No place to hide: What reformed Swiss banking law and monitoring of local funds transfers means for grand corruption in Africa

NAIROBI, Kenya, May 4, 2017 – A top National Lands Commission official was…found with a whopping Sh17 million (163,540 USD) in his house during a raid by detectives from the Ethics and Anti-Corruption Commission (EACC).

A senior EACC official told Capital FM News that they found $160,000 and Sh1 million in local currencies – in what they described as a major breakthrough in their investigation of skewed compensation of land for the Standard Gauge Railway.

“In total, Sh17 million was found in the house of the NLC official,” the EACC official said, but declined to name the individual…. Our source at EACC said could not disclose the suspect’s identity for fear of jeopardising the ongoing investigation because the money seized is considered crucial evidence in prosecuting the case.

 – Capital News, Nairobi 

The man on the ground, leading Kenya’s war on corruption. Ethics and Anti-Corruption Deputy CEO Operations, Michael Mubea. (Photo: Ethics and Anti-Corruption Commission (EACC)/Facebook)

When this revelation of large sums of cash being found in the private residence of a public servant was first made, the question on the lips of many Kenyans was not “Where on earth did a public servant get that much money?” Kenyans have long been accustomed to revelations about massive thefts of public funds, by officials at various levels, and one more such theft was not really a surprise.

The more pertinent question was, “Why would anyone take the risk of keeping such large sums in their own house in cash?”

Why indeed?

VERY SMALL TIP OF A VERY LARGE ICEBERG

This revelation was just the very small tip of a very large iceberg. For years, Kenyans have watched helplessly as far larger sums – sometimes in the billions of Kenyan shillings, and hundreds of millions of US dollars – were stolen with impunity from public coffers. And this money then seemed to just vanish into thin air.

However, without much fanfare, the noose has steadily been tightening on all such beneficiaries of official corruption. First, thanks to much-improved monitoring by the Central Bank of Kenya, the option of just depositing such funds in a personal account was no longer an option. One local bank had already landed in hot soup for not reporting faithfully on the large cash withdrawals from certain accounts linked to the fraudulent procurements at the National Youth Service.

But local banks have not been the only institutions involved in facilitating such fraud. International banks have also had a conspicuous role in helping to conceal the proceeds of large-scale theft of public funds.

KENYA’S LONGSTANDING “CULTURE OF IMPUNITY”

Traditionally, Kenyans who wanted to conceal the large bribes they had received insisted that their money be deposited in offshore accounts. A fine example of this kind of thing is Messrs Samuel Gichuru and Chris Okemo, whose shenaniganry was reported as follows in the Nation media website on the 7^th of March 2016:

“…More than Sh380 million that was stashed abroad would be returned to Kenya in a deal signed by the government and the UK. The two countries signed an agreement on March 3 this year paving the way for the return of the money. The agreement is the latest step taken by both governments to secure the return of the funds, which were confiscated by the Royal Court of Jersey in February 2016.

This is after defendant company Windward Trading Limited, associated with former Kenya Power boss Samuel Gichuru, pleaded guilty to four counts of laundering the proceeds of corruption. The corrupt activities took place in Kenya and in May 2011, the UK issued a warrant of arrest against Mr Gichuru and former Nambale MP Chris Okemo over alleged corruption and money laundering….”

Chris Okemo and Samuel Gichuru in court. The former kingpins of Kenya’s energy sector are now fighting extradition tooth and nail.

In the dock: Chamanlal Kamani, Deepak Kamani and Rashmi Kamani during a mention of the case against them over the Anglo Leasing Scandal.

But this is just the beginning of a trend that seems set to make it possible that an end may be on the horizon, for Kenya’s longstanding “culture of impunity” when it comes to grand corruption.

Top Kenyan officials may yet continue to use their positions to collect large bribes, or to profit from fraudulent procurement, as has been done since the 1960s. But, unlike in past years, they will no longer find it that easy to conceal the proceeds of their grand theft.

At the forefront of this new trend are two countries: The UK and Switzerland.

MEMORANDUM OF UNDERSTANDING

The Ambassador of Switzerland to Kenya, Dr Ralf Heckner, and the Attorney General of Kenya, Prof Githu Muigai, signed a Memorandum of Understanding on mutual legal assistance in criminal matters, on April 28, this year.

According to Ambassador Heckner, this was intended to “bring about an improved and enhanced co-operation between Switzerland and Kenya when it comes to fighting corruption and to facilitating the repatriation of stolen funds to the people it belongs to.”

In a jointly-authored op-ed published in The Star, on the day of the signing ceremony, the two wrote:

“…Corruption literally kills – because there is a lack of money for health, sanitation, infrastructure and education. …The Memorandum of Understanding is more than a piece of paper, it is a demonstration that Switzerland and Kenya are committed to taking all steps within their own legislation to stamp out corruption and organised crime…”

The signing of this MoU was the culmination of a decade of continuing effort – on the Swiss side, by three different Ambassadors over that period.

And to fully appreciate the significance of this MoU, we first need to take a detour into African history:

THE ‘AFRICAN BIG MAN’

Perhaps one of the most widely read books written about Africa is Blaine Harden’s Africa: Dispatches from A Fragile Continent.

This is what he had to say about the ‘African Big Man’ – the type of African leaders who were dominant in the 1980s, the period just before the fall of the Berlin Wall marked the end of the Cold War, and a wave of democratisation swept over Africa:

“…His face is on the money. His photograph hangs in every office in the realm…He names streets, football stadiums, hospitals and universities after himself…His every pronouncement is reported on the front page…His off-the-cuff remarks have the power of law…He awards uncompetitive, overpriced contracts to foreign companies which grant him, his family and his associates large kickbacks…”

All this may seem exaggerated and maybe even a misrepresentation, given the changes that have occurred in African politics since the early 1990s. But if anything, it is a somewhat toned-down account of the kind of shenanigans that African Big Men routinely got up to, in their days of glory when they could play off global Eastern and Western bloc interests against each other, and continue to pile up vast personal fortunes even as their people sunk deeper and deeper into poverty.

THE PREEMINENT DESTINATION FOR ILL-GOTTEN WEALTH

One thing Blaine Harden did not give enough thought to, however, was the role that European banks – and in particular, Swiss banks, famous for their extreme secrecy – played in sustaining the rule of African Big Men.

When you are busy looting your nation’s treasury at every opportunity, you need to identify a safe place where all that stolen money can be deposited. And back then, the preeminent destination for such ill-gotten wealth, was the “Swiss numbered account”: So termed because such accounts officially had no names attached to them at all. There was only a number.

According to a Wikipedia entry:

“A numbered bank account is a type of bank account where the name of the account holder is kept secret, and they identify themselves to the bank by means of a code word known only by the account holder and a restricted number of bank employees, thus providing accountholders with a degree of bank privacy in their financial transactions.

It is in this context then that Félix Houphouet-Boigny, the founding president of Cote D’Ivoire (who ruled his country for 33 years) once posed, reportedly with no humour intended, the question, “Is there a serious man on earth today who does not own a Swiss bank account?

Birds of a feather: Félix Houphouët-Boigny with then Romanian dictator Nicolae Ceausescu in 1977.

IN THE FOOTSTEPS OF MR KURTZ

And yet, although a dollar billionaire by the last decade of his rule, Félix Houphouët-Boigny was by no means the most rapacious of Africa’s Big Men. That title goes to the late “Field Marshal” Mobutu Sese Seko, who even had his country’s name changed from Congo to Zaire – though it is now again Congo, and colloquially known as “Congo DRC”.

Mobutu is generally regarded as having had no peers among African Big Men, as much in how ruthlessly he dealt with political opponents, as in his ability to gather unto himself much of his country’s wealth (even intercepting, for personal use, the loans that the country received from multilateral lending agencies).

Cover of “In the footsteps of Mr Kurtz” by Michela Wrong

Michela Wrong, in her book, In the Footsteps of Mr Kurtz: Living on the Brink of Disaster in the Congo gives an account of the efforts to trace Mobutu’s fabulous fortune after his death:

“Mobutu’s name features near the top of a list which embraces Marcos and Bhutto, Noriega and Suharto: Third World leaders whose swollen assets serve as shameful indictments of a bankrupt Western policy based on indulgence and appeasement. For the campaigners, the paltry $4 million unearthed by the Swiss banks is a sign of either institutional hypocrisy or wilful naivety. An operator as wily and as well connected as Mobutu, they argue, would never make the basic mistake of depositing the bulk of his takings in his own name.

‘They launch an electronic search for “Mobutu” or for “Bobi Ladawa”. But you’d have to be crazy to keep accounts in those names!’ scoffs Jean Ziegler, a writer and socialist Swiss MP who has dedicated his career to exposing the moral duplicity of the Swiss banking system. ‘If you set up an off-shore society, which sets up a trust fund, which opens an account in a fictional name, then that’s not going to show up on the computers.”

Advertisement

The “Mr Kurtz” in the title of this book is the extraordinarily sinister figure in Joseph Conrad’s Heart of Darkness. This book was published in 1889, and was written after Conrad had sailed up the River Congo and observed for himself the excesses of the mostly Belgian “traders” who dealt primarily in ivory.

Cover of “Heart of Darkness” by Joseph Conrad.

The suggestion here is that just as the Belgians had mercilessly plundered the “Congo Free State” (as it was known at the time) so too was Mobutu, during his 32-year rule, allowed by his Western allies to plunder Zaire (as he had personally named the country). And by some accounts, of the Western institutions which facilitated this plunder, none was considered more culpable than the Swiss banking system.

But even though it was not at all obvious in Mobutu’s heyday, Switzerland was by the 1980s already moving towards putting an end to its reputation as a jurisdiction wherein, once a dictator or corrupt politician from a developing nation transferred huge sums into a bank account, he could rest easy.

A POLICY SHIFT TOWARDS TRANSPARENCY

Starting in the 1980s with an effort to deny criminal racketeers the use of the Swiss banking system to launder the proceeds of their illegal activities – and especially drug money – a series of anti-money-laundering laws were passed in Switzerland.

The focus within the Swiss financial sector was on becoming a ‘clean financial sector’ rather than a place notorious as a haven for illegally-obtained funds; and this involved a policy shift towards transparency.

As explained by Ambassador Ralf Heckner, from that point onwards, “Switzerland would no longer be a safe haven for the corrupt.”

Switzerland Ambassador Ralf Heckner with his wife Ilaria. (Photo: Ralf Heckner)

The thinking behind this change was not purely altruistic. There was an awareness that the Swiss bank sector could only thrive if Swiss laws created a win-win situation between Switzerland and other nations; and that Switzerland itself could not thrive if it was seen to be a rogue state in the middle of Europe.

And it is here that this new Swiss policy becomes of great interest not only to Kenyans, but to many others in developing nations.

It all began when the Swiss authorities changed their banking laws. (Photo: Swiss Parliament Building/Federal Palace of Switzerland)

MAKING SURE CRIME DOESN’T PAY

The Swiss Federal Department of Foreign Affairs, Directorate for International Law, explains the new Swiss policy in a document titled, “Making Sure Crime Doesn’t Pay: Repatriating the Proceeds of Crimes” as follows:

“Assets illicitly acquired by Politically Exposed Persons (PEPs) such as Heads of State and high public officials, who illegally enrich themselves through state funds, deprive their state of capital and hinder the development of their country. These so-called “potentate funds” are frequently sent out of the country and invested in international financial centres. Switzerland has a fundamental interest in ensuring that assets of criminal origin are not invested in its financial centre…Assets illicitly acquired by PEPs that manage to enter Switzerland despite comprehensive precautionary measures have to be identified and repatriated to their country of origin.”

This might seem like mere eyewash, intended to deceive the citizens of those nations which have thus been subjected to the depredations of ruthless dictators, their families and associates. After all, there must have all along been some very specific financial advantages in permitting all those many “Swiss numbered bank accounts” to be opened within Switzerland. Both the banks and the country must have seen some advantage in it. So why throw away a goose which had evidently been laying golden eggs all this time?

Well, such skepticism may have been valid in the early years of this shift towards transparency, but not anymore. Remember, this process started back in the 1980s, and in the 30 years since, much progress has been made, and evidence of the serious intention by the Swiss in this matter has been steadily accumulating.

Here are two examples from documents provided by the Swiss Federal Department of Foreign Affairs:

1. Philippines: In the end of the 1990s, the Swiss Federal Supreme Court determined that the assets held by the Marcos foundations were of criminal origin and the Court ordered their transfer to escrow accounts in the Philippines. An enforceable judgment by a Philippine Court finally brought the mutual legal assistance procedure to an end and the restituted USD 684 million could be used to compensate victims of human rights violations under the Marcos regime.
2. Nigeria: In 2005, the Swiss Federal Supreme Court ruled that Sani Abacha’s assets frozen in Switzerland were of criminal origin and could be restituted to Nigeria even though the country had not issued a forfeiture order (advanced restitution). Switzerland and Nigeria agreed that the use of the assets (USD 700 million) would be monitored by the World Bank.

Ferdinand Marcos (saluting), the legendary dictator of the Philippines. (Photo/Dino Bartomucci)

And this is by no means the worst news for those who would seek to hide their ill-gotten funds in Swiss banks.

The approach used by the Swiss authorities has since evolved to include the anticipatory freezing of funds:

“During the Arab uprisings of 2011, the Swiss government immediately took proactive measures and ordered the freezing of assets of the former rulers involved and their entourages without waiting for requests for mutual legal assistance from the countries in question. Lacking a specific legal basis to do so, this was undertaken as an emergency measure based on the government’s constitutional right to safeguard Switzerland’s interests.”

What all this means is that a modern-day Mobutu or Houphouet-Boigny, intent on concealing his vast illicit fortune behind the safety of numbered accounts, would have to look elsewhere. As the Swiss Federal Directorate for International Law explains:

“The strict provisions of Swiss anti-money-laundering legislation oblige Swiss banks and all other financial service providers to identify not only the contracting party, but also the economic beneficiary…Banks and other financial intermediaries are required by law to report all suspicious transactions and to block immediately any account where there is suspicion of money laundering. Swiss banking secrecy provides no protection against the prosecution of criminal offences either in Switzerland or in the context of international mutual assistance in criminal matters.”

AND SO, ONTO ANGLO LEASING

Of particular interest in this context is the Anglo-Leasing scandal, currently before the courts here in Kenya, and therefore subject to the ‘sub judice’ provisions of the law. But what is already in the public domain is that a fabulously wealthy family of Kenyan Asians, the Kamani family, has been accused of playing a central role in this giant scam, and a few of the family members have already appeared in court to answer charges related to Anglo Leasing.

President Daniel arap Moi and his successor President Mwai Kibaki.

This scandal – of alleged “ghost contracts” – was initiated in the last days of the regime of retired President Daniel arap Moi, but extended into the early years of the Mwai Kibaki presidency (2002-2013). It was initially brought to public attention by the British High Commissioner Sir Edward Clay, perhaps the most storied foreign diplomat to ever serve in Kenya.

Sir Edward Clay, the former British High Commissioner to Kenya. During his stint in Nairobi, Sir Edward earned a reputation for his willingness to speak out against corruption at high levels.

In this scandal, public funds were alleged to have been stolen by direct payment for contracts which were never honoured; for goods which were not supplied; at prices which were impossible to justify; and to corporate entities which, basically, did not exist.

Whatever the truth may be in this matter, the established fact is that there is roughly 2.0 million Swiss Francs (KSh206 million) currently held in frozen accounts in Switzerland, which are judged to be the fruits of fraudulent contracting by officers of the government of Kenya, in this matter.

If the Kenyan courts were to finally get to the bottom of this matter, it would not only free the Swiss authorities to release – for use in Kenya – the sums which are currently in those frozen accounts.

Possibly even more important than the money to be refunded, is the signal it would send: It would encourage Kenya’s growth as a regional financial hub.

There is currently a Bill before Parliament, which is supposed to facilitate the proposed Nairobi International Finance Centre. A final resolution to the Anglo Leasing scandal, through the courts, would demonstrate that the Kenyan financial sector was governed by the rule of law, and not by the arbitrary whims of those who might be temporarily in power.

THE QUESTION OF SCALE

The problem, when it comes to this matter of repatriation of the proceeds of crime, is one of scale. The Swiss authorities may currently be on standby to send back to Kenya the aforementioned KSh206 million. But by all accounts, that is but a small part of the money Kenya lost in the Anglo-Leasing scam: A very small slice of a very big pie.

Possibly even more important than the money to be refunded, is the signal it would send: It would encourage Kenya’s growth as a regional financial hub.

The US Ambassador to Kenya of the time, Michael Ranneberger, highlighted the magnitude – and sheer brazenness – of this type of grand corruption, in a speech he gave in Nairobi back in 2006.

The Ambassador emphasized that: “Corruption exacts a terrible human and economic cost and is probably the single greatest impediment to economic development and poverty reduction in Kenya.”

He then went on to speak of the Anglo Leasing scandal, which he said consisted of schemes involving several branches of the government, and which had robbed the Kenyan taxpayer of some $700 million. It should be mentioned though, that not all this money necessarily found its way to Swiss numbered accounts.

“MORE THAN ALL THE FOREIGN ASSISTANCE”

These schemes had been designed to siphon off significantly more than that, but were only partially successful: Most were closed after details of their operations were exposed in the media.

The Ambassador summed up with these words: “To put this number in perspective, that $700 million is more than all the foreign assistance provided to Kenya over the past year by international development banks and (foreign governments) …It is twice as much as the amount budgeted for health.”

In this context then, Kenyans can only take limited consolation in the knowledge that 2.0 million Swiss Francs (KSh206 million) held in suspect accounts believed to be related to this scandal, have been frozen by the Swiss authorities.

It has now been over 10 years since Kenyans heard of Anglo Leasing, and the broad public consensus has long been that there was a massive fraud involved in these various contracts collectively termed as “Anglo Leasing”.

Suspects have been in and out of court, but there has been no final determination. And many questions remain unanswered.

Wycliffe Muga is a Kenyan writer and veteran newspaper columnist.