How a Bank Linked to DR Congo’s President, Joseph Kabila, Enabled Hezbollah Financiers to Bust U.S. Sanctions

How a Bank Linked to DR Congo’s President, Joseph Kabila, Enabled Hezbollah Financiers to Bust U.S. Sanctions

18/10/2017

BGFIBank DRC is headed up by the brother of DRC President 

Joseph Kabila Kabange (pictured). The Sentry originally was

 investigating the bank for separate allegations that the

banking institution had been used to divert public

 funds, including millions in withdrawals by

 Congo’s electoral commission. 

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The same banks used by kleptocratic governments to divert state assets can also be used by terrorist financing networks. This is what has taken place at one prominent bank in the Democratic Republic of the Congo (DRC). Individuals and entities subject to U.S. sanctions, in connection with Hezbollah, used the bank to move money through the international banking system, despite several warnings from bank employees that doing so could violate U.S. sanctions. This was not just any bank. BGFIBank DRC, the institution that processed the transactions, is run by President Joseph Kabila’s brother and has been mentioned in a recent scandal in Congo involving the alleged diversion of public funds from state-owned mining companies and the national electoral commission.[i]

  BGFIBank DRC's headquarter in Kinshasa, capital of the 

Democratic Republic of the Congo.

As set out in this report, in 2011 bank employees at BGFIBank DRC raised the alarm with senior officials at the bank, in writing, about a series of transactions. The concern was that the transactions involved companies linked to financiers of Hezbollah, a Lebanon-based terrorist group and political party. The main entities in question were subsidiaries of Kinshasa-based business conglomerate Congo Futur, a company under U.S. Department of the Treasury sanctions. Among the recipients of the warnings was Francis Selemani Mtwale, the bank’s CEO and brother of President Joseph Kabila.[ii] But the bank’s relationship with Hezbollah-linked companies continued. BGFIBank DRC even went so far as to request that certain transactions be unblocked by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) after other banks refused to process them. And BGFIBank DRC continued to engage in correspondence with Congo Futur-affiliated company representatives in 2016. This raises major questions about the bank’s ability and willingness to fulfill its sanctions and anti-money laundering compliance obligations.

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BGFIBank DRC has been reported to have been used to divert significant public funds in Congo, including millions of dollars in withdrawals by Congo’s electoral commission, and transfers of $8 million in cash in irregular “tax advances” from Congo’s largest state-owned mining company, Gécamines.[iii] Published reports raise serious questions about the bank’s regulatory and compliance regime.

Inadequate anti-money laundering compliance and sanctions enforcement standards at banks can empower a wide range of criminal groups and corrupt actors—and ultimately undermine governance and contribute to instability in Congo and elsewhere. Members of civil society have suggested that business interests could be part of the reason Kabila, who has sparked a violent nationwide political crisis by recently overstaying his presidential term limits, has maintained an iron grip on the presidency.[iv]

A new report alleges that several 2011 transactions at the Congo-based 

BGFIBank DRC involved companies that had been linked to Kassim 

Tajideen—a Lebanese-Belgian businessman who was designated

 by the U.S. Department of the Treasury as a Specially 

Designated Global Terrorist.

In the example profiled in this report, BGFIBank DRC’s approach to enforcing sanctions has allowed Kassim Tajideen—described by the U.S. government as “an important financial contributor” who “has contributed tens of millions of dollars to Hizballah”[v]—and his network to maintain access to the global financial system despite being placed under U.S. sanctions in 2009 and 2010. The documents reviewed by The Sentry also show links between Congo Futur and other firms under Kassim Tajideen’s control. These documents indicate that Congo Futur subsidiaries used BGFIBank DRC to operate accounts and make wire transfers after both Congo Futur and Kassim were placed under U.S. sanctions, despite warnings from bank employees that the bank should not do so. This is despite repeated public assertions from both Kassim and one of his brothers who is not under U.S. sanctions, Congo Futur General Manager Ahmed Tajideen, that the Kinshasa-based conglomerate had no links to any of the Tajideens under U.S. sanctions.

Congo Futur has continued to thrive in Congo despite U.S. sanctions; it even maintains financial ties to the Congolese government and has received government contracts. These continued relations raise serious questions about the Congolese government’s reliability in the fight against global terrorism, transnational crime, and illicit finance. Congo Futur has risen and remained prominent despite facing sanctions and the Kabila regime’s decreasing legitimacy. BGFIBank DRC has been used to facilitate Congo Futur’s access to the U.S. financial system, despite sanctions.

I.        Targeted Sanctions. The United States and European Union should urgently impose and implement three sets of targeted economic sanctions actions:

·         The U.S. government should investigate and act pursuant to Executive Order 13224, which is the principal authority used for counterterrorism sanctions, to designate any officials at BGFIBank DRC who the United States identifies as having knowingly undertaken transactions on behalf of Congo Futur, as well as to designate any other entities in the Congo Futur network that the United States identifies as engaged in unlawful activities.

·         The U.S. government should investigate and act pursuant to Executive Order 13671 and the European Union should investigate and act pursuant to Regulation (EC) No. 1183 of July 18, 2005 and Regulation (EU) 2016/2230 (2), which are the principal U.S. and EU authorities used for sanctions related to the Democratic Republic of Congo, to designate the networks of senior members of the regime, including financial advisors, Kabila family members, and their companies that the United States and the European Union identify as having engaged in unlawful activities.

·         The U.S. government should sanction those responsible for “acts of significant corruption” in connection with the transactions described in this report, pursuant to the Global Magnitsky Human Rights Accountability Act (Public Law 114-328).[vi]

The impact of these sanctions actions would be the same: to freeze the assets of any designated individuals and entities and block them from the financial system.

II.        Criminal Investigations. The U.S. Department of Justice should expand its investigation into the Tajideen network to evaluate the potential criminal liability of BGFIBank DRC leadership for knowingly doing business with Hezbollah financiers pursuant to the U.S. Patriot Act and the U.S. International Emergency Economic Powers Act (IEEPA). Specialized human rights and transnational crimes units in the United States and Europe should investigate whether entities within their jurisdiction have ties to the Tajideen network, with a view toward any financial facilitation of terrorist activities or human rights violations, including the potential facilitation of crimes occurring in Congo.

III.        Anti-Money Laundering/Counter-Threat Finance Actions. The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and financial intelligence units (FIUs) in Europe should immediately investigate the transactions described in this report and, if warranted, issue advisories to banks and other financial institutions. FinCEN should issue an investigative request, pursuant to its authority under Section 314(a) of the Patriot Act, to request that banks search for records related to the individuals and companies involved. If FinCEN identifies specific patterns of money laundering or threat finance, the advisories should state the risk that banks conducting business with BGFIBank DRC may incur by processing transactions on behalf of Hezbollah-linked entities. If warranted, FinCEN should also warn of the broader risks evident in the Congolese banking system, specifically the money laundering and threat finance risks related to the corruption of the Kabila regime and business network. This critical step would lead banks to conduct greater vigilance and reporting and could lead to further FIU actions.

IV.        Bank Due Diligence/De-Risking. Global banks with commercial relationships in Congo should immediately undertake enhanced due diligence on those relationships with banks in Congo, including provision of correspondent banking, trade finance, and other services, while at the same time being cognizant of and avoiding over-compliance and de-risking.

V.        Public Corporate Registry. The Congolese government, led by the Ministry of the National Economy and the Ministry of Foreign Commerce, should create a searchable online public registry of all corporate entities formed in the country to improve corporate transparency, public oversight, and accountability.

By The Sentry 

     War Crimes Shouldn't Pay

Resources:

[i] Xavier Counasse and Colette Braeckman, “Corruption au Congo: les preuves qui accablent le régime Kabila,” Le Soir, October 29, 2016, available at http://plus.lesoir.be/66290/article/2016-10-29/corruption-au-congo-les-preuves-qui-accablent-le-regime-kabila; Jeffrey Gettleman, “As President Joseph Kabila Digs In, Tensions Rise in Congo,” The New York Times, December 27, 2016, available at https://www.nytimes.com/2016/12/17/world/africa/congo-joseph-kabila-corruption.html.

[ii] According to the Congo Research Group and the Pulitzer Center on Crisis Reporting, “Selemani became an adopted son after his father, one of Laurent-Désiré’s rebel comrades, was killed.” Congo Research Group and Pulitzer Center on Crisis Reporting, “All the President’s Wealth: The Kabila Family Business,” p. 7 (July 2017), available at https://allthewealth.congoresearchgroup.org/dist/assets/all-the-presidents-wealth-ENG.pdf.

[iii] Documents obtained and reviewed by the Sentry; Counasse and Braeckman, “Corruption au Congo”; Aaron Ross, “Belgium, Congo activists urge probe into Congo corruption claims,” Reuters, October 31, 2016, available at http://www.reuters.com/article/us-congo-corruption/belgium-congo-activists-urge-probe-into-congo-corruption-claims-idUSKBN12V1ZW; and Gettleman, “As President Joseph Kabila Digs In.”

[iv] Michael Kavanagh, Thomas Wilson, and Franz Wild, “With His Family’s Fortune at Stake, President Kabila Digs In,” Bloomberg, December 15, 2016, https://www.bloomberg.com/news/features/2016-12-15/with-his-family-fortune-at-stake-congo-president-kabila-digs-in; Kimiko de Freytas-Tamura, “When Will Kabila Go? Congolese Leader Long Overstays His Welcome,” The New York Times, July 23, 2017, available at https://www.nytimes.com/2017/07/23/world/africa/congo-joseph-kabila-elections.html?mcubz=1.

[v] U.S. Treasury Department, “Treasury Targets Hizballah Network in Africa,” Press release, May 27, 2009, available at https://www.treasury.gov/press-center/press-releases/Pages/tg149.aspx.

[vi] S.284 – Global Magnitsky Human Rights Accountability Act 114th Congress (2015-2016), available https://www.congress.gov/bill/114th-congress/senate-bill/284/text; Letter from 23 organizations dedicated to the promotion of universal human rights and the fight against corruption to U.S. Secretary of State Rex Tillerson and U.S. Treasury Secretary Steven Mnuchin, September 12, 2017, available at https://enoughproject.org/blog/ngos-call-sec-tillerson-sec-mnuchin-robust-implementation-magnitsky-act

VW fails to secure long-term cobalt supply for electric vehicles

VW fails to secure long-term cobalt supply for electric vehicles

16/10/2017

Producers shun carmaker’s tender for five years’ worth of the battery raw material

An employee working on an e-Golf at VW's factory in 

Dresden, Germany

An attempt by one of the world’s biggest carmakers to secure long-term supplies of cobalt for its push into electric vehicles has been shunned by leading producers of the metal.

Volkswagen issued a tender last month seeking a minimum of five years of supply at a fixed price, according to people familiar with the process, but struggled to find any takers. 

The carmaker put off miners by suggesting a price that was well below current market prices, which have jumped by more than 80 per cent this year, the people said. “They’re being arrogant because they’re automotive and they’re used to doing it,” one trader said.

“They completely misjudged the contents of the tender. There’s no point negotiating — it’s not even a discussion point.” 

The pushback is a sign of the difficulties carmakers face securing long-term supplies of battery raw materials as they gear up to produce electric vehicles for the mass market.

“Volkswagen is looking for long-term strategic solutions for important e-mobility raw materials in order to ensure capacity and price stability,” a spokesman for the company said, declining to comment on ongoing sourcing processes. 

Electric vehicle batteries require much larger quantities of raw materials than those found in smartphones and iPads. That is challenging small markets for lithium and cobalt, which have seen dramatic price rises.

More than 60 per cent of cobalt is mined in the Democratic Republic of Congo, which has raised fears among automakers over security of supply. The DRC’s president Joseph Kabila has not set a date for elections, after he failed to step down before a deadline last December.

Cobalt production in the DRC is dominated by a handful of producers including Glencore and China Molybdenum. Outside the large companies, cobalt is mined by hand before it is collected and sent to China. Last year Amnesty International said that process often involved child labour. 

“A secure and sustainable supply of raw materials for the Li-ion [lithium ion] battery will be the key factor to become e-mobility market leader,” VW said in the tender, a copy of which was seen by the Financial Times.

The original deadline for the tender was the end of September, which was then extended until this month.

Tesla Motors and BMW is also said to be looking for supplies of cobalt, according to people in the market, though no formal tenders have been issued. 

VW Group, whose 12 brands include Porsche, Audi, Skoda and Bentley, has pledged to spend €70bn to electrify 300 models by 2030. It aims to be the biggest producer of electric vehicles by 2025. 

While it did not give a specific amount of cobalt required, based on the tender it would need 80,000 to 130,000 tonnes of cobalt, one trader said. The current market is just over 100,000 tonnes a year.

With assistance from Patrick McGee in Frankfurt
Financial Times

How Ballots Are Being Used to Delay the Congolese Election

How Ballots Are Being Used to Delay the Congolese Election

13/10/2017

Congo opposition supporters protest what appear to be 

fraudulent ballots – badly printed photocopies of 

election ballots found in Kinshasa.

Election ballots in the Democratic Republic of the Congo can look more like the weekend edition of a newspaper than the single folded sheet of paper common the United States.

Congolese electoral laws allow a nearly unlimited number of candidates to run for parliament. In the coming election, now pushed to 2019, there may be as many as 28,000 candidates, each one with their name and photo printed in a ballot.

The expense and logistical difficulties of printing and distributing 45 million of these massive ballots are nearly insurmountable. After they’re printed, ballots must be trucked or flown to 126,000 polling stations around the country. The electoral commission has yet to acquire the necessary funds, and the voter registry isn’t complete.

Or at least, these are some of the official reasons given for why Congo will not be holding elections for another year and a half, according to a source familiar with the election process who requested not to be named.

“In 2006, we got huge support from the [United Nations]. We used 108 aircraft supported by the U.N. But today there is none,” the source told Foreign Policy in an interview in Washington, D.C. “The budget is around $600 million. Who is going to fund [this]?”

Presidential and parliamentary elections were scheduled for December 2016, but those were delayed, with President Joseph Kabila and the opposition coming to an agreement that elections would be held in 2017. Even with the agreement, the election delay has threatened a political crisis in the young Central African republic.

Kabila, who assumed office after his father, President Laurent Kabila, was assassinated in 2001, has already completed two six-year terms — the maximum allowed under the constitution.

Opposition members claim that the younger Kabila is trying to hold on to office until he can find a way to change the constitution to allow him to stay in power longer, or even indefinitely, as has happened in Rwanda, Burundi, and elsewhere.

Dozens died when rowdy protests and subsequent crackdowns broke out after Kabila refused to hold elections last December.

But on Tuesday, Congo’s Independent National Electoral Commission (CENI) announced that elections would be pushed back 504 additional days, to mid-2019. That could be a disaster for the unstable, corruption-riddled government, opposition leaders and analysts say.

What the CENI has announced is not an electoral calendar but an election-killing agenda,” said Claudel Lubaya, a member of the opposition, in an interview with Reuters.

“If elections are not held this year, it will embolden the opposition” and support their allegations that Kabila is carrying out a power grab, John Mukum Mbaku, a nonresident senior fellow with the Africa Growth Initiative at Brookings, told FP. “It will create the kind of frustration among members of the opposition that could launch the country into more sectarian violence.”

Since December, the country has faced pushback from the international community. The United States, Britain, Belgium, France, the United Nations, and human rights groups have called on the government to respect the rights of its citizens to peacefully assemble and to hold elections in a timely manner.

In the run-up to Tuesday’s announcement, the Congolese government has hired prominent lobbyists in Washington, D.C., including Nancye Woolsey (the wife of former CIA director James Woolsey), former U.S. Senator Bob Dole, and Donald Trump campaigner Adnan Jalil. In an unusual arrangement, Congo has also agreed to pay the Israeli firm Mer Security and Communications $5.6 million this year to help coordinate lobbying the Trump administration and Republican leadership.

The agreement between Kabila and the opposition was a “lie” to the Congolese people, said the source familiar with the electoral process, because it was logistically impossible to hold a fair election in 2017.

The source denied that Kabila was behind the delay but admitted that “maybe President Kabila is profiting from this.”

The DRC embassy in Washington did not answer multiple calls and an email on Thursday.

But the argument that elections are logistically challenging and expensive is the same argument given almost a year ago when the vote was delayed the first time.

There’s a real possibility, Mbaku said, that in 2019, the president “and the electoral commission would find some other thing to complain about and postpone the election again.”

By Bethany  Allen  Ebrahimian

Foreign  Policy