[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
                       CAPITAL LOSS, CORRUPTION,
                        AND THE ROLE OF WESTERN
                         FINANCIAL INSTITUTIONS

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 19, 2009

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-34



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             KENNY MARCHANT, Texas
RON KLEIN, Florida                   THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio              KEVIN McCARTHY, California
ED PERLMUTTER, Colorado              BILL POSEY, Florida
JOE DONNELLY, Indiana                LYNN JENKINS, Kansas
BILL FOSTER, Illinois                CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana                ERIK PAULSEN, Minnesota
JACKIE SPEIER, California            LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 19, 2009.................................................     1
Appendix:
    May 19, 2009.................................................    43

                               WITNESSES
                         Tuesday, May 19, 2009

Baker, Raymond W., Director, Global Financial Integrity..........     5
Blum, Jack A., Esq., Former Head, UN Experts Group on Asset 
  Recovery.......................................................    12
Lawson, Anthea, Lead Investigator, Global Witness................     6
Macovei, Monica, Former Minister of Justice, Government of 
  Romania........................................................    10
Ribadu, Nuhu, Former Executive Chairman, Economic and Financial 
  Crimes Commission (EFCC) of Nigeria............................     8

                                APPENDIX

Prepared statements:
    Baker, Raymond W.............................................    44
    Blum, Jack A.................................................    89
    Lawson, Anthea...............................................    94
    Macovei, Monica..............................................   112
    Ribadu, Nuhu.................................................   115


                       CAPITAL LOSS, CORRUPTION,
                        AND THE ROLE OF WESTERN
                         FINANCIAL INSTITUTIONS

                              ----------                              


                         Tuesday, May 19, 2009

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Members present: Representatives Frank, Waters, Maloney, 
Watt, Meeks, Moore of Kansas, Clay, Hinojosa, Baca, Lynch, 
Scott, Green, Cleaver, Ellison, Perlmutter, Carson, Kosmas, 
Himes, Maffei; Bachus, Castle, Manzullo, Biggert, Miller of 
California, Garrett, McCarthy of California, Posey, Jenkins, 
Paulsen, and Lance.
    The Chairman. The hearing will come to order. The ranking 
Republican was required to attend a meeting of the Republican 
Conference. I can tell you from personal experience that when 
you have one of these jobs, you have to go to those things, as 
much as you might not like to, so he had no choice on this, and 
that's where he is, but he is on his way. I will begin with a 
brief opening statement, then I will call on my colleagues, and 
we will have an opening statement from the ranking member as 
soon as he arrives.
    The question of corruption is a very serious one, and it is 
important as we go ahead with the inevitable global interaction 
economically that we do that as carefully and with as much 
attention to honesty as we would do domestically. And it's also 
the case that--I think it's very clear. Corruption 
internationally is not simply a matter of dealing with theft. 
That's important enough in itself but it clearly has a negative 
impact on our ability to accomplish the goal of improving the 
lives of people. That is, corruption is not just theft, it is 
theft from the poor, it is theft from the neediest.
    So we address this not simply from the moral plane, which 
is, as I said, important in itself, but it is clear that if we 
do not do a better job of diminishing corruption, we hinder our 
ability to reduce poverty. Many of the gains that are posited 
as a result of the global interaction in the economy are 
diminished by the persistence of corruption. So this is a very 
important subject. This committee has jurisdiction over the 
Bank Secrecy Act and the Foreign Corrupt Practices Act, both of 
which are implicated here. And I believe this is an issue on 
which we may well be able to get some bipartisan support to 
move ahead.
    And as I said--I say that because the ranking member years 
ago took the lead. I was one of those who joined in the lead 
that he and some others took to provide debt relief to the 
poorest countries in the world. But the good that you do by 
providing debt relief can be eroded if there is then a 
corruption with the funds that might be freed up by that. So we 
regard this as very much part of our mission to work to improve 
economic development to the world from the standpoint of 
improving the lives of people.
    And I will now recognize the gentleman from Alabama.
    Mr. Bachus. I thank the chairman, and I thank you for 
convening this important hearing. It calls attention to a 
matter that is crucial in breaking the cycle of poverty in 
developing nations, and that is the role of corruption. 
Corruption is an unfortunate reality in all nations, but the 
consequences are particularly tragic in fragile developing 
nations, and also in many of those, corruption is widespread.
    We have seen its effect in Nigeria where Dictator Abacha 
systematically looted the Nigerian treasury of literally 
billions of dollars during his tenure, leaving behind a 
desperately impoverished populace. We see it today in the 
Republic of Congo where the country's president and his family 
appear to be engaged in similar behavior, which will likely 
leave the same blanket of suffering. Simply put, corruption 
robs fragile nations, and more importantly its families, of a 
better future.
    The humanitarian tolls of corruption cannot be denied. 
Chairman Frank mentioned some of them. We see the consequences 
in starving populations. We see it in nations ravaged by 
disease because they can't get adequate health care because 
money is diverted into the pockets of corrupt rulers and 
politicians. We see it in nations wholly reliant on the aid of 
other nations because of this corruption.
    Yet the consequences aren't limited to these fragile 
developing nations or broken states, as they often are. Because 
fragile and what are referred to as broken states with a 
disenfranchised populace present a grave security threat to the 
United States. Afghanistan was a country that was a broken 
state. Corruption aggravates this situation.
    There is also no doubt, as we have learned, if we didn't 
know it in the past, we have learned it in the last year or 
two, the interconnectivity of our economies. The United States 
and other nations who trade with these countries benefit from 
their economic expansion and their growth. We all benefit from 
economic growth across the globe. And many of these countries 
represent a global consumer base for our exports and for 
imports. It's a win-win situation when we trade goods and 
services. And corruption robs us of this economic growth which 
benefits all of us.
    So corruption is something that affects all of us, no 
matter where it occurs. Corruption in the developing world also 
impacts the global banking sector. The global banking system 
still can easily be exploited by those seeking to conceal or 
laundry the proceeds of political corruption. A concerted 
international effort involving close cooperation between 
regulators, law enforcement authorities, and financial 
institutions is absolutely essential to preventing further 
exploitation.
    I would like to recognize Chairwoman Waters. She is not 
here, but her efforts on that front have been extraordinary. 
She has long pointed out that in developing nations, corruption 
often isn't limited to the ruler, but involves his or her 
family and their associates. And she has fought for years to 
make sure that U.S. and international law enforcement focus on 
these politically connected people in such regimes, to make 
certain that when they do loot these nations, as much money as 
possible is recovered and goes back to where it rightfully 
belongs.
    Mr. Chairman, I appreciate your efforts in this regard. I 
would like to close just by saying we have invited Mr. Jack 
Blum to appear before the committee. He's a world renowned 
expert on issues such as I have spoken about and what policy 
steps we can take, and he has worked on them extensively in a 
number of different capacities and testified on this matter, I 
remember in 2002 on a hearing I chaired about recouping stolen 
sovereignty assets. So, I thank you for your efforts.
    The Chairman. I thank the gentleman. Let me just say, I 
appreciate the fact that he mentioned our colleague, Ms. 
Waters. She has played the role, he said, and in fact, it was 
on the return of a congressional delegation of this committee 
from Africa, a bipartisan delegation, in which having listened 
to people, including nongovernmental organizations as well as 
officials and members of Parliament in four African countries, 
that she said, we have to get into this. We heard that. And it 
takes a while, because we have had a fairly busy agenda, as 
people know. But this hearing is a direct result of that 
congressional delegation. The gentleman from North Carolina was 
on it, and we clearly learned then the importance of this for 
development efforts. So we're very pleased to be able to do 
this.
    And now I will recognize the gentleman from Georgia, Mr. 
Scott.
    Mr. Scott. Thank you, Mr. Chairman, and I certainly 
appreciate this hearing. It couldn't be more timely, and I 
certainly concur with you and what your words were, because 
nowhere is this issue of corruption more prevalent than on the 
continent of Africa, and it's most important, vitally important 
that this Congress put Africa at the front and center to make 
sure that our monies that are going there are going for the 
right purposes.
    I just returned from Africa about 3 weeks ago, went into 
the Congo and saw firsthand what is happening in the Congo. In 
Fasio, the same thing, which is the poorest countries in the 
world on the continent of Africa, but yet the richest countries 
in the world are on the continent of Africa. The dynamic of 
this situation is here is a continent and countries that are 
full of the natural resources, the minerals, the diamonds, the 
gold, the oil, the rubber, all of these, for centuries they 
have been exploited by European powers, the colonialization. 
The remnants of this exploitation still remains in the presence 
of these dictators and heads of these regimes. Now here we come 
with our funds. We have to make sure that they are not being 
misused in corruption.
    When we got back the very next day, Secretary Clinton came 
before our Foreign Affairs Committee and I got to ask her that 
question as well. She was very passionate about it, and I am so 
pleased to see this committee moving forward, and the Foreign 
Affairs Committee moving forward, and the Secretary of State 
moving forward to say that we do not need our taxpayers' 
dollars going to prop up these regimes in Africa that are 
bleeding the countries of their natural resources, and with the 
wretched conditions of poverty unlike any you have seen on the 
face of the Earth.
    There's no greater example than what is happening in the 
Congo. For example, the president of Congo's son's credit cards 
could be traced back to a bank account in Hong Kong that 
received the proceeds from Congo's oil revenues. For just 1 
month, his credit card bill was $32,000. And that money could 
have paid for 80,000 Congolese babies to be vaccinated against 
measles, which is a leading cause of child death in that 
country.
    The question has to be, are our taxpayers' dollars propping 
up these banks, and also helping to prop up the ease of 
corruption in these developing countries around the world, and 
especially in Africa? There are indeed existing international 
standards, but the question has to be, are these financial 
institutions truly paying attention to them or taking them 
seriously at all? And as billions of dollars in developing 
countries being transferred to Western financial shelters in a 
matter of a year, this is cause for real concern.
    So ensuring prudent management of resources, promoting 
accountability and openness is of utmost importance, as is 
allowing for vital information to be put in the hands of civil 
society groups and therefore its citizens. Too often the common 
citizen is left out while their country engages in fraudulent 
activities with regards to their own natural resources, as I 
mentioned. And with many conflicts, the results of a country's 
extractive industries, we must also look into the corruption 
behind a country's extractive industries, because without a 
strong stance on these corrupt officials, this will only lead 
to poverty increases, social investments being put by the 
wayside, and funds continuously being misappropriated and 
misused.
    And finally, greater accountability for the large revenues 
coming from these industries, working to generate economic 
growth from these revenues and reducing poverty are all aspects 
we should focus on. However, without reform in transactions 
being made between these developing countries and Western 
financial institutions, it will be harder and harder to move 
forward.
    Chairman Frank, I can't thank you enough personally for 
your leadership in moving on this vital issue and on behalf of 
those suffering millions of people in Africa, I want to say 
thank you for providing leadership on this important issue.
    The Chairman. I thank the gentleman. Our colleague from 
Texas had a statement but he had to go off and make a quorum 
somewhere, so we are now going to begin. I will reiterate that 
we have the entire legislative jurisdiction in this committee 
and it is our intention to move legislation. So I thank the 
witnesses. You are helping us with a process that we think is 
going to result in better laws. We will begin with Mr. Raymond 
Baker, who is the director of Global Financial Integrity, an 
impressive title.

   STATEMENT OF RAYMOND W. BAKER, DIRECTOR, GLOBAL FINANCIAL 
                           INTEGRITY

    Mr. Baker. Thank you, Mr. Chairman, Ranking Member Bachus, 
and members of the committee. I appreciate the opportunity to 
appear before you today.
    There is no evidence that the dollar volume of corrupt 
money flowing across borders is declining. On the contrary, it 
appears that corruption may be at the highest levels ever, 
particularly with very large sums of money shifting out of 
China and Russia, while flows likewise continue out of Africa, 
Latin America, the Middle East, Asia, and states of the former 
Soviet Union, and indeed out of Western countries as well.
    How can this be? To answer this, we must place the issue of 
corruption into its larger context--the global shadow financial 
system and its attendant culture of opacity. Since the 1960's, 
we in the Western world have created and expanded an entire 
integrated global financial structure to facilitate the 
movement of illicit money across borders. This structure now 
comprises a number of elements: Tax havens; secrecy 
jurisdictions; disguised corporations; anonymous trust 
accounts; and fake foundations. Falsified pricing in import and 
export transactions is by far the most frequently used element 
in this structure. Money laundering techniques are widespread, 
and there are holes left in the laws of Western nations which 
serve to facilitate the movement of money through the shadow 
financial system and into our own economies.
    Regarding this last point, for example, in the United 
States, it remains legal to bring into this country proceeds 
generated abroad from handling stolen property, counterfeiting, 
contraband, slave trading, alien smuggling, trafficking in 
women, environmental crimes, virtually all forms of tax-evading 
money, and more. Having initiated the anti-corruption effort in 
1977, we are now far behind our European counterparts in the 
range of illicit monies that we bar from entering our country.
    This global shadow financial system moves cumulatively 
trillions of dollars of illicit money across borders. It 
equally facilitates the shift of the proceeds of corruption by 
foreign government officials, criminal activities such as drug 
trading and racketeering, terrorist financing and tax evasion.
    Global Financial Integrity has recently completed an 
analysis of illicit financial flows out of developing 
countries, utilizing well-accepted economic models. We show 
that somewhere between $850 billion to more than $1 trillion a 
year of illicit money flows out of developing countries on an 
annual basis. This massive shift of illicit money abroad is the 
most damaging economic condition hurting the global poor. It 
drains hard currency reserves, heightens inflation, reduces tax 
collection, worsens income gaps, cancels investment, hurts 
competition, and undermines trade. Quite simply, it contributes 
in a major way to the environment in which corruption thrives.
    Now, how can we address these problems? Three measures can 
substantially curtail the cross-border flow of all forms of 
illicit money:
    First, financial institutions around the world should be 
required to know the beneficial owners of entities with which 
they do business.
    Second, it is time to institute automatic exchange of key 
elements of information across borders, including for non-
citizens their earnings on accounts. Such automatic exchange of 
information exists today between the United States and Canada 
and within the European Union via the EU Savings Tax Directive.
    Third, country-by-country reporting of sales, profits, and 
taxes paid by multinational corporations would do more to 
curtail the shadow financial system and the culture of opacity 
than any other step.
    To address the flow of corrupt money per se, three 
additional steps are recommended:
    First, we should harmonize predicate offenses under the 
anti-money laundering laws of all countries cooperating with 
the Financial Action Task Force.
    Second, strengthened know-your-customer regulations as they 
apply to foreign account holders should be implemented. Adding 
a specific point on suspicious activity reports for corruption 
is needed.
    Third, lists of politically exposed persons, PEPs, should 
be available for all countries receiving development 
assistance, and the use of PEP lists should be required by 
financial institutions.
    The fight against global corruption is not being won. As we 
did in our early passage of the Foreign Corrupt Practices Act, 
it is time once again for strong U.S. leadership.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Baker can be found on page 
44 of the appendix.]
    The Chairman. Thank you, Mr. Baker.
    Next we have Ms. Anthea Lawson, who is the lead 
investigator of financial institutions at Global Witness.

 STATEMENT OF ANTHEA LAWSON, LEAD INVESTIGATOR, GLOBAL WITNESS

    Ms. Lawson. Mr. Chairman, members of the committee, thank 
you. Global Witness is a nongovernmental organization that 
investigates the links between natural resource extraction, 
conflict, and corruption.
    The world's poorest countries would be far less poor if 
revenue from natural resources that should be spent on 
development had not been looted by their senior government 
officials. Banks are not permitted to accept corrupt funds 
under existing international standards, but too often they do 
not seem to be taking this obligation seriously.
    I will present three examples from the latest Global 
Witness report, ``Undue Diligence: How banks do business with 
corrupt regimes.'' First, we show that the international 
regulatory regime governing banks has not put into place 
effective procedures to prevent them handling the proceeds of 
corruption, as have been used to stop the handling of terrorist 
funds.
    Dennis Christel Sassou-Nguesso is the son of the president 
of Republic of Congo, which earns about $3 billion a year from 
its oil, but where a third of the population don't live past 
the age of 40. Between 2004 and 2006, he spent hundreds of 
thousands of dollars on luxury clothes and shoes with money 
that derived from Congo's oil sales, as Representative Scott 
has reminded us. Using a Caribbean tax haven, Anguilla, he set 
up a shell company, disguised his ownership of it, and opened a 
bank account in its name at the bank in Hong Kong. Money 
deriving from Congo's oil sales was paid into this account.
    When the credit card bills came in each month after the 
designer shopping sprees, the Anguillan company services 
provider that was fronting for him wrote to the bank 
instructing payment of the bills from this account. He is named 
on these payment instructions as the owner of the credit card, 
and these payment instructions were stamped, presumably by the 
bank, ``record of terrorists checked.'' This is a fascinating 
insight. The bank ran his name through the terrorist watch list 
to make sure that he's not a terrorist, but does not appear to 
have checked whether he's a political figure and whether 
there's a high risk of corruption.
    The U.S.-led campaign to create international controls 
against the financing of terrorism has had results. Banks are 
now checking that their customers are not terrorists. But there 
has been no similar campaign to ensure that banks worldwide do 
not accept the proceeds of corruption.
    In our second example, the United States took action 
against a bank for doing business with a corrupt regime, and 
then a bank in Europe continued to do business with a member of 
this regime and handle its funds. In 2004 to 2005, Riggs, as 
you know, was finished off after holding accounts for President 
Obiang of Equatorial Guinea and his corrupt government. More 
than 3 years later, the British bank, Barclays, was still 
holding an account for Teodorin Obiang, the president's son, at 
a branch in Paris. Teodorin reportedly earns a salary of $4,000 
a month as a minister in his father's government, yet he owns a 
$38 million mansion in Malibu, California, and a fleet of fast 
cars.
    Global Witness has asked Barclays what due diligence it 
could possibly have done to reassure itself that the source of 
funds in this account is not corrupt, and they can't tell us. 
This case illustrates the need for the United States to take 
further action internationally to ensure that all the major 
banking centers are operating at the same level.
    Without further steps, not only will the fight against 
corruption be ineffective, but U.S. banks will not be operating 
on a level playing field.
    Our final example reviews Citibank's facilitation of 
banking activities that allowed Charles Taylor, the ex-
President of Liberia, now on trial for war crimes, corruptly to 
divert timber revenues to his personal use during the conflict 
there. His regime instructed one of Liberia's main timber 
exports to make its payments in lieu of tax directly into a 
number of nongovernmental bank accounts, including Taylor's 
personal account at a Liberian bank. These dollar payments 
could not have taken place without the correspondent 
relationship between the Liberian bank and Citibank in New 
York, through which the payments were routed, which gave Taylor 
the means to receive these corrupt timber revenues into his own 
account.
    Banks must be forced by regulators to improve their due 
diligence practices. Banks must not accept funds unless they 
can identify the beneficial owner and they can demonstrate 
strong evidence that the funds are not corrupt.
    The United States has been a driving force behind the 
Financial Action Task Force, or FATF, the intergovernmental 
body that sets the global anti-money laundering standards and 
measures member states' compliance with them. The United States 
should use its influence to ensure that FATF undertakes further 
steps to make anti-corruption rules and on money laundering 
more stringent, and names and shames countries that are not 
compliant with FATF standards or that are not enforcing them, 
so that those countries that are ahead of the curve are not 
penalized. We would be pleased to see this committee take up 
these issues, and I would be happy to answer any questions.
    [The prepared statement of Ms. Lawson can be found on page 
94 of the appendix.]
    The Chairman. We have been joined by our colleague, Ms. 
Waters, and I did want to tell her, let me say it publicly, 
that both the ranking member and I acknowledge the very 
important leading role she has taken in bringing this subject 
forward.
    Next we have Mr. Nuhu Ribadu, who is the former executive 
chairman of the Economic and Financial Crimes Commission of the 
Government of Nigeria.

 STATEMENT OF NUHU RIBADU, FORMER EXECUTIVE CHAIRMAN, ECONOMIC 
       AND FINANCIAL CRIMES COMMISSION (EFCC) OF NIGERIA

    Mr. Ribadu. Thank you, Mr. Chairman, Ranking Member Bachus, 
and members of the committee. Let me thank you for the honor of 
this invitation. As you said, my name is Nuhu Ribadu, and I am 
the former chairman of the Economic and Financial Crimes 
Commission of Nigeria, assigned with the responsibility of 
fighting economic crimes in Nigeria that came as a result of 
pressure from the international community, FATF, the U.S. 
Government, and the U.K.
    I have heard a lot, and you have said eloquently on the 
issue of how terrible corruption is, the damage it is doing to 
us, not just Africa, but the world. But I also want to tell you 
from the side, from those who are at the receiving end, and I'm 
one, I'm sitting here, an African, a Nigerian, a picture of 
really what really happened to us as people who have been 
reduced to a level of more or less living on the kindness of 
others, our honor, our dignity, our respect, everything has 
been destroyed. We are today at the bottom of the ladder in the 
world, and that is not fair.
    And that is what I want to share with you. You have said 
everything, but I want to give you a little bit of statistics 
of what really is happening, what has happened to us as people. 
AU, for example, the African Union, came up with a figure that 
as much as $140 billion is wasted, going to corruption, stolen 
from the people of Africa, the poorest people of the world; $20 
billion annually goes out of the country, stolen. I want to 
talk about money coming from companies that are doing business. 
This is stolen money going out of the poorest country. Imagine 
what that money can do. This is far, far more than the entire 
support that comes from United States to the continent.
    The U.K. Commission that was set up by Tony Blair came up 
with the figure that as much as $93 billion is out there in the 
financial institutions of the West coming from Africa, stolen. 
Nigeria is a country, a country that I come from, and as much 
as about $440 billion in 3 decades from selling of crude oil, 
all wasted, stolen, nothing to show for it. This is money that 
is probably 6 times what was needed to change Europe after the 
second World War. Today go to Nigeria and see, you will realize 
what we are talking about, the crime of corruption. It's very 
unfair. It's tragic.
    But I'm here to also tell you my own experience. I fought 
corruption in Nigeria. I have seen at close range what is 
happening to us. I have also, as a person who more or less is 
responsible for bringing out the case of Halliburton, the one 
where Halliburton gave about $184 million as a bribe to 
Nigeria. Where Halliburton today is punished in the United 
States by probably as much of a fine of about $600 million. But 
Halliburton still is getting away with $6 billion of contracts, 
and there are people out there in Nigeria who have received 
this money, and they are continuing to continue doing business 
as usual. The same thing, for example, with Siemens. The same 
thing with all the other companies. Siemens is a company that 
was punished by the U.S. Government. Today Siemens is doing the 
same business in Nigeria.
    Mr. Chairman, this is what is happening to us. I fought 
corruption. I know what it has done to us. The problem, for 
example, of Nigeria, while we are attempting to address it, I 
know it is as a result of corruption that we have this 
situation where we found ourselves. I brought one governor who 
was in charge of one of the states in the Niger delta. He gave 
me $15 million cash in a box to stop me from prosecuting him. I 
refused this money. I took him to court and I charged him and I 
handed that money also as evidence in Nigerian court. Today, 
that gentleman is probably one of the most powerful individuals 
in our country. He's one of the most powerful people in charge 
of the ruling party.
    It is happening. It has done damage to us growing, people 
like us, who are desperate for change, who are fed up, who 
don't want this type of thing that they have done to us. The 
leaders from Angola to Zimbabwe, those who are in charge of our 
own affairs, have done this damage to us. That is the reason 
why, Mr. Chairman, we think that we need help. While sitting 
down out there, before getting into this hall, I read your 
Declaration of Independence, the one that you did hundreds of 
years ago. I saw where you, the Congress, dreamt and wanted 
freedom, liberty, and the pursuit of happiness. We are equally 
entitled to that. We want that, and we desperately want the 
world to come in and support us.
    Those of us who are victims of this corruption are 
helpless, are powerless. Today I have been kicked out of 
Nigeria. I can't even go there. I survived an assassination 
attempt. Because some of us few who had the courage to stand up 
and say enough is enough, let's stop this, let's move forward, 
today, Mr. Chairman, this is what--it is still coming down to 
the fact that we must do it ourselves. Nobody else will do it. 
It is we, the Africans, and I can assure you, people are fed 
up. People are tired. But we need the good people of this 
world. We need you to support, to stand by us and see that it 
is possible for us to also have a change, change that is taking 
place in the world today. We have seen those who, not 
necessarily even one deserved a change, but they are getting 
it. But we in Africa are desperate for change.
    Thank you very much, Mr. Chairman. I will wait for your 
questions.
    [The prepared statement of Mr. Ribadu can be found on page 
115 of the appendix.]
    The Chairman. Thank you.
    Ms. Monica Macovei, who was formerly the minister of 
justice in the country of Romania.
    Ms. Macovei?

   STATEMENT OF MONICA MACOVEI, FORMER MINISTER OF JUSTICE, 
                     GOVERNMENT OF ROMANIA

    Ms. Macovei. Thank you, Mr. Chairman, ladies and gentlemen. 
I was the minister of justice in Romania in 2005-2006. I was 
fired in April 2007, 3 months after Romania's accession into 
the European Union. It's not about my situation I want to talk, 
it's about my experience as a minister of justice fighting 
corruption.
    At the beginning of my mandate, I had to establish the 
strategy and the action plan to fight corruption under a 
safeguard closed by the European Union in Brussels, and before 
I established the benchmarks and the concrete activities and 
measures, each institution within the anti-corruption area had 
to do. So there were benchmarks in high-risk corruption areas 
such as public procurement, privatization, transparency of 
public spending, in particular all the contracts from the state 
money, anti-money laundering legislation, independent and 
efficient law enforcement agencies, conflict of interest 
incompatibilities, funding political parties and campaigns. And 
then we started after we made these benchmarks, we started the 
implementation.
    Now I took it seriously, and the same did the anti-
corruption prosecutors office, which I set up in 2005, and 
these prosecutors started to investigate politicians from all 
the parties, including the parties in power, and high 
officials. This was really a premiere in Romania. I think in 
the last 2 or 3 years, this prosecutors office prosecuted, sent 
to trial about 20 current and former members of the parliament 
and of the government for corruption and fraud and other 
officials from all areas, including from the judiciary.
    The reaction to this prosecution came in particular with 
priority from the political class. And I saw the behavior of my 
colleagues in the government when people from the parties in 
power started to be investigated and prosecuted. It was 
unbelievable. We are in power and we are investigated. So 
consequences of this continuous public pressure, I would say 
political pressure for those investigated, all claiming that 
these are political cases, although they are, as I said, coming 
from all the political parties. Then attempts from the 
parliament to change the procedural law such as to try to avoid 
being investigated.
    And I can give you a quick example. We had--and also an 
example of the level of bribe, which shows it better. We had in 
2007 a minister of agriculture taking a very low-level bribe in 
terms of money, about 15,000 euros, and also sausages and other 
products for--allegedly for giving contracts about 6 million 
euros to some private companies. And also speaking about the 
level of bribe, we heard the cases with members of the 
judiciary who were prosecuted and convicted for amounts around 
100, 200 euros, which shows to me not that their bribe is 
small, but it shows a practice.
    So coming back to the reaction of the politicians, when 
such cases became public, and of course they were damning the 
use of surveillance measures, interceptions, and filming. One 
measure taken by the parliament without any public debate was 
to make this procedure impossible. For instance, one provision 
was saying that a person cannot be intercepted before--unless 
he's informed that an investigation is going on against the 
person, so therefore making all these surveillance measures 
useless.
    These provisions were not passed, because they were 
rejected and they were sent back for examination by the 
president of the country, but they showed the attitude of the 
politicians when they are, of the majority of the politicians, 
when they are under investigation. They try to use any means, 
and they have the decision in their hands, and they use it to 
fight back.
    Another example of political behavior is the decision to 
lift immunity when the prosecutors ask for the parliament. 
These cases, many of them were rejected, were denied, and then 
they were re-heard again. These cases took about between 5 
months and over 1 year for each case to be decided in a way yes 
or no, and those many MPs said that they have to look at the 
evidence, so they basically tried to take the role of the 
charge. So all these together shows an opposition to this 
investigation. Basically, what they are trying to do is 
invoking civil rights in all these changes basically to 
establish and practice the right not to be investigated.
    I was supported by the president of the country. When I was 
a minister, I was independent. I didn't belong to any political 
party. This is how it happened. As I said, I had the support of 
the president of one party which supported me. After the 
accession when all the politicians saw that--achieved the 
objective of being into the European Union, the party which 
supported me was asked to withdraw the political support for 
the minister of justice. It refused and then it was basically 
excluded from the government.
    There are sustainable things and things which could not be 
changed back, as, for instance, this anti-corruption prosecutor 
office, which is still there, and which is still investigating, 
including politicians and which is still under attack, but I 
think the most important thing is that these people are doing 
their job. Thank you.
    [The prepared statement of Ms. Macovei can be found on page 
112 of the appendix.]
    The Chairman. And next, Mr. Jack Blum, who was the former 
head of the UN Experts Group on Asset Recovery and has a very 
extensive background in dealing with this. And I said that this 
is going to be a bipartisan issue. We have witnesses, and the 
practice is that most witnesses are proposed by the majority. 
The minority gets to propose witnesses. I must say here I think 
the choices were totally interchangeable. Mr. Blum--sometimes 
there are differences on issues, but this is case where I think 
just the very selection of witnesses shows that there's a great 
degree of consensus.
    Mr. Blum?

STATEMENT OF JACK A. BLUM, ESQ., FORMER HEAD, UN EXPERTS GROUP 
                       ON ASSET RECOVERY

    Mr. Blum. Mr. Chairman, it's a pleasure to be here this 
morning, and I thank you and the ranking member for their kind 
remarks. This committee did quite admirable work 7 years ago in 
putting together a hearing to discuss these issues. 
Unfortunately, the events of the last number of years made it 
very difficult to continue down that path.
    I am currently involved in the Nigerian Halliburton bribe 
case, representing the government of Nigeria, trying to get 
mutual legal assistance from the United States. Now that case 
and other cases illustrate the complexity of the problems we're 
dealing with, and they really are complicated problems.
    The screaming frustration of people looking at something 
like the family of the Obiangs running Equatorial Guinea where 
you have 700,000 people in desperate poverty and a per capita 
GDP that makes it 8th highest in the world, is unbelievable. 
Yet there's nothing, it seems, anyone can do about the fact the 
Obiangs are running the country and stealing it blind, other 
than to wait for them to either depart office and try to 
prosecute after the fact, or wait for some form of criminal 
complaint or conviction to come forward, and then begin a 
process of searching for the money.
    But failing to have that criminal process undertaken, 
either in Equatorial Guinea or against a company that's 
actually taking the oil out of Equatorial Guinea, everything is 
absolutely okay. And if a bank gets a deposit from the Obiang 
family, the simple solution for the bank is to file an SAR, 
report to the government that in fact there has been a 
suspicious transaction, and then it's really up to the bank as 
to what they want to do in terms of handling the money. And, of 
course, the situation is, and this is very clear, that if a 
U.S. bank doesn't take the money, somebody will take the money 
and then funnel it into a U.S. bank through some other shell, 
either a trust or a shell company or whatever.
    This business of sovereignty protects a lot of sitting 
crooks. And I'll give you another example. The government of 
Kazakhstan, which is notorious in its corruption, yet because 
the same people are running the government, there are no 
charges and no basis for anybody going after their assets or 
even saying we can't do business with them. This is a very 
frustrating problem, and there are no simple solutions to it.
    The idea of national prosecution such as we have in the 
Foreign Corrupt Practices Act is a very appropriate approach. 
It works as far as it goes. So it's a deterrent to U.S. 
corporations and paying the bribes, it's a way of keeping 
people from doing the outrageous. On the other hand, most of 
the enforcement of that law has come out of self-reporting, 
which is to say the company or its auditors or its internal 
controls have come forward and said, look, we found these bribe 
payments and we confess.
    It's very difficult to find those cases without the self-
reporting, and then once the cases are prosecuted, there's the 
further problem. If a company comes forward and says, we paid 
bribes in Nigeria, the U.S. Government is in the terrible 
position of not being able to say who the bribes were paid to, 
for the simple reason that there's no proof that the person on 
the other end received it. What they know is the payments were 
made.
    And I say in my statement, I have a very vivid memory of 
having a witness in a Foreign Relations Committee hearing talk 
about Prime Minister Seaga of Jamaica step forward--the witness 
said that Ciega had hidden bank accounts in the Cayman Islands. 
And I got back to my office and there was Prime Minister Seaga 
on the phone saying, wait a minute. How do I get to defend 
myself? I can't come as a witness to your hearing. And your guy 
who said I had these bank accounts was a convicted drug dealer. 
And I sat there and listened to myself being reamed out by the 
prime minister for the better part of a half-hour.
    This is a very real problem. We will not be in the position 
of naming the people involved as a U.S. Government for that 
reason. On the other hand, do they have to be named? Do we have 
to figure out a way to stop this? You bet we do. And it's a 
real dilemma.
    The most effective remedies in this area, because the 
criminal law is so fraught with these cross-border 
difficulties, and I can go into it in question and answer, the 
best solutions are in the civil arena, and that's what we 
talked about 7 years ago. And I'm pleased to say that in the 
intervening time, I have been working with Lord Daniel Brennan, 
who is a very distinguished member of the House of Lords, on 
putting together a civil asset recovery organization that will 
work across borders on behalf of countries that have now 
decided to try to recover the money. And this organization, I 
think, has the capacity to do what others don't, because it 
would be private and nongovernmental, and therefore wouldn't 
fall into the thorny messes that come when you have to deal 
with sovereign relations among states.
    I see that my time has expired. Am I wrong about that?
    The Chairman. Take an extra minute, because we only have 
one panel.
    Mr. Blum. The problem of civil recovery is it requires a 
lot of work in a lot of different countries. It requires many 
different sets of legal skills, and it requires a degree of 
non-interference by political players. And that's a very 
important extra piece. We have had too much interference by 
political players, even in the areas of criminal prosecution. 
And I give you as a couple of examples the Geffin case 
involving Kazakhstan, an indictment years ago of a gentleman 
who was supposed to be a bag man in some oil contracts. The 
case has yet to come to trial. The indictment is pending, and 
there's no explanation whatsoever for why this case hasn't come 
to trial. There have been delays and arguments that, well, 
maybe this man was somehow connected to our intelligence 
services, but not a shred of evidence has been put on a public 
record about it.
    In the case of other countries where criminal prosecutions 
have gone forward, let's talk about the Nigerian case, the U.S. 
Government is currently delaying the mutual legal assistance 
because the investigation is ongoing here in the United States. 
Now just understand the bribes in Nigeria took place between 
1995 and 2002, 2004 perhaps. We're just going to finish up our 
criminal proceedings perhaps in another year or so.
    But now the Nigerians get evidence that is 10 to 15 years 
old, and then there's the question of all the other countries 
that this case touched. So Halliburton had a partner in France. 
The partner in France worked with Halliburton to set up a 
company in the Portuguese island of Madeira. There's a French 
criminal investigation underway, and the assembly of all this 
evidence to make any sort of case in a Nigerian forum won't 
happen for another 5 years at the minimum. This is a kind of 
impossible situation. It's so far after the fact that the money 
will be gone and the defendants will be able to do all sorts of 
things with respect to statute of limitations and making their 
defense.
    So I just stress that this is a very difficult and thorny 
process. We don't have any simple solutions to it, and I think 
a lot of work and discussion will have to go forward. I think 
perhaps some of the answers lie in tightening up know-your-
customer rules, but even there we have a real problem.
    Thank you.
    [The prepared statement of Mr. Blum can be found on page 89 
of the appendix.]
    The Chairman. Thank you. Let me just begin, Mr. Blum, you 
mentioned because Ms. Lawson talked about naming and shaming as 
a major tool given some of the legal problems, but you point 
out there's a problem with the naming. Could we work out a 
procedure in committees where you would not release the name 
until the party had some chance at a rebuttal?
    Mr. Blum. Well, it's really tough. The first time we hit 
that was with the Lockheed case in Japan. We had hard evidence 
that the Prime Minister of Japan, Tanaka, had received bushels 
of cash money from Lockheed Aircraft to get their planes into 
Japan. The State Department was apoplectic. They said you can't 
do this. The Japanese are major allies of ours. This will cause 
a political earthquake in Japan, which it did do, and they 
wanted us not to hold the hearing. It took tremendous effort to 
then get the evidence to the Japanese, and to their credit, the 
Japanese actually did something about it. They convicted him 
and he went to jail. But there were many other countries we had 
evidence on, and the State Department didn't go anywhere with 
it.
    The Chairman. Well, let me ask you, what if we try to work 
out a procedure whereby if we said in advance, let us know, and 
we would then notify the named individual and offer to release 
contemporaneously any rebuttal? Obviously you're not going to 
get the prime minister to come sit here. But I'm wondering 
whether you think that could--
    Mr. Blum. It's a possibility, but I don't really have 
confidence that the prime minister would be very happy or that 
the State Department would be very happy.
    The Chairman. Well, I appreciate that, but State 
Departments are often unhappy with Congress and vice versa.
    Mr. Blum. I know.
    The Chairman. What I'm trying to satisfy is not some 
diplomatic rule but our own standard of fairness. And I will 
say that we might want to work on something where with--that 
there has to be some notice, and there is then a chance to 
rebut, and if somebody decides not to rebut, they don't.
    Let me now ask the general question, obviously, and Mr. 
Castle and I were talking about it, there's a great deal of 
support for doing away with the corruption, particularly, and I 
appreciate the extent to which we have emphasized, it damages 
our ability to alleviate poverty. It is poor children who are 
the major victims of the corruption. This is not a victimless 
crime.
    We will be told, yes, but the problem is you can't put 
American businesses at a disadvantage. Ms. Lawson mentioned the 
level playing field. I will just make an aside on this. The 
level playing field, it's an extraordinary phenomenon, the 
unlevel playing field. It is I think the only one I can think 
of where it is an unlevel playing field and no one in the 
history of economics has ever been at the top of the level 
playing field. It is a constantly downward-sloping playing 
field, and people are only at the bottom. No one in the history 
of congressional testimony has ever acknowledged being at the 
top, or even in the middle of the unlevel playing field.
    But that's the question which I will ask you to comment on 
briefly now. Help us figure out ways to diminish the 
disadvantage. Part of it, I think, would have to do where this 
committee has the jurisdiction, with the banking system, being 
frozen out of the American banking system could be tough. And 
Mr. Blum mentioned that people managed to sneak their way in. 
But I think you were suggesting with know-your-customer that we 
may be able to prefer to do that.
    But I would just ask if one of you had any comments now, 
and I think we would be very open to what we could do to 
diminish the argument that we're putting Americans at a 
disadvantage. Mr. Baker?
    Mr. Baker. Thank you, Mr. Chairman. The same argument was 
made at the time the Foreign Corrupt Practices Act was being 
discussed, that it would badly damage U.S. business interests 
around the world. It did not. We may have lost the odd aircraft 
sale or the odd oil field service contract, but we certainly 
did not hurt U.S. business globally. It did take the Europeans 
another 20 years to follow suit, but that was an example of 
U.S. leadership that led to the rest of the world following as 
well.
    And I said in my remarks, further U.S. leadership is 
needed. In fact, what we need to do now is to catch up with 
where the Europeans are. They have gone past us in the range of 
what is barred of monies crossing borders. We cannot 
successfully fight corruption while at the same time 
maintaining our financial system open to so many other forms of 
illicit money that go through the same such channels. 
Corruption can pass through the same channels as the flows of 
other forms of illicit money.
    The Chairman. Ms. Lawson?
    Ms. Lawson. I would encourage the committee to focus on the 
role that the Financial Action Task Force could play in 
improving the standards elsewhere. The United States is one of 
the driving forces behind the Financial Action Task Force and 
has a lot of influence within it. At the moment, the naming and 
shaming that I referred to is not about individuals, it's about 
jurisdictions who do not have anti-money laundering standards 
at the appropriate level, and while FATF is spending some 
attention at the moment talking about some of the countries 
that are way out of line, most if its own members do not yet 
have standards fully in compliance with the levels that it 
sets. So that's one way that the United States can use its 
influence abroad.
    The Chairman. Mr. Ribadu?
    Mr. Ribadu. Thank you. Well, just to agree with her, the 
FATF did a lot of--
    The Chairman. Move the microphone closer to you.
    Mr. Ribadu. FATF changed Nigeria, and it has really made it 
possible for us to really address the problem, not just of 
corruption but so many other things. I think there is a need to 
look at the possibility of strengthening and helping it to get 
back to what it was a couple of years ago.
    On the issue about the American business outside, as a 
person, a physical person on the ground in Nigeria, I can 
assure you that the Foreign Corrupt Practices Act did a lot of 
good to America, far, far more than what you can ever imagine. 
I investigated companies in Nigeria from 2003 to 2007. Wherever 
I see an American company is involved, doing business, I tend 
to be relaxed. I tend to believe that somehow they are far, far 
better than the rest of the world, not to talk of the emergence 
of the Chinese and the Indians.
    The Foreign Corrupt Practices Act helped to build 
confidence, show direction, change the world perception, and it 
also helped us to raise our own standards. It may be the same 
thing that you are faced with today. Please do have the 
courage, understand that what you are doing, you are taking the 
lead. Whether it is going to be a temporary loss, I can assure 
you in the future you will see the benefit of it. Today, most 
of the companies from America are taking the benefit. They tend 
to be believed. We agree with them because of this oversight 
responsibility coming from their home country.
    The Chairman. Thank you. Ms. Macovei, on the international 
coordination, is there anything we can do?
    Ms. Macovei. I didn't understand.
    The Chairman. Yes, if you had anything that you wanted to 
add on how we can--
    Ms. Macovei. I would like to say as the others to insist on 
international cooperation. Exchange of information is vital, 
and I saw in some cases where information to not leave one 
state to go to the other through the law enforcement. And also 
I can say that I saw contracts, and without direct evidence of 
corruption looking at the terms of the contracts where all the 
rights were and all the duties were, it was a clear bad 
business for the state and good business for the company. But 
my point is probably companies who try to do these, the problem 
is the environment where they do the contracts. If a country 
provides this poor environment in which corruption is possible 
at the government level, then the company will take--
    The Chairman. Well, in some cases you can just look at the 
terms of the contract and figure out that some money changed 
hands because there would be no other logical explanation for 
those contract terms.
    Ms. Macovei. Right. I made these examples because I saw 
contracts where there was no price. The price was going, for 
instance, to be decided by the contractor, by the contractor 
company.
    The Chairman. Oh, very nice. Mr. Blum, any last word on 
this?
    Mr. Blum. A couple of thoughts. First on the issue of level 
playing field in the banking business, I think that if banks 
don't take this kind of corrupt money, well, they may be at a 
competitive disadvantage, but this is business we don't want 
them to touch. Moreover, when things go bad, the advantage is 
not to the people who took the bad money. So look at UBS, which 
took all this tax cheating money, that now has all of its 
customers fleeing because they're going to be exposed, and 
they're in terrible trouble. So I don't think that's the issue.
    Now this business of the contracts, I think the issue here 
is price. If there's public exposure of the price and the 
terms, it gets to be very had to pad the contract to hide the 
bribe. And that is a very important aspect of keeping this 
process honest. So, for example, there was an infamous case in 
St. Maarten where a Sicilian contractor went into negotiation 
to build a new airport, and the price once they sat down with 
the people who were running the government of St. Maarten kept 
going up with consulting payments supposed to go to a company 
somewhere in Switzerland. Well, you knew what that was all 
about. Ultimately, the Dutch government got on top of it and 
did something about it.
    The Chairman. Okay. Thank you. We will ask all of you, 
please feel free, and we'll be in touch about how we deal with 
this, because it is a practical matter that is going to be, I 
think, one of the issues we will have to deal with.
    The gentleman from Florida.
    I misread my things. The gentleman from Minnesota was first 
on the list.
    Mr. Paulsen. I will yield back, Mr. Chairman.
    The Chairman. Then, the gentleman from Delaware.
    Mr. Castle. Thank you, Mr. Chairman. I want to ask you 
something which I think is related to what we have been talking 
about, in fact, quite closely related. And that is the new 
trends in international terrorist financing, the new 
technologies in moving money around. Do we see scam charities 
or corporations playing a role in terrorist financing or even 
the corruption you have been talking about in foreign 
governments and should we be doing more and should the UN be 
doing more or is there some other entity out there that should 
be doing more? To any of you.
    Mr. Baker. Thank you for the question. In my own opinion, 
sir, the pursuit of terrorist financing has been a bright spot 
in these efforts. There were, shortly after 9/11, some 25 arms 
of the U.S. Government that were pursuing terrorist financing 
and as a result of that, I think that we have pushed terrorist 
financing out of the legitimate financial system. In my 
observation, as I study the issue, terrorists are moving their 
money through commodities, through drugs, through gold and so 
forth, but only to a rare extent using the legitimate financial 
system. There is some money passing through the Hawala system 
back into the hands of drug dealers in Afghanistan and Pakistan 
that end up in Taliban hands. So, there is a linkage there. 
But, as far as terrorist financing in the legitimate financial 
system, personally, I think that U.S. leadership on this part 
of the problem was excellent.
    Mr. Castle. Mr. Blum?
    Mr. Blum. The critical place to get at that sort of problem 
is in identifying shell corporations and in identifying who the 
beneficial owners of various trusts are. At the moment, under 
the know-your-customer rules, many financial institutions have 
been content to receive a copy of a corporate charter of an 
off-shore corporation, passport photographs of the local 
directors, and say, okay, the beneficial owner of the account 
is the corporation. That cannot be. We have to know who is 
underneath any shell entity that's coming into the U.S. banking 
system. And that is a fairly straightforward proposition, which 
will help us with tax collection, will help us ensure that 
terrorist money is out of the system.
    Mr. Castle. Your answer is somewhat in contrast to Mr. 
Baker's answer, to a degree. You're basically indicating that 
shell corporations could be set up, you could use some sort of 
local director, take a picture, whatever, and accept the 
documentation and all of the sudden be able to fund through 
that--
    Mr. Blum. I don't know whether they would be used to fund, 
but I can say they can enter the banking system and their 
accounts can be used to move money. You know, where it goes or 
who it goes to, or what they do, is another issue. But used to 
move money, yes. And in the end, in the end, even the Hawala 
system uses the banking system, so you really want to know who 
the people are who are opening your accounts. And I think 
that's something that we have already talked about a lot in the 
area of the Bank Secrecy Act.
    The banks and brokerage firms got a pass on identifying old 
accounts and then on the issue of identifying corporate 
accounts, the identification was left to saying, well, tell us 
who the directors are, and when you have a shell and you have 
shell directors, it doesn't tell you anything about the 
corporation. You have to know the beneficial owner.
    Mr. Castle. Mr. Baker, can you respond to that? You 
indicated, obviously, in your statement, that we have taken a 
lot of steps to address the terrorist financing, etc. Mr. Blum 
points out the circumstance of being able to set up a shell 
corporation and avoid some of the niceties that might trip that 
up if it were to happen. Do we know that is not happening based 
on some of the things you have talked about or is it possible, 
it's obviously possible, but is it likely that some terrorist 
financing is taking place in shell corporations?
    Mr. Baker. It certainly can, sir. There is no evidence that 
I have seen that it is taking place. If I could make a further 
point about beneficial ownership. I strongly agree with my 
friend, Jack Blum, that beneficial ownership of entities needs 
to be known by every financial institution holding accounts. I 
made this point in New York recently and a Wall Street banker 
in the room raised his hand and asked, ``Do you have any idea 
how much it would cost us to determine the beneficial owners of 
all of our accounts?'' And of course, the answer is, it costs 
nothing. You put the shoe on the other foot.
    It is the responsibility of the account holder to affirm 
who is the flesh and blood owner of the account or what is the 
listed company that owns the account. But this is a no-cost 
exercise and it should be done by all financial institutions. 
In this day and age of crime and terrorism, I cannot imagine a 
financial institution not wanting to know who are the 
beneficial owners of accounts with which they do business.
    Mr. Castle. I thank you. My time is up. I would just say, 
in closing, that I agree with everything you have said about 
the problem. I worry about the solution on a broader basis in 
just the United States or just Europe. I think it's going to 
take a great deal of international involvement to get this 
resolved. I yield back.
    The Chairman. The gentlewoman from California.
    Ms. Waters. Thank you very much, Mr. Chairman. I am very 
appreciative for this hearing that you're holding and very 
appreciative for the leadership and support of Mr. Bachus in 
dealing with this issue on corruption in the role of western 
financial institutions. We have been kind of picking around the 
corners of this for a long time. I recognize that we here 
cannot, perhaps, stop all of the corruption in the world, but 
I'm very, very concerned about our banks and financial 
institutions who participate in the support of corruption with 
acceptance of stolen money, drug money, on and on and on.
    I would like to especially thank Mr. Blum for being here 
today. It seems as if he has been around the world with so many 
of these issues and I would just like to let him know that Mr. 
Ricky Ross, who was at the center of the crack cocaine scandal 
that was exposed by the San Jose Mercury is out, back at a 
halfway house in San Diego. Of course, as you know, Daniel 
Ortega, who was fighting with the Contras is in power now with 
the Sandinistas in charge. I don't know. It seems as if things 
just continue to rotate and that things don't really change 
that much.
    But, here we are today again looking at this issue and 
whether it is a Halliburton that's involved in a bribery or any 
other American firm, or any American financial institution that 
knowingly accepts money from people like Abacha, and protect 
it, it seems as if we should be able to do something about 
that. I spent a lot of time on Citibank because they were 
obviously purchasing dope, little banks throughout Central 
America and Mexico and one of the brothers of a former 
president of Mexico, had a private banker at Citibank, who 
bought their homes and boats and all of that.
    And that's what I think we can get a handle on. ``Know-
your-customer'' does not accurately describe it. I mean, it has 
to be better than that. I don't think that the brother of the 
president of Mexico at that time even had a card on file to 
talk about where they lived, earned money, but they had a 
private banker who facilitated the purchase of all of these 
assets. So, what I would like to do is, I would like to find 
ways to stop our banks, period, from accepting a corrupt money 
and protecting corrupt money.
    I would like to find out what the IMF and not only the 
International Monetary Fund, but the World Bank, they have a 
lot of investigations. And they have a lot of research 
information. They know a lot about some of these countries that 
are involved in deep, deep corruption and who are putting money 
in American banks. I would like us to find ways to get access 
to the research they have and, of course, simply close down the 
ability for our banks to have this money placed in accounts in 
these banks. So, you have been giving us some suggestions. You 
have talked a lot about the know-your-customer rules. Is there 
anything else you would like to share with us about what we 
should be doing to close down the ability of American banks to 
accept this cash from these corrupt people? Yes?
    Ms. Lawson. In response to your points about the IMF and 
the World Bank, they have a very strong role to play in this. 
They play a significant part in the mutual evaluations, the 
peer reviews, that the financial action task force does of its 
members. When they got involved in 2002, it was on the 
condition that FATF stop naming and shaming, explicitly, the 
countries that did not have appropriate standards in place. So, 
if they were to be supportive of that, FATF could be made more 
effective in ensuring that there's a better global standard.
    The other interesting role that the IMF and the World Bank 
can play is that in the analyses of countries' economies, the 
Article IV Reports, for example, for the IMF. There is 
information about the transparency over natural resource 
revenues and payments. Given that in many of these most corrupt 
countries, it is natural resources that are providing the money 
that can be so easily looted, more information made available 
in a very clear form, from the international financial 
institutions to the banks to help them in doing their due 
diligence to identify where the corruption might be taking 
place, would be very useful.
    Ms. Waters. Thank you very much. Mr. Chairman, let me wrap 
up simply by saying, we don't want to hurt the poor people who 
we are trying to support in these countries and I'm just 
sitting here thinking about how we cannot get the money to the 
governments that are responsible but rather to some NGOs or 
other to continue some of that work. And I yield back the 
balance of my time.
    The Chairman. The gentleman from New Jersey was next on the 
list.
    Mr. Garrett. I thank the chairman. I thank the members of 
the panel, Ms. Macovei, Ms. Lawson, Mr. Ribadu, well, everyone, 
everyone on the panel for your work and the sacrifices that you 
have made on its behalf. You know, I think of the actions that 
Congress has tried to take in this, that I have been involved 
with, is trying to help the people. One prior to the Iraqi war 
situation, I was down on the Floor on a number of occasions 
when the whole issue of the now infamous oil for food scandal 
began to explode.
    And there is, just as Ms. Waters says, the issue there is, 
where is the money supposed to go? It is supposed to go to the 
folks over there, the people over there, the poor people over 
there for food and medical supplies and other things and it 
didn't get there. And of course, we have now learned it went 
from, not just to Iraq, but political folks from Russia to 
France and in this country, all around the world. The 
discouraging part from my aspect was, in Congress we put in a 
number of, I put in a number of amendments to say, let's call 
for accountability, let's withhold some of our funds to go 
there, and quite honestly, they fell on deaf ears in this House 
because of the nature of what we were, others were trying to 
do.
    But I think it was the right thing to do, to try to call 
even an entity like the UN, accountable for their actions. Now, 
the chairman raises the proverbial issue, I'll go along this 
line with regard to the level playing field. Ms. Lawson, I 
think you mentioned in your testimony with regard to at least 
one bank, Riggs Bank, and what happened there. Now, there is a 
case, just to tell you the other side, there is a case where 
the United States did have the tougher law.
    We had the civil and criminal prosecutions. They had to 
basically sell out and what was the outcome of that, the 
outcome of that for them, not very good, outcome as far as in 
Europe and the rest of the banking world, they just continued 
on, right? So, even though we took the leadership position, 
what came of that? Ms. Lawson?
    Ms. Lawson. Thank you for your comments. I think that 
brings up a very interesting issue. It's very concerning that 
when the United States takes this very effective action using 
some of the powers that it has, that we then see a European 
bank continuing to hold an account for one of the characters 
involved and I would like to reassure you that in addition to 
coming here to seek leadership from the United States, we are 
also working, spending a lot of time working, in London, in 
Brussels, and in other European capitals to try and get 
European governments to look at this, as well.
    But another issue that comes out of this is, let's look at 
the mansion that Teodorin Obiang owns, which is in the United 
States and was purchased in February 2006. Now this is after 
Riggs was closed. This money that he used to buy it, $35 
million or thereabouts, must have come into the United States 
in some form or other. So, while it is very important to ensure 
that the European standards also improve by using the 
mechanisms that we have internationally, such as FATF, there 
may also be issues with money still being able to come into the 
United States somehow in order for this guy to purchase his 
house.
    Mr. Garrett. Well, you know, you raised the issue of the 
banks looking at, how do they have this much assets, I was 
thinking, I'm from New Jersey. We had a case where we had a 
prominent city mayor who made a city salary and he was getting, 
he had a large boat, several real estate holdings, and cars and 
everything else, so with the idea of looking at, not just the 
terrorist list, which you referenced, does that mean that we 
have to have a system where banks even within this own country 
have to start questioning if we have political figures that are 
getting all this aggregating of assets when they're only making 
X number of dollars as a city mayor or councilman or something 
like that, but that's their responsibility now?
    Ms. Lawson. As far as I'm aware, it's the bank's 
responsibility to ensure that they don't accept the proceeds of 
crime of whatever it is and that applies to their customers 
wherever they're coming from. Now, the strong, impressive work 
of this committee has led some regulations in the form of the 
Patriot Act, section 312, that apply to foreign account owners, 
in particular, as a specific means of tackling corruption. But, 
the anti-money laundering laws are basically the proceeds of 
crime. So, it's a bank's job to work out whether their 
customers' funds are legitimate, whoever they are.
    Mr. Garrett. Okay. Yes, Mr. Blum?
    Mr. Blum. I might add in this discussion, I represent 
financial institutions and work with them in compliance. I have 
actually sat with committees that look at questionable accounts 
and decide whether or not the bank will take them on or whether 
or not, after looking at some questionable transactions they 
want to get rid of the customer. And, in truth, the better 
institutions all recognize something called reputational risk. 
The presence of, let's say, the Obiang account is not worth the 
trouble that account will bring if we all understand that we're 
dealing with a significant crook. The problem comes when that 
crook comes into the bank through some kind of disguised means 
where the bank can't be certain that it's the crook and can't 
really question. Let's talk about a clearing broker who sees 
the transaction. The account originated with the introducing 
broker, now what do you do? Pick up the phone and say, we're 
going to fire you, the introducing broker unless you get rid of 
your customer? And that gets to be a lot tricker.
    Mr. Garrett. My time is up, thank you.
    Ms. Macovei. Can I--
    The Chairman. Yes, if the gentlewoman would like to answer, 
she may. We only have one panel, so we can be a little loose 
with time here.
    Ms. Macovei. I think we should also think of the 
responsibilities of all the reporting agencies to the anti-
money laundering financial needs. It's first the banks and 
they, as we all know, they have to report not only transactions 
over a certain value, but any suspect kind of activity or 
transaction. And also, there are responsibilities at least in 
the laws for notaries and for other categories of sort called 
deporting entities. So maybe you should also look at the 
framework and the obligations of these many others who know. 
Thank you.
    Mr. Garrett. Thank you very much. Thank you, Mr. Chairman.
    The Chairman. The gentleman from Kansas.
    Mr. Moore of Kansas. Thank you, Mr. Chairman, and thanks to 
our witnesses for your testimony this morning. As a former 
district attorney, and the chairman of this committee's 
Oversight and Investigations Subcommittee, exposing corruption, 
fraud, and wrongdoing at both the local and Federal levels of 
government has been a top priority of my public service and I 
hope everybody on this committee's public service.
    Today we're focusing on corruption and criminal acts at the 
international level. When the stolen funds can mean the 
difference between life and death for too many impoverished 
people, the need to crack down on these acts could not be 
greater. Normally, a government program is set up, funds are 
distributed, and we wait for enforcement at the end of the 
process and hope to catch any illegal acts that may have 
occurred. The Special Inspector General for TARP or SIGTARP has 
worked to move enforcement efforts earlier in this process with 
respect to the TARP program.
    Mr. Barofsky last reported having 20 criminal 
investigations ongoing and has made it a priority to work with 
Treasury to build into their TARP program stronger 
accountability and transparency measures to prevent waste and 
fraud before crime happens. Can we implement the same approach 
for these international programs? That is, increased 
transparency in the program and establish vigilant oversight at 
the beginning so we can catch possible illegal acts before the 
crime happens and becomes more widespread and I would like to 
hear from any of the witnesses who care to comment. Please. No 
comments? Mr. Baker?
    Mr. Baker. Congressman, what I would like to comment on is 
the question of what U.S. banks can take and what they cannot 
take.
    Mr. Moore of Kansas. Okay.
    Mr. Baker. The United States has two different lists. A 
very long list of domestic crimes of which we cannot knowingly 
accept that kind of money. The foreign list is a very short 
list. Basically, we borrow inflows from abroad of the proceeds 
of corruption, terrorist financing, and drug trading. Bank 
fraud is also part of that. But in my earlier remarks, I 
indicated all the other kinds of criminal activities the money 
of which can flow legally into the United States.
    Now, if the receiving bank has a suspicion that the money 
is from a criminal source, it is expected to file a suspicious 
activities report. But, the key is, it can accept the money. It 
can take the deposit. The United States is one of the last 
countries to utilize a two-list system. Most European countries 
have gone to the definition of what constitutes laundered 
money, illicit money, as being the proceeds of a major crime. 
The UK has gone a step beyond that and called it simply the 
proceeds of a crime. If you knowingly handle the proceeds of a 
crime, you've committed a money laundering offense.
    Congresswoman Waters asked for specific suggestions as to 
what needs to be done to address this problem. I would assert 
that until we close those loopholes by which other kinds of 
criminal money can come into the United States, we cannot 
effectively fight that component, which is corrupt money.
    Mr. Moore of Kansas. Thank you, sir. Are there any other 
comments from the witnesses? Yes?
    Mr. Blum. I would like to add a thought on this. The 
biggest problem that I see is the absolutely antiquated and 
impossible situation of information exchange and witnesses 
exchange. Let me give you an example. When we met as a working 
group at the UN to discuss the problems of prosecution and 
going after this kind of corruption, the prosecutors, the 
working prosecutors said, you realize we can't compel the 
attendance of a witness across international boundaries if the 
witness doesn't want to come.
    There's no system for bringing them into the country with 
immunity to testify. The process of getting evidence across 
international borders is basically a bilateral business that 
takes months to accomplish. And if you get a lead in one place 
and then have to follow up in another country, you can be years 
in trying to develop even the simplest criminal case involving 
financial flows. So, one of the most important things we can do 
is find a global way of modernizing this absolutely antiquated 
bilateral system of one off exchange.
    Mr. Moore of Kansas. Even with the cooperation or 
willingness of the other country, where the resident resides? 
They can't compel that person--
    Mr. Blum. If the person is willing to come here as a 
witness, that's fine.
    Mr. Moore of Kansas. But I mean, the government of the 
nation where that person lives can't compel that person to go 
to our country?
    Mr. Blum. No. By and large it will be, the opportunity will 
be then given to perhaps have a deposition in the foreign 
country if it's a country that wants to cooperate.
    Mr. Moore of Kansas. Thank you. I see my time is up. Thank 
you to the witnesses.
    The Chairman. The gentleman from Minnesota.
    Mr. Paulsen. Thank you, Mr. Chairman. Many changes to the 
transparency of the financial institutions have been made since 
September 11th and we have also seen an increase in efforts 
internationally to clamp down on financial crimes. There are 
currently some pretty heavy regulations on U.S. financial 
institutions and we can certainly debate whether or not those 
are sufficient, but I think there's still a heavy burden on 
U.S. banks. As I understand it, one of the areas where we are 
seeing some increase in fraudulent activities right now is with 
the new technologies that are going on. In particular, online 
payment systems and banking provide an easy opportunity to 
evade regulators in general. Can any of you comment, 
specifically, on that, on what might be targeted directly on 
that area in particular? Mr. Blum?
    Mr. Blum. There are some new technologies which are being 
used. Smart cards, cell phones, that offer opportunities, but 
in this issue that we're talking about today, grand corruption, 
they go the old fashioned way, which is plain old investment 
accounts and investment advisors and lawyers in Geneva and 
private bankers. They're not using high tech. And in fact, the 
problem is, that when they get this corruption money and 
they're still in power, there's no reason why anybody can't 
deal with it because there's nothing in the system that can 
say, don't deal with money you suspect being corrupt other than 
your own good nature.
    Mr. Paulsen. Mr. Baker?
    Mr. Baker. Congressman, the argument is often made that we 
cannot stop these kinds of illicit flows and use of cell phones 
and Smart cards is given as an example. I have long advocated 
that the goal is not to try to stop all corruption and all 
illicit financial flows; the goal is to try to curtail it. We 
can curtail it very substantially with a handful of measures. 
This won't completely end the problem, but the first goal 
should be to substantially curtail the literally hundreds of 
billions of dollars of illicit money and tens of billions of 
dollars of corrupt money that flow across borders. That can be 
done as a matter of political will.
    Mr. Paulsen. And Mr. Ribadu, I had the privilege of 
traveling to Africa also just 3 weeks ago with my colleague 
from Georgia, and it was stunning to spend some time in The 
Congo and see how aid is potentially not reaching the folks 
that it should be targeting, especially children and a lot of 
the IDP camps where we had a chance to visit. And I'm just 
curious, based on some of the comments you had in your 
statement where the African Union is reporting that corruption 
really is draining the region of something like $140 billion a 
year, 25 percent of the continent's official GDP.
    In general, how much money of multilateral bilateral aid is 
reaching the citizens of a developing nation, realistically, at 
the level that it should be targeted to. Or what percentage of 
those extractive revenues is reaching those citizens? I guess, 
in other words, does much of the money pouring in from the G-7 
or other organizations, is it targeting and doing much good 
where it should be getting to or is there another way to aid 
development if so much money is getting picked off the top or 
being stolen?
    Mr. Ribadu. Thank you. Well, that is what the fundamental 
issue is. Basically, whatever that goes in, hardly will see the 
benefit of it. It's literally probably 20 percent, average, of 
what I have seen in terms of credit, it's international aid 
that goes in, for the money coming internally, chances are if 
you are lucky in some conditions, you could get fairly about 20 
percent of the value. And that is really the issue.
    And the problem we are talking about here and what I have 
heard so far, it seems as if we tend to look at from this 
point, we don't seem to understand what is going on, on the 
ground, where the corruption is happening. I have heard one 
person after another asking, what can the United States do? 
What could you do with your own institutions? We have to start 
talking about what could you do out there, where it is 
happening. You may take your own measures, you may take your 
own fantastic beautiful, whatever, it is not making any impact. 
But from where the corruption is taking place. I think it is 
high time to start looking at what are the possibilities of 
reducing whatever is making it possible for this corruption to 
continue.
    Who are those responsible? What can be done about it? And I 
have seen from the experience of what I did in Nigeria, with a 
little effort of pushing, for example, the initiative of FATF, 
the Financial Action Task Force, that costs nobody nothing it 
makes massive impact in us having to change fast, set up a 
financial intelligence unit, have a control over all financial 
system, ability to also improve and raise our own standard and 
then it suddenly change the whole dynamics of corruption 
between the developing countries and the developed ones.
    I think we need to have this type of thinking and 
direction, the United States giving more attention, more time, 
and more resources to this issue involving 400-something 
million people who are desperately poor. I can imagine if 5 
percent for example of the initiative or the effort being given 
to some other parts of world, issues to do, for example, I'm 
sorry to say, maybe with Israel and the Arab countries. Israel 
and Palestine have 10 million people; Africa has close to 500 
million people.
    Please give us 5 percent of the time you are giving to 
Israel and the Palestinians, and you will see the difference it 
can make. Unless we start addressing the problem back home on 
the ground in Africa, trying hard to confront those who are 
responsible for this corruption, chances are you may continue 
to improve your own systems here, it is not likely going to be 
the solution. This is the direction I think we should start 
looking at.
    Thank you.
    Ms. Lawson. Could I briefly add something to that? We have 
an interesting statistic here, which is that in 2007, the value 
of exports of oil and minerals from Africa was roughly $260 
billion, which was nearly 6 times the value of international 
aid to Africa. Now, the fact that we're needing to give that 
aid shows that those natural resource revenues are not going 
where they need to.
    What we see happening time and time again in every one of 
these natural resource rich but highly corrupt countries we 
investigate, is that aid is propping up the basic functions of 
government and providing legitimacy to the regime while they 
get on with the larger and more lucrative business of stripping 
the state of its assets. Now, if that aid is going to be 
undermined until we stop the incredibly damaging illicit flows 
that are coming back out into the rich world.
    Now, I'm interested that in Congressman Bachus' testimony 
in 2002, that committee, he said, it's a concerted 
international effort involving close cooperation among 
regulators, law enforcement authorities and financial 
institutions is absolutely essential for dealing effectively 
with future Abachas. Now, here we are 7 years on. Perhaps some 
of those future Abachas are being talked about in this room 
today.
    And as far as we can see, in addition to the international 
problem, it's not completely clear from what we have looked at, 
that the U.S. regulators have a handle on exactly what it is 
that U.S. banks are doing to fulfill their requirement to 
identify the beneficial owner of their customer. There's a good 
framework in place there, but the specifics of whether it is 
working properly do not seem to be clear.
    So, we would encourage this committee to inquire of the 
Treasury what it is doing to ensure that it and the U.S.'s 
regulators fully understand whether the U.S. banks are 
fulfilling this requirement in a meaningful way and whether 
further explanation is needed in the second deregulation to 
make it absolutely explicit and to make these regulations 
meaningful so that they're used effectively.
    The Chairman. Mr. Scott?
    Mr. Scott. Thank you, Mr. Chairman.
    In trying to get our hands around this in terms of what can 
we really do about this situation, and I think that if we focus 
on the banks, we regulate the banks, the banks could be an 
area. Let me just ask: Do any of you know any United States 
banks who are engaged with accepting corrupt customers? All 
right. Perhaps you do and do not want to mention. Let me ask 
you this then.
    Because if we are not willing to face the truth and say 
that U.S. bank are engaged in accepting corrupt customers, then 
we all need to just dismiss this panel and go home. What are we 
doing here? Our number one function is regulating our banks. 
Now, we know one thing, Mr. Baker. You have mentioned that once 
a bank receives, so there are banks who are receiving what they 
comprise as a suspicious customer, and then you said that that 
bank must require that a report be filed and submitted for the 
suspicious customer, but they still take the money.
    That appears to me like a get-out-of-jail-free card. If 
they suspect it's a suspicious, corrupt customer, then why do 
we have this loophole here for them to say just file a report, 
but go ahead and take the money. And they filed the report just 
in case it shows up that they're corrupt. Well, hey, we have a 
chair to sit in here when the music stops. I got the report I 
filed. It seems to me that we ought to be able to do something 
about that. But now, let me ask you this. When they get the 
report, they file the report. Where do they send the report? 
And then secondly who is overseeing this? Who do they report 
the report to? They just file a report and it sits there?
    Yes, Mr. Blum?
    Mr. Blum. A problem is, yes, they file a report. The report 
then goes to the judicial district where the most activity 
relating to that report exists, and then there's a committee of 
law enforcement agencies that sit and decide whether anybody 
wants to pick up on it and make the case.
    Let me assure you that with thousands of reports and all 
sorts of prosecutorial possibilities, no agency is going to 
step forward to go after a foreign leader's corrupt money case 
to figure out if there's a violation of U.S. law they can 
prosecute; and, as a result, because it's time consuming, 
sticky, difficult. They take the easy stuff, and these cases 
don't go anywhere.
    Mr. Scott. So what can we do about this? We have on the 
books two major laws: the Bank Secrecy Act; and the Foreign 
Corrupt Practices Act. Is that sufficient? I mean what can you 
tell this committee that specifically the Financial Services 
Committee needs to do to tighten this?
    Mr. Blum. Well, first and foremost, as I said earlier, it's 
essential that every bank know the beneficial owner of these 
offshore entities they're dealing with, and that doesn't mean 
getting passport photographs of a board of directors sitting in 
Nevus. It means actually finding out where the heart, the mind, 
and the brains of whatever entity it is exists and who it is. 
And, that way, they can't shrug their shoulders.
    The institutions can't shrug their shoulders and say, 
``Well, we really didn't know that was money coming from 
Abacha, or it was coming from somebody else who is robbing this 
country blind.'' They will then have the specific knowledge; 
and, the beauty of that is that then the institution will 
confront reputational risk. But I have to give you caution. 
I'll give you the case of a wonderful fellow who was the 
Mexican ambassador to the United Nations, who suddenly found 
Citibank closing his account because of money transfers from 
Mexico. And the money transfers, they were his salary.
    There is a flip-side to all of this, and that is that the 
people who have the accounts and the people who have legitimate 
business have to be able to sort of respond and say, wait a 
minute, this is legitimate.
    Mr. Scott. All right, Mr. Baker, really quick.
    Mr. Baker. One of the steps that needs to be taken is 
substantially strengthening ``know your customer'' 
requirements. At the present time, a U.S. bank receiving money 
from a foreign depositor is expected to satisfy itself that the 
money is not derived from corruption, drug trafficking, or 
terrorist financing. That's the extent of the questions that 
need to be asked.
    If that individual walks in and says, ``I make my money by 
smuggling aliens from one part of the world to another part of 
the world, but not into the United States,'' a U.S. bank can 
take that money. It would be expected to file a suspicious 
activity report. I think the last that I recall, there were 
some 12 million to 14 million suspicious activities reports 
filed a year, so you can imagine how few of them get addressed.
    The last time, and we're talking what--1999--when ``know 
your customer'' was put on the table in an attempt to 
strengthen regulations. At that time, it was made equally 
applicable to American and foreign account holders, and it was 
not legislated successfully, because it broached privacy 
concerns of U.S. account holders.
    There is no reason why we can't strengthen ``know-your-
customer'' requirements as applied to foreign account holders 
and require, not on a judgmental or voluntary basis, the kinds 
of questions that bankers are expected to ask. Put ``know your 
customer'' questions, requirements, into a much more regulatory 
framework. The following questions have to be asked. Preceding 
all of that as I stressed again must be the passage of 
legislation that says all those kinds of criminal money are not 
acceptable in the U.S. financial system.
    Mr. Scott. Thank you.
    Mr. Blum. I would like to, if I may, add one.
    Mr. Meeks. [presiding] Really quick; the gentleman's time 
has expired.
    Mr. Blum. The real thing you could do would be to change 
commercial banking law so that the bank becomes a constructive 
trustee for money that it knows is derived from a fraudulent 
source, so that the bank then carries the civil law 
responsibility if it forwards the money to somebody other than 
the genuine, beneficial owner. So in the case of money stolen 
from Nigeria, that would be the Nigerian people. But if it 
forwards the money on to buy a mansion in Malibu, let's say, 
they would be liable for passing the money on. Make the banks 
commercially responsible under civil law and you take a huge 
step forward.
    Mr. Scott. Thank you very much.
    Mr. Meeks. The gentleman from Florida.
    Mr. Posey. Thank you, Mr. Chairman, and first I also want 
to commend Chairman Frank for bringing forth this issue to the 
light of day. Listening to the comments of course, the 
consequences are heart-wrenching that are described in your 
testimonies; and, to put things in a proper perspective, I mean 
we have to realize that there are a lot of legal protections 
that we take for granted in this country that aren't really 
relevant in another country, I mean, to own and transfer 
property to go into business in a timely manner.
    I mean, just a whole lot of things, not to mention the 
civil and human rights protections we have that so many people 
around the world right now are unable to enjoy. And while 
reading through the remarks of course those of the first four 
speakers, they gave us your testimonies in order and so we look 
at them in order. The thought comes to mind that there might 
really be a legitimate beneficial place for the UN to do 
something as an international crime-fighter until I read about 
Mr. Blum's experiences with the Transnational Corporations Act 
of 1976 and how that was just blown away and laughed off 
apparently.
    And given the fact you have to realize this country was 
given the heads-up 10 years ago about Bernard Madoff, and, 
nonetheless, the people we have to enforce those laws turned a 
blind eye or a deaf ear to that and allowed him to plunder $70 
billion, which makes your thieves in your countries look like a 
bunch of small town crooks.
    And, so, you say, wow; you know, can there be any hope? Can 
there be any hope? But I think fortunately right now there 
still is some focus and everyone seems to agree that these 
activities that are used to fund terrorism are not going to be 
tolerated anywhere, except of course by the terrorists 
themselves. And I think that the inhumane treatment, the human 
misery that's caused by this corruption that can maybe, at 
least through mutual partners or mutual banks, be tied to 
funding of terrorism might be the link, might be the answer 
that it's going to take to get some action.
    You know, it's not going to be a unilateral action by the 
United States taking sanctions just against our banks or our 
wrongdoers. It has to be more international and bilateral, and 
multilateral, and like your comments on how you think that 
might work, because I see that maybe as an open door for you.
    Ms. Lawson. And if I might respond to that comment, I think 
you're right that the key to this is in what is being done to 
focus on terrorist finance in the system, and it's very clear. 
And I think there's pretty much agreement on that, that all 
forms of dirty money flow through the same system. So if we 
don't close the system to the types of dirty money, all of them 
are going to come through.
    The key to this, I think, the key to illustrating it is 
this extraordinary document we have in our report and the 
stories I touched on very briefly. I have more detail in the 
written testimony about Denis Sassou Nguesso, the son of the 
President of Congo, and his extraordinary designer credit card 
shopping. We have a map of his shopping route through Paris and 
the report.
    Mr. Posey. I read all that, but the focus still sounded 
drilled down.
    Ms. Lawson. This document has been stamped, ``Record of 
Terrorists Checked.'' This shows that there has been a focus 
from the international community, pretty much led by the United 
States, to make sure that a bank in Hong Kong--it's called Bank 
of East Asia--I'm not even sure if anyone here would have heard 
of it--it's stamping that document, a payment credit card 
instruction, ``Record of Terrorist Checked.''
    Now, we need to use the same mechanisms that have made that 
happen to say, so that that bank is stamping that document, 
``Record of Politically-exposed persons checked,'' to make sure 
that they have done their due diligence into whether they're 
dealing with a politically exposed person. The same mechanism 
that is being used to do that can be used to focus on 
corruption. This isn't a matter of technical difficulty or of 
the huge amount of new regulation that's required. It's a 
matter of political will.
    Mr. Blum. One of the things that has been left out of the 
discussion this morning is some obvious cases where the 
corruption is undermining U.S. national security interests in a 
major way. So, Afghanistan, there's a huge flood of drug money 
back. That drug money isn't walking there. There's a system 
that's moving that money. There's a lot of money involved in 
that. We have yet to get our arms around it and, likewise, in 
Iraq there's massive corruption and we haven't really gotten 
our arms around what's happening there; and, in both cases, 
it's undermining our national security interests.
    Now, this is for a lot of reasons. Most of the heroin in 
Afghanistan winds up in Western Europe. The Western European 
countries are not dealing with drug money laundering. They're 
very good at certain other things, but in this area, the 
failure of cooperation among the European countries, has 
allowed that money to flow back. Now, this is all part of the 
same problem we are talking about. It's part of the corruption 
because the drug money is going back to pay corrupt government 
officials. It's undermining our most important strategic goal 
at the moment. So we really have to find way to tackle these 
problems, and as I say, it's not easy, and it's something we 
just have to put a lot more work into.
    Mr. Meeks. The gentleman from Texas, Mr. Hinojosa.
    Mr. Hinojosa. Thank you, Chairman Meeks. Thank you for 
giving me the opportunity to ask some questions.
    I want to thank all the panelists, because I think that you 
all have given us some very interesting information and I too 
want to join Chairman Frank and Ranking Member Bachus in 
acknowledging the neverending quest of Chairwoman Waters to 
combat poverty in Haiti and corruption in foreign governments, 
particularly in developing countries.
    Congresswoman Waters has helped me considerably in my 
congressional district on various issues and I am glad to 
participate today. I agree with Chairman Frank's assessment of 
what we have heard this morning from the panelists. He 
describes the problem of corruption as an unlevel playing field 
for have-nots who continue to be disadvantaged on this playing 
field.
    So my first question is directed to Mr. Ribadu. My question 
is in two parts. First, it seems to me that you contend there 
is approximately $93 billion currently in the markets 
supporting corrupt governments. If $93 billion is the accurate 
data, how did you arrive at that number. Second, what 
substantive and credible evidence do you have that American 
companies, government contractors and our financial 
institutions are helping developing countries to loot moneys 
and public assets by public officials?
    Mr. Ribadu. Thank you. The first question on the $93 
billion, it comes from the Europe and United Kingdom Commission 
for Africa. They came up with that figure. They said that about 
$93 billion stolen from Africa is divided to different 
financial institutions across the world. So it came from the 
U.K. authorities.
    On the issue about the American companies, let me share 
with you the fact that American companies probably are the best 
in the world today if you compare with the rest of the world. I 
have seen it in Nigeria. Partly because of what you are doing, 
no other country in the world is doing what you are doing. For 
example, Congress calling the whole world to come and share 
with you what the experience, and you have most of the 
stringent legislations. It is working. It has helped greatly. 
It's just not America benefiting from it. We are the first in 
terms of benefit, and I would want to encourage you to go that 
direction, improve on it.
    The challenge is what also can you do on ground where it is 
happening. For example, I wanted to suggest about the Foreign 
Corrupt Practices Act. If there would be a possibility of 
extending the sanctions, not just to the American companies and 
individuals from America who do give bribes to foreign 
countries and foreign business entities, but what can you do 
about those who are the receivers. As long as you continue to 
get those who are beneficiaries of this corruption and they 
continue to get away with it.
    Mr. Hinojosa. Excuse me for interrupting you, Mr. Ribadu.
    I don't want you to answer my question with a question.
    Mr. Ribadu. Yes, sir.
    Mr. Hinojosa. Just give me credible evidence that our 
American companies are doing what you said.
    Mr. Ribadu. Halliburton, Parnanpena, Zenith, in the last 2 
years, the Justice Department cut it out, investigation into 
close to about 20 companies doing business in Nigeria and they 
also put sanctions to the tune of over a billion dollars. But 
nothing is happening to the other side, those who made this 
money, and they are still very big, powerful individuals in 
Nigeria, and they will be continue to be there. And, as long as 
they are there--
    Mr. Hinojosa. Thank you. Time is running out and I want to 
take advantage of this opportunity to ask another question 
directed to Mr. Baker and Ms. Lawson.
    I realize that drafting legislative language is not your 
specialty, but what language would both of you recommend that 
we on this committee, with the support of Chairman Frank, use 
to draft and move through regular order?
    Mr. Baker. If I could give you what in my opinion is the 
first and most important step, and that is to change the range 
of predicate offenses under anti-money laundering legislation 
to include all forms of criminal money coming from abroad. As I 
have explained, we are currently very selective in what we bar 
coming from abroad. That needs to be changed. We cannot alter 
the reality of corrupt money flowing into the U.S. banking 
system, while at the same time being open to so many other 
forms of illicit money.
    Senator Grassley, who endorsed the back of my book along 
with Senator Levin, has in fact in the last legislative session 
and in the preceding legislative session, put a bill on the 
table that does exactly that.
    Mr. Hinojosa. Thank you.
    I want to hear from Ms. Lawson. What is your 
recommendation?
    Ms. Lawson. I would encourage this committee to push for 
some more explicit language around Section 3-112 of the Patriot 
Act, which is the bit about requiring due diligence on the 
beneficial owner of foreign accounts opening accounts here, to 
make it explicit that not only should the bank be required to 
identify the beneficial owner, but they should have evidence 
that the funds are not corrupt, else they should not accept 
them.
    Mr. Hinojosa. Thank you for those specific responses, and I 
yield back, Mr. Chairman.
    Mr. Meeks. Mr. Miller.
    Mr. Miller of California. About time you recognized me, my 
friend.
    I have enjoyed the testimony today. We have talked about 
laws that we have in the Federal Government and who is 
responsible for implementing those laws.
    And we talked about United States banks and if a bank, you 
know, accepts illicit money, knowing that that's one thing; but 
when a bank files a suspicious report, they're saying, ``We're 
asking if this is legitimate or not.''
    And we talked about liability for such actions and such. 
But if a bank does that, they're sending a need to the Federal 
Government or to a government agency that has jurisdiction. And 
then I think responsibility falls on us at that point in time, 
the government agency or the Federal Government, to respond to 
that bank.
    I want to move very cautiously in the direction of saying 
that bank is bad, because they did what they were supposed to 
do, and if the money is not only suspicious, it is illicit, 
they have done their job.
    And I would want to move cautiously in areas where we are 
going to say we are going to hold the bank liable for something 
that they did that they were supposed to do.
    But Mr.--is it ``Ribadu?''
    Mr. Ribadu. Exactly.
    Mr. Miller of California. I was right, he was wrong. I 
thought it was ``Ribadu,'' he said ``Ribadu.''
    Mr. Meeks. No, I said ``Ribadu,'' and he said--
    Mr. Miller of California. No, you blew it, I'm not buying 
it.
    You talked about Halliburton--
    Mr. Meeks. The gentleman's time has expired.
    Mr. Miller of California. Well, don't get personal.
    [laughter]
    Mr. Miller of California. I tried to get in the Black 
Caucus and you wouldn't let me in. That's why he's trying to 
get even with me.
    [laughter]
    Mr. Miller of California. You talked about Halliburton 
doing business in a country, and it sounded like the country 
was extorting Halliburton if they wanted to do business in that 
country. Is that what you were saying? And Halliburton paid 
money and went to some illicit group or government agency that 
was wrong or improper?
    Was that what you were saying?
    Mr. Ribadu. Exactly.
    Mr. Miller of California. How was that Halliburton's fault?
    Mr. Ribadu. The fact that they gave money--
    Mr. Miller of California. Well, the fact is that a business 
wanted to do business, and they're saying ``Unless you pay us--
we're a corrupt government--we're not going to let you do 
business.''
    Mr. Ribadu. Yes. That--
    Mr. Miller of California. So who are you pointing the 
finger at, I guess--
    Mr. Ribadu. That is the sad story of the whole thing. And 
that is what is really going on. It's not just Halliburton.
    Mr. Miller of California. Yes, but whose fault is that?
    Mr. Ribadu. Unfortunately, those who are in charge of 
foreign affairs--
    Mr. Miller of California. Is it not the person who is in 
charge of extorting the business?
    Mr. Ribadu. But it is the responsibility of the company 
doing the business. Also, what they could not do back home, 
they are also not entitled to do outside.
    If you behave very well in your own jurisdiction, chances 
are it is expected that you should also extend the same thing 
to wherever you go.
    You cannot, for example, do a different--
    Mr. Miller of California. I understand. But what do we do, 
let's say, if an American business is trying to do what they're 
in business to do business in the country, and the country 
basically their leadership is extorting that business.
    The American business can--they have two choices. They can 
say, ``Fine, we're not going to do business, and we're going to 
let somebody from France or Germany or Japan or wherever do 
business over there, because they're going to play by the 
illegal questionnaire rules.''
    I mean, I think we need to be getting at what countries are 
doing this, and how do we really deal with those? But how can 
we ensure that the policies to prevent exploitation from 
financial institutions and businesses by these corrupt figures 
are really implemented comprehensively? And how do we do that 
globally?
    I know, Ms. Lawson, you're looking at me with a question.
    But the reason I ask you that question--and you get that 
look on your face is: When I was a young man, I had a HUD 
official do that to me as a business person, as a contractor. 
We were doing business in Los Angeles County, my partner and I; 
I was in my early 20s and he was in his late 40s.
    And we had a HUD director in Los Angeles call my partner 
into his office, close the door, and say, ``Unless you give me 
a third of your profits in advance, when you issue the 
contract, you're not going to get the work any more.''
    And my partner came back to me, and I said, ``Well, he 
can't do that, because this is a government agency, and we have 
a right, we're on a bid list to bid the job.'' And I thought, 
you know, I was being extorted, and I said ``No.''
    And I'm going to put myself into a position to Halliburton. 
Well, every contract we bid on after that, that we were a low 
bidder on, they found a problem with the RFP, and when they re-
did the RFP, we were not on the bid list for the second one.
    So we were a company--and I was a young guy--who would have 
said, ``We're not going to do that, we're not going to fall to 
corruption,'' even if it was a director of HUD back in those 
days.
    Halliburton is in the same situation, and other American 
companies are in a situation, where they go and they say, 
``Well, we want to bid on your job, and we bid appropriately. 
And you're telling me that if I don't pay you off, I don't get 
the job, and this is an American company doing business in a 
foreign country.''
    And my opinion is, the contractor is the innocent guy. He 
just had the stupidity or whatever you want to call it, 
integrity, to say, ``No, you can't do that because you're a 
government agency and I can bid on it.''
    But I never got another job. So the American companies are 
stuck in the same situation. And my question is: How do we make 
sure that we adopt policies that not only apply to the United 
States, but apply globally?
    Mr. Ribadu. Yes. Well, let me just explain this little 
thing: Corruption and bribery is a criminal act.
    Mr. Miller of California. Yes.
    Mr. Ribadu. It's not different from, for example, murder, 
rape, or kidnapping. Do you think just because others are doing 
it, it is okay for you to go into it? No.
    I think the first step, the first position is to say, ``No, 
I'm not a criminal, I'm not going to do it--
    Mr. Miller of California. But what country was it you said 
Halliburton was having to pay off?
    Mr. Ribadu. Excuse me?
    Mr. Miller of California. You mentioned a country you said 
Halliburton was having to pay off.
    Mr. Ribadu. Well, in the case of Nigeria, about--
    Mr. Miller of California. What country was that?
    Mr. Ribadu. Nigeria.
    Mr. Miller of California. Who were they paying off?
    Mr. Ribadu. Nigerians.
    Mr. Miller of California. And who's in charge of--
    Mr. Ribadu. Unfortunately, that is the case, but--
    Mr. Miller of California. Prosecuted--
    Mr. Ribadu. The desperate poor of Nigeria are the ones who 
are at the receiving end, not the very few who are privileged 
to be in charge of the affairs in Nigeria. That's why the 
issues is: What can you do as a country, as good people of the 
world? As leaders. What do you do to help be on the side of the 
140 million desperately poor Nigerians?
    Or do you think it is okay for profit to stand in 
conspiracy with a small group of Nigerians who benefit from 
this, and then cheat, short-change, and literally turn--
    Mr. Miller of California. I think it's wrong--
    Mr. Meeks. Let me let Ms. Lawson--and then we're going to 
be out of time.
    Ms. Lawson. I hate to employ a cliche, but it's the most 
relevant way of doing this. The cliche is, ``It takes two to 
tango.'' And that is the best one that we can apply to 
corruption.
    Of course, there are a small minority of people in Nigeria 
and in a number of other countries in the developing world and 
indeed sometimes in the developed world, who wish to employ 
corrupt means to do what they want do to.
    But they cannot do it without the involvement of businesses 
to pay bribes and of banks to take the money that either comes 
from the bribes or comes from people having their hands in the 
till.
    Corruption cannot take place on this scale, without the 
facilitating services provided by the rich world. And we are 
being inconsistent in our policies towards these countries, if 
we don't make sure that we and our businesses and those that we 
regulate are not complicit in doing that.
    The other thing to point out is that there is a set of 
international norms and domestic laws in the United States, 
which make everything that you're talking about illegal.
    Mr. Miller of California. And I agree with everything you 
have said--
    Mr. Meeks. I'm going to let Mr. Blum go, and then that's 
going to be it--
    Mr. Blum. I want to just throw in this thought. If I were 
representing the company, but had the demand made for payoff, I 
would go to the U.S. Embassy, explain what was happening, and 
insist that my government step forward to both make 
representations to the Nigerians. And then, because I know who 
else is bidding, to make representations to the other 
governments about, ``Well, these guys are bidding, and we think 
they're involved in payoffs, and why don't you ask about it?'' 
and get at that level immediate cooperation in shutting that 
game of payoff down.
    Now in the case of Halliburton, what happened was the U.S. 
company worked with a French company and they cooperated 
together in paying the bribes.
    That was not the approach. The approach should have been: 
Talk to your governments, use the international agreements, and 
then put pressure on the Nigerians to say, ``Cut it out.''
    Mr. Meeks. Mr. Baker?
    Mr. Baker. Congressman, I have done business all over the 
developing world for 35 years before I segue'd into the think 
tank community. I lived 15 years in Nigeria, and spent another 
20 years doing business all over the rest of the developing 
world.
    You can do business without indulging in corruption. You 
may lose the occasional piece of business, which I have done, 
but I have no regrets over the business that I have lost.
    We're not going to revisit the question of whether or not 
it is illegal to bribe foreign government officials. That is 
U.S. law. There is no excuse for any U.S. company doing so.
    Mr. Meeks. The gentleman from Colorado, Mr. Perlmutter?
    Mr. Perlmutter. Thanks, Mr. Chairman. And this really has 
been a fascinating conversation.
    Mr. Miller, your questions were good ones, because the way 
I see your testimony, everybody, you have a couple things going 
on here. One is: You want the banks to be the traffic cops, and 
it involves illegal sales or illicit sales, so drugs. It 
involves bribery and extortion, and it involves theft--somebody 
just stealing from the country's treasury in some fashion or 
another.
    So you have three things. You would like to expand kind of 
the laundry list that banks look at. Ms. Lawson would like to 
have another box to check, which would say, ``Is this a 
political person? And why does he own the house in Malibu, you 
know, when he should only be getting $5,000 a month?''
    And so, Mr. Miller's question is, ``Okay, does this only 
apply to the United States, or do we have a global banking 
system? So, you know, it's Wells Fargo. Are they--Wells Fargo 
is the only one that looks at this? Or does the Bank of East 
Asia?''
    How do we, if we're going to do something, expand the list 
of laundered funds, and expand the list of people that you look 
at; how do we get this to other countries? That's number one.
    And then Mr. Blum, I have a second piece, which is I am 
actually working on an amendment to the Foreign Corrupt 
Practices Act that tries to bring in more of the civil side of 
things, so that if, you know, company X feels like it was hurt 
by a French company that did, in fact, bribe somebody, that 
company X could go get a lawyer, try to bring a civil lawsuit, 
and recover monies under the Foreign Corrupt Practices Act, 
that it isn't just the Federal Government's.
    So I want to start with you, Mr. Baker. How do we make all 
the banks traffic cops? Or do you want to start with U.S. 
banks?
    Mr. Baker. The first step is for the United States to catch 
up with where the European countries are.
    Mr. Perlmutter. Okay.
    Mr. Baker. Most European countries have passed laws stating 
that it is illegal to knowingly receive the proceeds of a major 
crime. We are not in that position yet. We need to catch up 
with the European--
    Mr. Perlmutter. A major crime would be drugs sales, 
bribery, extortion, theft?
    Mr. Baker. No. It's the same list in almost all European 
countries, the list that applies to domestic crimes. And that 
is usually any crime that carries the punishment of a year or 
more in jail--
    Mr. Perlmutter. Okay. A felony.
    Mr. Baker. A felony.
    Mr. Perlmutter. All right.
    Mr. Baker. It's against the law in almost all European 
countries to knowingly handle the proceeds of a felony offense, 
whether that offense was committed in country or out of 
country.
    Mr. Perlmutter. All right. Ms. Lawson, do you agree with 
that?
    Ms. Lawson. Yes. I would agree with that. And I would 
reiterate the point that the way that these mechanisms can be 
expanded to the rest of the world is the way in which the 
United States has already required the rest of the world to 
come along with it in the war against drug trafficking and the 
war against terrorist finance.
    Both of those were led by the United States and it used the 
Financial Action Task Force to ensure that other jurisdictions 
had similar standards in place.
    And while it's a bit clunky at the moment, they're not all 
quite there, it's definitely bringing them along. So that is 
the mechanism that you use to ensure that the international 
community as a whole turns against the proceeds of corruption.
    We're dealing with global flows of money. It would be 
absolutely pointless for the United States to do it on its own.
    Mr. Perlmutter. Okay.
    Mr. Blum, what do you think about private rights of action 
and getting the civil community into this? If my company has 
been hurt because somebody else bribed, I didn't get the job. I 
want to sue somebody.
    Mr. Blum. We already have unfair methods of competition 
rules under the Federal Trade Commission Act, and this is 
certainly an unfair method of competition.
    The biggest problem is going to be getting the evidence and 
the witnesses and the material, especially if this has happened 
outside the United States, and then finally getting a U.S. 
court to decide, ``Yes, we have jurisdiction and that this is 
the right forum to hear it.''
    Because until now, a lot of international cases that have 
involved questionable activities wind up being thrown out on 
the ground of forum non conveniens. The judge just simply looks 
at it and says, ``I don't need this horror show in my court 
room, this is the wrong place. Go sue somebody in France or in 
England.''
    Mr. Perlmutter. So then, what you're saying is not only do 
we have to change the law, to expand it, but we're going to 
have to have some treaties that allow for witnesses to be 
obtained--
    Mr. Blum. Yes, and this business of exchanging information 
and evidence is critical, especially given the timelines.
    I mean, my experience in trying to get the Justice 
Department to respond now to turn over Halliburton-related 
evidence to the Nigerians is an illustration of that. We are 
now 10 years out on the case. And they haven't begun to turn 
anything over.
    Now who knows what will happen to it on the other end? 
That's not the issue. The issue is: Can they get started? And 
this is a very complicated case involving multiple players, 
multiple countries. And you have to produce evidence and you 
have to produce evidence beyond a reasonable doubt.
    Mr. Perlmutter. Okay. Thank you. My time has expired.
    Mr. Meeks. The gentleman from New Jersey, Mr. Lance?
    Mr. Lance. Thank you, Chairman Meeks. Good morning to you 
all. I have found the testimony compelling. And I think it's 
very disturbing, and I hope that we can work together in a 
bipartisan capacity on this issue.
    Mr. Ribadu, you indicate in your testimony that you would 
recommend a proposal on an international proceeds of crime 
treaty. Could you flesh that out to a greater extent for me as 
to how that would work? And would that require a statutory 
change here in Washington? And among others across the world?
    Mr. Ribadu. Thank you, sir. First, I wanted to also say 
something with respect to what the U.S. authorities have done 
so far to bring this international cooperation.
    Nigeria is a very good example today. We do have a 
financial intelligence unit, that has helped greatly to improve 
our own financial system. And it came as a--support from 
FINCEN. FINCEN is an American outfit with responsibility of 
regulation.
    We have Edmund Group. Edmund Group is a group that is 
involving financial intelligence units in the world, where we 
share information and through that we are able to advance the 
work we are doing.
    It has all been promoted and supported by the United States 
and the U.S. Government.
    I also wanted--I may not be, but just understand where I'm 
coming from--I'm coming from Nigeria, Africa--maybe not part of 
your own system here--but I wanted to see the possibility of 
not just America going after those who are giving the bribes, 
in the case of corruption; but what can you do also, the 
receivers who are out there? Because nothing is happening to 
them.
    Of all the 60-something cases that have so far been taken 
under the Foreign Corrupt Practices Act, not a single case has 
been where you have a punishment of the receiver. Unless 
something is done, then nothing is going to happen to them.
    In Nigeria, the Halliburton people who made money from it, 
are still our rulers. If you go to Congo, the same thing. If 
you go to almost all the other countries, as long as--
    Mr. Lance. What would you recommend to change that 
situation?
    Mr. Ribadu. Is it possible, for example, to have an 
amendment or have a new law that says: If you receive money 
from an American company or an American entity, you have 
supported an American company in the commission of a criminal 
act involving corruption. You are also subject to the American 
control and judiciary, and therefore you can be punished.
    And America is powerful, I can tell you. America, the 
moment it takes the step, the rest of the world comes along. I 
have seen it. Almost all the work I have done as a physical 
investigator, I have seen what American authorities have done.
    The case of Halliburton, I followed it as far back as 2003. 
I went and met the magistrate in France, who refused to support 
me, who refused to help me, who refused to assist me on this 
case. I took the case to UK, I did not get the support. I 
brought the matter to the US, here. And the U.S. authorities 
took it. And since then, we have seen the difference. In 
several other cases, it has always been so. I am very, very 
passionate about the steps, the actions America usually takes.
    That is why we believe that if there is hope to address 
this problem of corruption, it is likely going to be coming 
from America.
    Please take that and recognize the fact that the world is 
having these high hopes and expectations. You can do it by 
making the laws. You can do it by expanding your--you control 
MasterCard today. You control VISA. All these transactions go 
through such companies.
    If you want to go after the son of the--he uses a 
Mastercard. That alone gives you jurisdiction and control. The 
laws in America ought to be expanded to cover these areas.
    Thank you.
    Mr. Lance. Thank you. Would others on the panel like to 
comment on what has just been said regarding the fact that we 
seem to be doing something right, but there is this situation 
regarding other countries--the countries that were mentioned, 
France and Great Britain--because obviously we can't fight this 
battle alone.
    Mr. Blum. Well, I think that we have signed a variety of 
conventions. There is now a Global Convention Against 
Corruption. There is an EU Convention Against Corruption. 
There's a Latin American Convention Against Corruption.
    So the problem isn't that there aren't international 
agreements. The problem is that in our legal system, all 
criminal matters are matters for the individual state. And one 
state can't push another state to prosecute people. We can't 
step across borders to prosecute crimes in other countries. And 
that issue of sovereignty becomes an enormous barrier to being 
able to do what you really want to do.
    I mean, in the United States we solved all of this by 
having a Federal Bureau of Investigation, that could actually 
take on individual corruption in individual States. We had a 
Federal system that could step in to deal with cross-border 
crime.
    In the rest of the world, that doesn't exist.
    And when these agreements are negotiated, every country, 
including the United States, is terribly careful not to impinge 
on the sovereignty of any other country.
    So every one of these agreements doesn't say, ``Here is 
what the law should be.'' It says, ``You will pass your own 
laws in accordance with this general framework.''
    Mr. Lance. Thank you. Thank you, Mr. Chairman. I yield back 
the balance of my time.
    Mr. Meeks. Thank you. And just before we adjourn, I think I 
heard in the beginning of this hearing, Ms. Waters make a 
statement in regards to concerns, because we want to make sure 
that those developing countries don't lose out on funding. We 
want to make sure.
    And I, along with Mr. Miller, who is my ranking member--I 
chair the Subcommittee on International Monetary Policy--we 
just had a hearing last week in regards to or following up from 
the meeting in London with the G-20, where now we know that 
there is going to be a substantial amount of money, close-
bordering on a tree in Dallas, going through the IMF, who is 
going to play a significant role in it.
    My question to you is: Number one, do you see or have you 
seen in the past any dollars as it pertains to IMF or the World 
Bank, find its way through the corruption of others, so that it 
has not reached the hand that it's supposed to? Is there a 
complicity with regards to some American as well as other 
banks, especially in Africa and Asia, where some of the IMF 
money may flow through, to get to the various countries?
    So that's a real concern to some. Let me just throw that 
question out really quick.
    Mr. Blum. I would say that you should remember what 
happened the last time the IMF had a lot of money to give to a 
country in trouble, it was Russia. The money wound up in a 
bunch of bank accounts offshore on the Island of Jersey. There 
was an audit report that talked all about it. The audit report 
was posted on the Web, but when the moment came to discuss it, 
it mysteriously disappeared, because the Russian government 
protested.
    The problem with both the IMF and the World Bank is the 
same sovereignty problem I have been talking about, which is 
they will do nothing to step on the shoes of a sovereign 
country that says, ``We won't.''
    And it makes following up on anything very, very difficult. 
It makes following up on issues of corruption and disappeared 
IMF money and disappeared World Bank money very difficult.
    The World Bank is still struggling to figure out how to 
deal with the obvious cases of corruption, where the money that 
it has lent has simply disappeared and the project doesn't 
exist.
    Ms. Lawson. There's a small practical step that the IMF and 
the World Bank can take when they're dispersing funds for any 
kind of, say bailout or development projects, which is that 
contracts are signed with officials in the government of the 
recipient countries. And if these are the people who are 
responsible for administering the project, then these are the 
people who have the potential, if they're going to be corrupt, 
to be accessing these funds for the wrong purposes.
    Now, a very practical step that the IMF and the World Bank 
could do, would be to make the names of those officials with 
whom they sign development contracts available to the companies 
that run the politically exposed persons lists. So that when 
the banks are doing due diligence on their customers, these 
people who are potentially at very risk of diverting funds are 
known to the banks, and they can feed that into their 
assessments of whether they might be dealing with somebody 
corrupt.
    Mr. Baker. Overseas development assistance has for the past 
several years been running about $100 billion a year from all 
sources: World Bank; the United States; the EU countries; 
Japan; and so forth. About $100 billion a year.
    Contrast that generous distribution of foreign assistance 
going into developing countries with our estimate of the amount 
of illicit money that comes annually out of developing 
countries. As I said to you, we have done a report utilizing 
standard economic models, and estimated $1 trillion a year of 
illicit money coming out. In other words, for every one dollar 
that we are handing out across the top of the table, Western 
countries have been receiving back some $10 in illicit money 
under the table.
    There is no way to make this process work for anyone, the 
developing countries or the Western economies themselves.
    Mr. Meeks. Mr. Ribadu?
    Mr. Ribadu. Thank you. Well, there are changes that have 
taken place at the World Bank and the IMF, which has changed 
considerably in the last few years. They have been able to 
improve their own internal systems and capacity.
    What I want to see happen now is let the governance and 
integrity packet that they have been able to develop now to be 
part of every transaction in their relation with any country 
that they are dealing with. Let it be central. Unless you are 
ready to do good governance, unless you are ready to open up, 
unless you are ready to make transparent every detail of the 
work you are doing, we are not going to deal with you.
    And I believe it is going to force these countries to 
change. The United States could also help by freeing the money 
that you can support the World Bank and IMF. Countries in 
Africa are in dire need of this support.
    America is the biggest of the supporters, and we need you 
to free this money and help them. The World Bank has changed 
right from Mr. Wolfowitz, the former president, up to Mr. 
Zoellick. We have followed what is going on; I can assure you 
it has changed considerably. It is already making massive 
impact in Africa. Almost all the new sort of relations that 
they are having, they put it at the center the need for 
openness, transparency, accountability, good governance, abuse 
of rights, and generally promotion of democracy. Hopefully 
maybe that may be the biggest change that will come to the 
developing countries.
    Mr. Meeks. Thank you.
    And I want to thank all of the witnesses for being here and 
for testifying today. Be assured that Chairman Frank has 
indicated that we will have a follow-up hearing where this 
committee will be looking at possible laws and regulations that 
can be put in place to try to stamp out the kind of fraud that 
has been taking place.
    I also note that some members may have additional questions 
for this panel, which they may wish to submit in writing. So 
without objection, the hearing record will remain open for 30 
days for members to submit written questions to these witnesses 
and to place their responses in the record.
    Again, we thank you.
    And this hearing stands adjourned.
    [Whereupon, at 12:25 p.m., the hearing was adjourned.]


                            A P P E N D I X



                              May 19, 2009


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