How The Elite Hide Their Wealth

Leaks reveal extensive siphoning of $5bn Angolan sovereign wealth fund

Opaque associations with the vice president’s stepson, a disgraced German bank president, people convicted of financial mismanagement and a private Russian bank indicate that Angola’s sovereign wealth fund may be little more than a laundering tool, writes Khadija Sharife.

Angola’s sovereign wealth fund, the Fundo Soberano de Angola (FSDEA), promotes itself as a vehicle of development and prosperity for Angola – all $5 billion worth of it. The FSDEA is headed by José Filomeno de Sousa “Zenu” dos Santos, the son of President José Eduardo dos Santos, who has been in power since 1979.

But some have questioned whether the FSDEA, funded by oil revenue from Angola’s state-owned Sonangol Group, is just a channel for laundering revenue out of Angola. Scant information has been provided about the use of funds or the FSDEA’s investments and the fund is beset by claims of irregularities, nepotism and financial secrecy.

Read the full response from Mossack Fonseca here

A leak of internal data from Mossack Fonseca, a Panama-based offshore services provider, obtained by German newspaper Süddeutsche Zeitung and the International Consortium of Investigative Journalists, sheds new light on the complex structures behind Angolan wealth and political capital.

Previously, the African Network of Centers for Investigative Reporting (ANCIR) has explored the secretive relationship – and shared principles – between the FSDEA, its financial adviser Quantum (based in Switzerland) and Banco Kwanza, an investment bank formerly known as Banco Quantum. All three entities were at one stage created, owned or managed by the same group of people, including Zenu Dos Santos; Quantum’s chair and shareholder of 75% of Banco Kwanza, Jean-Claude Bastos de Morais; Banco Kwanza chief executive and former Quantum director, Marcel Kruse; and Ernst Welteke, a board member for both Quantum and Banco Kwanza.

These individuals have arguably murky backgrounds, with both Kruse and de Morais being convicted in Switzerland for “repeated qualified criminal mismanagement.” And a decade ago, Welteke was forced to resign as president of Germany’s Bundesbank following a scandal involving private lifestyle expenses that were charged to the bank.

Money from the FSDEA was laundered through Banco Kwanza to previously unknown recipients, including Kijinga – an entity that received $100 million in a single transaction in 2015. First reported by Maka Angola in early 2015, the transfer appears to have delayed publication of Banco Kwanza’s annual report. The FSDEA denied allegations of wrongdoing, claiming transparency and a high sovereign wealth fund ranking in the index of the Sovereign Wealth Institute, an unknown company listing an office in Nevada in the US. ANCIR called the number and was informed by a Regus representative that it was only a virtual office.

The FSDEA’s Zenu Dos Santos declined to respond when asked why investments weren’t published according to value, company and jurisdiction. He also did not clarify how Quantum was selected to manage $3 billion in FSDEA funds or what its specific role in the FSDEA was. Various other funds connected to the FSDEA, such as Angola’s $250 million venture capital fund, the Fundo Activo de Capital de Risco Angolano (FACRA), were wholly invested in Banco Kwanza with little oversight or disclosure. Though FACRA claims no formal connection to Quantum, there are links between the two, such as FACRA’s website being registered by Quantum. Banco Kwanza declined to answer questions about the relationship, citing confidentiality.

In these dubious beneficial relationships, high ranking politicians would not be so crude as to use their own names. Often, complex organisational structures are created where shares are held behind nominees – or false fronts – of other shell companies that are administered by a host of fiduciaries. The more layers the better.

Complex Ownership Webs

Mirco de Jesus Martins’ questionable financial and corporate dealings are a clear example of the use of such obfuscation. The stepson of the former head of Angolan gas and petroleum parastatal Group Sonangol, and current Angolan Vice President, Manuel Vincente, Martins is the subject of multiple letters from the British Virgin Islands’ Financial Investigation Agency concerning entities in which he is the beneficial owner. Many shell companies, created for a fee as low as $300, and which tended to disappear quickly, exist purely as passive holding entities to cloak the presence of bank accounts or shares in other companies. Outside of registered agents, jurisdictions and dates of incorporation, Mossack Fonseca’s own database reveals “no data” under key due diligence criteria for many companies identified as Martins’, including Shaman, Rolika, Heli-Vest and Halifax.

In fact, to establish ownership, Mossack Fonseca was required to seek assistance from other agents that create shell corporations, such as Interfina, which played an intermediary role. In turn, Interfina was also required to reach out to others, such as Phillip Toussaint of W-Conseil.

In a letter to Mossack Fonseca, Martins wrote that while he had been involved in the financial side of entities such as Banco Kwanza alongside Zenu dos Santos and de Morais, he left due to his misgivings about the company’s management. He also confirmed that he possessed, and later sold shares in, Sakus, a shell company that held 3.6% of Angola’s African Investment Bank (BAI). The bank’s corporate structure was investigated by the US Senate Committee during a probe into HSBC where it was discovered that over 40% of BAI shares were held by politically connected persons, including Vicente, who held a further 5% share in a shell company called ABL.

One 2013 document allegedly concerning the web of companies connected to Martins identified more than 15 entities managed by Interfina. Ten of these companies (including Halifax, General Corporate, Farvel and Kumar) existed simply to hold bank accounts in Lebanon, Portugal, Gibraltar and Switzerland, about five (such as Shaman and Sicas) also held shares in Portuguese companies and two were connected to airplanes documented under purchase and consultancy.

Not all companies continue with the same name: Farvel, holding a Lebanese bank account, was changed to Capital & Legal Consultancy (held in the British Virgin Islands), which declared a source of income from contractual obligations related to business in Angola. Nor are all connections immediately obvious – or designed to be so: Halifax, for example, held a bearer called Rolika that was also a bearer of Shaman, Sicas (all of which were incorporated in the British Virgin Islands), and so on.

As far back as 2001, shortly after many of Angola’s shell companies were incorporated, KPMG Financial advised Mossack Fonseca to immediately transfer Sicas, Ka Lumba, Shaman and Halifax from the British Virgin Islands to Liechtenstein. According to an email dated 18 January 2001 from Mossack Fonseca Luxembourg to its British Virgin Islands office, “There are politicians involved in this structure, and our contact in KPMG informed us that it would be even better for us to release these companies for risk reasons.” High level sources claim the presence of senior Angolan politicians may have initially been involved before being shifted wholly or partially to Martins as a nominee. Ultimately, these companies were identified as belonging to Martins.

Attempts to reach Martins through Toussaint, who is listed as his financial adviser, and through other means, including social media, proved futile. On his LinkedIn page, Martins identifies himself as a partner in a private equity group involved in oil, gas, financial equity and real estate called Grupo Vernon. Leaked data from Mossack Fonseca identifies a company called Vernon Angola Oil Services, which was described by a senior Swiss source as a company connected to the FSDEA’s financial machinery. In addition, the partnership between Martins, Grupo Vernon and Sonangol has been previously confirmed by energy journals such as World Oil.

The deliberate opacity of these entities indicates that secrecy is both desired and necessary for activities that involve, as noted by KPMG Financial, the presence of politicians, multiple entities and beneficial owners that do their utmost not to be identified.

An email written by Toussaint, exposed during the Mossack Fonseca data leak, indicates that his client, Martins, was frustrated with requests by the law firm to establish ownership details and argued that if the information already provided was sufficient for the Bank of Luxembourg, then it should also suffice for Mossack Fonseca. However, Mossack Fonseca appeared to struggle in re-domiciling Martins’ companies in Luxembourg under different agents due to the same lack of beneficial owner information that the firm required to fulfill the British Virgin Islands’ anti-money laundering legislative requirements, among other purposes.

Hiding in the Open

Much of the mystery surrounding the FSDEA comes from its banking activities in less visible or less regulated countries. In Rostov-on-Don in southern Russia, for instance, Quantum’s Welteke sits on the board of a private bank, Center-Invest. Angola and the dos Santos regime have a long history with Russia that is reflected by Welteke’s relationship with Angola’s first president, Agostinho Neto. Welteke allegedly assisted Neto with establishing financial systems during the Angolan Civil War to enable the provision of arms and medicines. The investment, dated 2013, and channeled to Renfin (incorporated in the British Virgin Islands), was described by a member of Center-Invest as, “an offshore container … [with] hidden investors in the Russian economy.” The source claimed the stake in Renfin, remitted by the FSDEA, “allows the FSDEA to control directly a stake into Center-Invest Bank … represented by Ernst Welteke.” Renfin Limited owns Rekha Holding, incorporated in Cyprus, which holds a 7.5% stake in Center-Invest. Like Renfin, Rekha’s beneficial owners are unknown. Neither Banco Kwanza nor the FSDEA offered comments on the question of Center-Invest and Renfin except to say investments were confidential. At the time of publication, Center-Invest had not responded to questions about the relationship, though the emails were tracked as having been received and opened by the Russian bank. Mossack Fonseca data shows that Center-Invest’s own shareholder structure, involving companies like Shaftesbury and Ewanton, involves hidden partners and provides loans to other shell companies with zero interest rates, omits specific repayment dates and has a general lack of detail about the identities of the involved parties.

There are a myriad of ways in which private banks can facilitate money laundering through offshore branches based in tax havens or less regulated countries like Russia. Private banks, particularly in tax havens or jurisdictions with scant regulation, allow for real or fictitious loans to create legitimate paper losses and the use of shell companies to remit or receive money as “investments” or deposits. Influence over, or ownership of, private banks provides a facility to illicitly move funds camouflaged among legitimate transactions.

The system established by the architects behind the FSDEA and Banco Kwanza is therefore a perfect set-up. There is a financial adviser, a source of funds, private banks and countless unknown recipients. The possibilities for illicit activity, particularly where it concerns political capital, are as limitless as the means by which to conduct them.

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