Luanda Leaks: How Consultancies Covered Up Corruption

The red flags were already in plain sight. So how and why did Western companies turn a blind eye –
at huge reputational risk?

“These guys hear about Isabel and they run like the devil from the cross”. A casual aside by an associate of Angola’s former First Daughter, revealed as part of a trove of leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ), shows how banks were slowly waking up to the risks of dealing with the rich and powerful. The early 2010s saw regulators across the globe crack down on financial institutions’ handling of politically exposed persons (PEPs) in an effort to combat money laundering. The vast wealth of Isabel dos Santos, who landed on the Forbes World Billionaires List for the first time in 2013, was cause for concern.

Known in her home-country as “the princess”, the youngest person from Africa and the only woman from the continent to be included in the Forbes list had accumulated her USD 2 billion fortune during the long presidency of her father, José Eduardo dos Santos (1979-2017). The scrutiny grew after international media tied Isabel’s wealth in the oil-rich nation to handouts from her father and preferential treatment. By 2015, Isabel’s reputation was bound so closely to allegations of nepotism that Transparency International named her among the 15 biggest examples of grand corruption worldwide.

Even as Isabel had increasing difficulty finding banks to service her companies, major Western accounting and consulting firms continued working for dos Santos companies. These firms allegedly helped her and her husband set up shell companies and tax efficient structures in Malta, Switzerland and Portugal. As Angola suffered its worst economic crisis in decades, sparked by the 2014 drop in oil prices, they provided avenues for millions of dollars – often of uncertain provenance – to exit the country.

Accountancies and consulting firms face less stringent regulations than banks. The US has no federal law forcing accountants to vet potential clients or report suspicious activity, and though these requirements exist in the EU, firms have been inconsistent in meeting them. In the absence of regulatory pressures, such companies could do business with Isabel despite the persistent allegations of corruption. But the reputational consequences of maintaining these relationships are now surfacing. Whether or not the firms – many of which also offer integrity due diligence services – breached any regulations in servicing Isabel’s companies, the millions of dollars made in consulting fees that may have come from illicitly obtained public funds call their ethics into question.

Since the end of Angola’s civil war in 2002, most of the billions of dollars in state oil revenues has ended up in the pockets of a tiny elite closely linked to the dos Santos family inner circle. Meanwhile, the majority of citizens live on less than USD 2 per day. Companies servicing these elites risk being seen as abetting grand corruption, whereby leaders manipulate political and economic systems to their own benefit in a way that harms the population.

In December 2019, Angolan courts froze all of Isabel’s assets in the country on suspicion that she, her husband and a business associate were responsible for state losses of USD 1.1 billion – money that could have been reinvested in the country. But Western companies gave tacit approval to her business activities by signing off on their finances and aiding their expansion. In an October 2019 interview with a Portuguese news agency, Isabel pointed to her work with these well-known Western firms as validation that her wealth is legitimate.

Thanks in no small part to the ICIJ, over the past decade the general public has become increasingly aware of the use of secrecy jurisdictions by corrupt political elites. Each set of leaks joins the dots between the generic-sounding entities typical for offshore vehicles and household names worth billions, prompting outrage over tax evasion, money laundering and embezzlement. The spotlight on Isabel may yet prove a catalyst for more stringent regulations. But it falls to all organisations, whether regulated or not, to avoid dealing with proxies for corrupt elites.