors: Laurie Asseo, Don Frederick