by Margarida Fontes and Margot Gibbs

Cape Verde’s finance minister has ordered an immediate investigation into how a bank owned by controversial billionaire Isabel dos Santos was granted a licence to operate in his island nation.

Olavo Correia, who is also the deputy prime minister, has instructed the country’s officials to launch a probe after he was shown details of a Finance Uncovered investigation into Ms dos Santos’s business in Cape Verde.

He has also asked them to examine a series of questionable payments that companies controlled by Ms dos Santos routed through her offshore bank, Banco Bic Cape Verde.

He revealed his decision during an interview with Finance Uncovered’s Cape Verde partner on Wednesday. 

But he also pushed back on accusations that his country was a “weak actor” in the international financial system, or that it was a tax haven.

“We comply with all legal standards,” he said.

Luanda Leaks reaction

Before the interview, Finance Uncovered had published an article as part of the Luanda Leaks project – an investigation into Ms dos Santos’s business affairs that has been coordinated by the International Consortium of Investigative Journalists (ICIJ).

Documents found in the leaked cache of files showed how the billionaire daughter of Angola’s former president used Banco Bic Cabo Verde to channel tens of millions of dollars in payments from Chinese and European contractors working on construction projects in her father’s country.

These payments through the lighter touch regulatory environment of Cape Verde – a Portuguese-speaking archipelago off the west coast of Africa – were ordered at around the time scrutiny of her business dealings mounted in the wider international banking system.

Ms dos Santos, then a “politically exposed person” (PEP) in anti-money laundering terminology, had bought into the bank in 2013. This was the same year Cape Verde’s regulators seemingly waived their ownership rules and granted it a banking licence.

Licensing concerns

Leaked documents seen by Finance Uncovered show that an investor consortium led by Ms dos Santos had been leaning on Cape Verde regulators to waive those rules.

Mr Correia, who has been finance minister since 2016, said he wanted his department to explain what happened before he took office. 

Cape Verde’s rules required offshore banks to be 15% owned by banks based in OECD countries, but gave the government discretion in “exceptional cases”.

Mr Correia said he had been unable to find documents showing how Banco Bic Cabo Verde met this standard. Ms dos Santos and her co-investors owned their shares through individual holdings and investment companies, rather than through other banks. Ms dos Santos originally held 25% of the bank’s shares, increasing her stake to 42.5% in 2015. 

Mr Correia’s predecessor as finance minister was Cristina Duarte, a member of a different party which had then been in power. When we had asked her for an explanation, she said she had “no information”. She then appeared to hang up, and has not responded to subsequent questions about the licensing process. 

According to the UN website, Ms Duarte is currently on the advisory board to the UN Department of Economic and Social Affairs.

Ms dos Santos has not responded to any questions from Finance Uncovered, but in an interview with BBC Africa about the wider LuandaLeaks allegations on Monday, she strenuously denied any wrongdoing.

Bic Cabo Verde also previously failed to respond to questions from Finance Uncovered.

She said: “The allegations which have been made against me over the last few days are extremely misleading and untrue.

“I have always operated within the law and all my commercial transactions have been approved by lawyers, banks, auditors and regulators.” 

She also said that she had engaged lawyers to take action against “inaccurate and defamatory reports”.

Her father, Jose Eduardo dos Santos, served as president of mineral-rich Angola from 1979 to 2017 and is suspected of corruption on a massive scale. The majority of the country’s population live on $2 a day.

Offshore banks not worth the risk

Meanwhile, the future of Banco Bic Cabo Verde hangs in the balance. Sweeping reforms to the country’s offshore sector have meant it has had to apply for a new domestic banking license.

Mr Correia said the offshore banking sector posed a reputational risk to his country, adding that the relatively small number of jobs they provided did not justify their special treatment.

His government removed offshore banks’ tax breaks in its 2019 budget.

He said: “Those offshore banks that have no interest in becoming regular banks will have to look for another financial centre outside Cape Verde”.

Bic Cabo Verde has applied to become a regular bank, which would mean that it would take deposits from and lend to domestic businesses as well as international clients.

Asked if he had concerns over Ms dos Santos’s bank operating domestically, Mr Correia said that the central bank would follow all applicable rules when assessing the application.

He said: “If they do not meet the minimum prudential standards and if the promoters are not credible and have a clean record, they will never be able to carry out banking activities.”

Mr Correia also dismissed a suggestion by banking experts that Cape Verde was a weak actor in the financial regulatory system.

A report last year by the money laundering watchdog, the Financial Action Task Force (FATF), found that Cape Verde’s banks still had “very little knowledge” of new beneficial ownership obligations. These are a central tenet of anti-money laundering regulations. 

But Mr Correia said: “It will also be the government’s concern to improve the law so that Cape Verde is increasingly a financial centre.” 

Editing by Ted Jeory

Margot Gibbs

Posted by Margot Gibbs

Margot Gibbs is an investigative journalist specialising in UK facilitation of corruption, natural resources and the environment. She has covered corruption in the Nigerian oil industry for Africa Confidential, revealed secret contracts underpinning a private tax haven in the Marshall Islands, and produced critically-acclaimed radio for BBC Radio 4. Working with NGOs, she has investigated corruption in the arms industry and the London property market, financing of environmentally destructive palm oil projects in Indonesia, and conflicts of interest in the UK accounting regulator. She is an expert in obtaining documents via freedom of information laws and has uncovered stories which have provoked policy changes in the UK and internationally.