Report: close lawyer loophole on tainted money

By Dan Margolies

WASHINGTON (BestGrowthStock) – Congress needs to close legal loopholes that allow U.S. lawyers, lobbyists, and real estate and escrow agents to aid money laundering by foreigners, a Senate committee recommended in a report released on Wednesday.

A multiyear probe by the Senate Permanent Subcommittee on Investigations found that foreign political figures were able to funnel large sums of possibly tainted money into the United States because lawyers and other professionals are not required to inquire about the sources of the funds.

While the USA Patriot Act requires banks to give enhanced scrutiny to private banking accounts opened for senior foreign figures, the same requirement does not apply to lawyers and other professionals.

“There are so many other holes in our system where corrupt money can flow and be laundered and be used in this country,” Senator Carl Levin, chairman of the subcommittee, told reporters at a news briefing on Tuesday. “It is our goal to show where some of the gaps and holes are.”

The subcommittee is holding a hearing on Thursday to examine whether legislation is needed to get these professionals to screen clients and scrutinize suspect funds more carefully.

The 325-page report released ahead of the hearing documented how senior African politicians and members of their families moved large sums of money into the United States by using lawyers, real estate agents and other intermediaries who asked few questions about the source of the funds.

Among many examples, the report detailed how two California lawyers and two California real estate agents helped Teodoro Nguema Obiang Mangue, the son of the president of Equatorial Guinea, send more than $110 million in questionable funds to the United States.

The lawyers allegedly parked the money in attorney-client, law office and shell company accounts without informing the bank of Obiang’s use of the accounts. The report said the real estate agents helped him buy a $30 million residence in Malibu, California, “without any legal obligation to inquire into the source of his funds.”

The lawyers, Michael Berger and George Nagler of Beverly Hills, and one of the real estate agents, Neal Baddin of West Hollywood, are due to testify at Thursday’s hearing. An attorney for Berger declined to comment Wednesday. Nagler and Baddin did not return calls seeking comment.

Also scheduled to testify Thursday are government officials from the State Department, Immigration & Customs Enforcement and the Financial Crimes Enforcement Network, as well officials from Bank of America, HSBC Bank and The Grace Group, a lobbying firm.


The report makes several recommendations, including:

* The U.S. Treasury Department should require U.S. financial institutions to crack down on the misuse of attorney-client and law office accounts.

* Treasury should repeal the 2002 exemption given to real estate and escrow agents and require them to abide by U.S. and international anti-money laundering safeguards.

* Congress and Treasury should implement recommendations by the World Bank to require banks to screen accounts held by top government officials, their relatives or close associates and to identify suspicious transactions.

* Congress should require persons forming U.S. corporations to identify the names of their beneficial owners.

* Professional organizations for lawyers, real estate agents and lobbyists should issue guidelines barring the use of any financial account to accept suspect funds from abroad.

The American Bar Association has opposed related legislation in the Senate requiring persons who form corporations in the United States to disclose their beneficial owners.

In a letter to Senator Joe Lieberman, chairman of the Committee on Homeland Security and Governmental Affairs, the ABA said the legislation would “impose new, enhanced, anti-money laundering compliance requirements on the legal profession and would treat lawyers as if they were banks.”

Dave Wenhold, president of the American League of Lobbyists, said on Wednesday that he agreed that any suspect funds should be scrutinized to the fullest extent.

“From the first blush, it sounds to me like something our board would probably be in favor of, but we’d have to see the actual language and what they’re looking for,” he said.

Officials of the National Association of Realtors could not be reached for comment.

“The key point here,” Levin told reporters on Tuesday, “is that even though our banks have become more vigilant… foreign officials still get access to our financial system at times because U.S. professionals aid and abet their actions.”


(Reporting by Dan Margolies; Editing by Tim Dobbyn)

Report: close lawyer loophole on tainted money