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Kleptocrats hiding funds in US warned ‘we will find you’

Meet the US Justice Department team that has so far uncovered more than $1.1 billion in allegedly stolen funds being channeled through America.

On March 5, the U.S. Department of Justice unsealed a complaint alleging a brazen pattern of high level corruption. A former president had manufactured phony national security expenses and directed his associates to stuff cash from the Central Bank into bags and boxes, which was then spirited through offshore companies in the British Virgin Islands into accounts in the world’s leading banks in New York and London.

The total amount looted through this scheme and other official acts, alleged the Justice Department, was more than half a billion dollars.

What made the announcement even more unusual than the vast sums of money involved was its target. The former president whose family’s assets were frozen was not an American, but the late Nigerian dictator Sani Abacha. The roughly half billion dollars being held was a record haul for the recently established Justice Department unit prosecuting his case: the Kleptocracy Asset Recovery Initiative.

“If you’re a kleptocrat, you’re going to have to do a really good job hiding your stuff because we’re going to get it eventually,” said Jaikumar Ramaswamy, the chief of the Justice Department’s Asset Forfeiture and Money Laundering section, which manages the Kleptocracy Initiative.

Announced by Attorney General Eric Holder in 2010, the Kleptocracy Initiative targets the proceeds of high level corruption in foreign countries. When looted assets pass through US banks and other financial institutions, the unit seeks to seize and ultimately return the assets to the countries affected. So far, it has uncovered more than $1.1 billion in allegedly stolen funds, much of which is still tied up in court.

Among the assets it has seized or frozen are $61 million from an Afghan trucking contractor, a Manhattan condo belonging to a former President of Taiwan, and nearly $2 million in Michael Jackson memorabilia belonging to the son of the president of Equatorial Guinea.

Ramaswamy said the unit has a dual mission: to help bring kleptocrats to justice, but also to harden the US financial system against illegal money flows.

The “underground criminal illicit finance infrastructure,” said Ramaswamy, serves not only corrupt politicians but also tax evaders and organized crime. If shadowy money is tolerated in any form, it opens the pipeline for other forms of criminal proceeds to flow into the United States.

In the case of Abacha – a military dictator best known in the West for his brutal execution of environmentalist Ken Saro-Wiwa – the Kleptocracy Initiative traced the BVI companies and bank accounts alleged to hold the looted money back to Abacha’s son and an associate. It has now frozen all of the assets within these companies and accounts, and is seeking their forfeiture in court.

But in some cases, Ramaswamy said, the unit is unable to penetrate the opaque shell companies that are used to hide stolen money. As ICIJ explored in its Offshore Leaks investigation, for as little as $90 “nominee directors” without business qualifications offer their names as fronts for offshore entities in which they have little to no real involvement.

“It often times is the dead end of an investigation, where you have a nominee trust or corporation, and you can’t pierce beyond it,” Ramaswamy said.

Just last week, the European Parliament voted to crack down on such companies by directing EU member countries to create public registries listing the real, flesh-and-blood owners of companies registered in their countries.

So far, the United States has not approved any comparable measures, and a former US financial crimes investigator recently argued in the New York Times that states such as Delaware are corrupt secrecy havens on par with any Caribbean paradise. The US Treasury Department is drafting a more limited measure which would require US banks and other financial institutions to find out and inform authorities – but not the public – of the true “beneficial owners” of their client companies. But as ICIJ reported in January, it has now been two years since the plan for the rule was announced, and the rule has yet to be drafted.

Ramaswamy said the lack of beneficial ownership data was the biggest obstacle that his team confronts in hunting down the assets squirreled away by kleptocrats.

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