Gulnara Karimova, since 2006 also known as the artist Googoosha, has founded five NGO’s in Uzbekistan, has initiated charities, founded a fashion and jewelry line and, last but not least, was appointed Uzbek ambassador to Spain in 2010. Quite a busy lady, yet in 2012 the Uzbek president’s daughter found time to fill a minor role within the country’s economy, merely a supervisory position in the national mobile telephone network, Uzdunrobita.
The Dutch VimpelCom, Swedish Telia and Russian MTS, large mobile operators, gave tens of millions of euro’s in bribes to Karimova for 4G-licences. Nothing interesting there, such is the status quo in a dictatorship you would say, yet the bank that was used to transfer the funds was not some shady Virgin Island bank, it was the ING and it wasn’t their first mishap. Due to a series of similar illegal affairs, the bank had to settle on a 775 million euro fine with the prosecution, historically the highest amount ever fined, double the amount VimpelCom had to pay for their bribes.
In 2013, due to the Libor-fraud where a small group of traders manipulated interest rates, Rabobank was also prosecuted, yet it resulted in a fine less than a tenth of the amount ING had to pay. The big difference, stated by the court, was the amount of corruption within the banks. Rabobank had a couple of rogue traders, ING was fundamentally corrupt. Not only does the bank conduct poor research into potential clients and transactions, they also hold on corrupt clients for way too long. All of this sounds quite severe, corruption within a major Dutch bank, yet this has been going on for two decades now at ING. Between 2001 and 2007, ING made some shady deals with Cuba and Iran on American soil and was fined almost a billion dollars by their financial authority, due to violating their trade sanctions.
Recently prosecution has started an investigation into potential money laundering within ABN AMRO, which resulted in a large drop on the stock market, a whopping 12 percent. One would say it’s a good thing that action is being taken against corruption within major banks, but are the reasons for prosecution aligned with the interest of the people in this particular situation? If we look at the prosecution’s budget historically, we can see that they need at least one major settlement a year: last year this was ING, the year before Telia and in previous years Rabobank and SBM Offshore had an honorary place in the annual report. Due to the current political trend, demanding retribution from big business not following the rules too closely, it was a no-brainer to investigate a major bank for money laundering, especially because ABN AMRO would pay a handsome fine just to get rid of all the bad publicity.
Besides the dubious motives from the prosecution, another fundamental player, the Dutch central bank (DNB), is acting quite strange this time around. Between 2014 and late 2018 DNB has punished numerous banks for poor supervision of their transactions and clients, and after the ING-affair the central bank saw their reputation being severely damaged when people started questioning if their actions against banks were actually bold enough. In 2018 ABN AMRO was punished and warned as well, having to promise to invest in a new screening method. Having promised this, it is quite odd that DNB notified ABN to the prosecution, since they were already changing their mistake, and besides, DNB has enough instruments to force ABN to change their ways. We can conclude that this decision was made to restore the reputation of DNB, now seeming more thorough in the eyes of the public.
Whether the banks lack interest in following the rules, or are incapable of following them, is not sure. The one clear problem is software. ING, for instance, who pride themselves on being hip, comparing themselves to Spotify, Uber and Google, have a very poor monitoring system which can’t store transaction data, resulting in having to reload all the data again for further investigation. The government has initiated plans to build an UBO (Ultimate Beneficial Owner) registry, due to the fact that most money laundering schemes involve businesses, yet such a registry doesn’t get updated enough, and can’t handle the number of businesses created on a yearly basis. The only realistic solution is outsourcing to companies like Fourthline. Such KYC (Know Your Customer) companies are specialized in screening clients, and with the help from fintech’s, can also screen businesses. The main problem with this solution concerns the privacy and legality of the data being shared with these privately-owned companies.
Time will tell whether or not fintech’s will be able to solve these problems, we can merely conclude that the future of the Dutch banks will drastically change the coming years.
Written by Sebastian Cornielje