BAI: The Regime’s Laundromat

In recent years, the Angolan financial market has been led by Banco Angolano de Investimentos – BAI (Angolan Investment Bank), a banking institution previously named Banco Africano de Investimentos (African Investment Bank). To a certain extent, the shareholding structure of the bank reflects its success as well as the institutionalization of public assets’ transfer to public officials, for their illicit enrichment.

Praised at US $8 billion, BAI currently holds a portfolio of deposits and credits estimated, by the Angolan National Bank, at US $10.4 billion and US $3.2 billion, respectively.

At its inception, in 1996, the National Oil Company Sonangol was BAI’s main investor, with 18.5 percent of its shares. Over the years, Sonangol quietly transferred 10 percent of its shares to the private ownership of high-ranking officials, besides the ones who, from the start, already owned considerable shares of the banks stock.

By way of illustration, the table below shows only the list of beneficiaries who, by the time they became shareholders of the bank, already held public office posts and who continue to hold positions in the government or in public administration. Left out of the list are individuals who became shareholders of the bank while in public office, but are currently engaged just in private business. This is the case of general João Baptista de Matos (2.5 percent) who, at the time, was Chief of the General Staff of the Angolan Armed Forces.

Altogether, identified public officials and former colleagues hold a total of 47.75 percent of BAI’s shares. Meanwhile, 42.25 percent is distributed among private Angolan companies associated with public officials, foreign and national managers of the bank, as well as foreign companies such as the Portuguese constructor Mota. Sonangol retains 8.50 of the shares, while the state-owned diamond company Endiama keeps 1.50 of BAI’s shares.

In 2010, the United States Senate investigated BAI’s operations in that country, on suspicion that the bank was operating as a money laundering vehicle at the service of senior Angolan officials. The investigation publicly revealed the transfer of BAI’s shares to certain high-ranking political figures.

According to the Senate’s report, BAI had requested HSBC to maintain confidentiality on the identity of the owners of Dabas Management, José Castro Paiva, and of ABL, Manuel Vicente, to allow “some privacy in relation to this investment.” But in fact, the intention of the confidentiality request was to conceal a crime of embezzlement. Manuel Vicente (Sonangol’s chair and CEO at the time) and José Paiva (Sonangol U.K chairman of the board) used their positions, while setting up the bank, to transfer a total of 10 percent of the bank’s shares, from the outset, to their private ownership.

With respect to Arcinella Assets and Sforza Properties, respectively registered in the Bahamas and in the British Virgin Islands, BAI provided contradictory information, according to the Senate report. As a way to avoid revealing the true identity of the shareholders, BAI declared that 13.5 percent of the shares, jointly held by the two companies, had been placed under the temporary ownership of José Carlos Paiva. He would hold them on a custodial basis, in his role as chairman of BAI. The bank further informed that, according to its strategy and that of Sonangol (its main shareholder), the shares would be transferred to “private individuals over time as they are able to generate wealth.” According to BAI, the individuals who would receive the shares were to be “of Angolan nationality,” with none to receive more than one percent of either special vehicle purpose company.

Moreover, Sakus – Empreendimentos e Participações S.A, a company that holds 3.6 percent of BAI’s capital, is run by Manuel Vicente’s stepson, Mirco de Jesus Martins, who is also his representative in many of his business dealings. This company was set up in 2005 by a Sonangol officer, Norberto Marcolino but, in 2007, new partners, represented by Mr. Martins took it over as an anonymous society (S.A).

The way BAI has explained the transfer of public assets to the private ownership of the Angolan elite is interesting. Its main reasoning is that BAI was created to facilitate the emergence of a national middle class, capable of controlling and developing the Angolan financial sector.

As a legitimizing example, BAI’s representatives have pointed out to the Black Economic Empowerment program in South Africa. This was a project created in 1994 by the ANC government as a legislative measure to correct the inequalities inherited from Apartheid. The program aimed to give economic opportunities to previously disadvantaged groups, such as blacks, coloureds, Indians and some Chinese. Besides promoting the participation in business creation and management, the program includes other initiatives aimed at improving the full economic and social integration of the country.

In a recent document accessed by the author, representatives of the bank also pointed out that war was an obstacle for any structural policy to be set in place. Therefore, BAI had to “take such a forward looking measure towards economic empowerment, even in the absence of a national program and national laws.”

There is, however, a very important element that differentiates the South African process from the Angolan case. Since Angola’s independence, both the political and economic power has been concentrated in the hands of a limited group of MPLA and government leaders. What changed, once the official Marxist-Leninist doctrine was abandoned in 1991, was simply a formality that transferred the control of the economy from the state to private hands, who are the same of government officials and their families.

For instance, in December 2010, just after the release of the Senate report, the Portuguese construction company Soares da Costa sold the three percent of shares it held at BAI to two Angolan private companies for US $27.7 million, but kept the identity of the buyers as a kind of state secret. These buyers are probably top government officials. Otherwise there would be no reason for such secrecy in a regular business deal.

BAI’s “empowerment” program is but a clear money laundering scheme. It introduces into the national and international banking systems assets diverted from public coffers for the private benefit of MPLA leaders and government officials, who are liable for crimes of corruption because of the plunder of the country’s resources. The Law against Money Laundering and Terrorism Financing establishes that both the participation and the facilitation of acts of traffic of influence are crimes of money laundering (Art. 51, 1). The law is also specific on the conversion and transfer of ill-gotten gains obtained directly or indirectly (Art. 51, 2), as is the case of share percentages transferred from Sonangol to Angolan officials.

BAI’s growth is due to the relationship it maintains with the state, the main shareholder and debtor of the bank. In fact, many of Sonangol’s financial operations are conducted through BAI. Last March, the state-owned oil company requested BAI to lead a bank syndicate from which to obtain a $600 million loan.

In 2007, BAI lead a syndicate of banks that loaned more than one billion dollars to the Angolan government. In 2008 BAI lent US $400 million to the government, according to public records, while Sonangol obtained a loan of US $150 million from the bank. In the following year, BAI issued credit to the government’s worth US $375 million.

International Respectability

Despite its deeply corrupt nature, BAI enjoys international respectability as it created, together with European institutions, the Angolan Private Investment Fund (Fundo de Investimento Privado de Angola). BAI’s partners include the European Bank of Investments (established by the European Union), the Norwegian Fund for Developing Countries (Norfund), the Danish Fund for International Investment (IFU), the Spanish Ministry of Foreign Affairs and Cooperation, as well as Banco Atlântico, in which Sonangol is also the main shareholder. The Angolan Private Investment Fund is administered by Angola Capital Partners, a private equity fund owned in equal parts by Norfund and BAI.

As a general rule, the Angolan government enjoys great complicity from the European Union and Nordic countries, which refrain from addressing publicly the situation of generalized corruption, democratic deficit and human rights’ abuses in Angola.

Angolans need to know about the type of detergents their government officials use, both in BAI and in other banks, to launder so much money stolen from the Angolan people. How can citizens, vested of their sovereign rights, claim back the assets that belong to them and demand justice? That is the question.