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From The Times
December 16, 2008
How Spain built on the boom in dirty money
Dodgy dictators and Russian mafiosi all beat a path to the Costas to launder their ill-gotten gainsGraham Keeley in Madrid
One of Africa's most unsavoury dictators, he shares the same dubious claim to fame as a number of Russian mafia bosses, crooked Spanish council officials and British criminals.
Teodoro Obiang Nguema, President of Equatorial Guinea, stands accused of siphoning off $26 million (£17.5 million) from state money and laundering it through a series of properties in Spain over a three-year period.
As Antonio Salinas Garcia, Spain's anti-corruption prosecutor, began examining allegations against President Obiang and 11 members of his family and high-ranking political officials, the spotlight is once more on how much Spain's spectacular ten-year building boom was driven by “dirty money”.
Experts agree that criminals may not have been the dynamo driving the boom, but they capitalised on the goldrush mentality that infected Spain. With house prices doubling in ten years between 1997-2007, many were desperate to grab a piece of the action. Some unscrupulous local authorities turned a blind eye to front companies set up by criminals or even took backhanders to grant building licences.
Keen to hide the spoils from prostitution, extortion, and drug dealing, organised criminals channelled millions into buying property. Meanwhile, police and judicial authorities were often overwhelmed by the scale and sophistication of criminal activities. On the Costa del Sol, where estate agents believed they had a licence to print money, anticorruption magistrates suddenly found themselves having to deal with scores of cases.
The group Pro-Human Rights in Spain (APDHE) last week claimed Obiang used millions from a state petrol company to buy homes in Madrid, Asturias and the Canary Islands. They alleged that the African dictator, who came to power in a bloody coup in 1979, tras*ferred money from Equatorial Guinea, a former Spanish colony, to several accounts in Riggs, the US bank. From there it was tras*ferred to an account at the Banco Santander in Spain.
Manuel Olle, president of APDHE, said: “We have filed this complaint with anti-corruption public prosecutors. We hope that they will agree to investigate these facts.” After a US Senate inquiry, Riggs was fined $16 million in 2005 for breaching money-laundering laws. Banco Santander denied any wrongdoing and said that it complies fully with Spanish regulations combating money-laundering.
The Police and judiciary have long been aware of how the tentacles of Russian crime groups spread across Spain during the construction boom. The mafia exploited a lack of judicial muscle to launder the millions of ill-gotten gains.
Gennadios Petrov, the alleged head of the Tambovskaya-Malyshevkaya crime gang, was arrested in June in Majorca. In a big police operation, codenamed Troika, 20 members of the gang led by Mr Petrov were arrested in Majorca, Málaga, Alicante, Valencia and Madrid.
Police seized €200,000 (£178,000) in cash, 23 luxury cars and a Dalí painting. Bank accounts containing €414 million were frozen. Mr Petrov and 17 others were charged with a variety of offences including money-laundering, murder, extortion, drug dealing, illicit association, falsification of documents and tax fraud.
The arrests were the latest in a string of police operations targeting the illicit activities of the Russian mafia, many of whose leading members have moved their entire operations to Spain in recent years.
But they are not the only criminals who have spotted a potential way of hiding the profits of their illicit enterprises. British criminals, who set up home on the so-called “Costa del Crime”, also laundered millions in property deals in Spain.
A spokesman for the Serious and Organised Crime Agency said: “Property ownership [by criminals] in many countries, including Spain, is common. Serious organised criminals invest their ill-gotten gains in property, often held in the names of relatives or associates to conceal the true ownership.
“However, these investments leave audit trails making them vulnerable to law enforcement detection, and we have had many operational successes with our partners.”
Spanish councils, seeing a chance to make fast money — legally or illegally — also got in on the game, with some unfortunate results. One such was Juan Antonio Roca, the former head of urban planning at Marbella city council, who is allegedly at the centre of a €200-million civic corruption scandal. Mr Roca, who faces charges of money laundering, fraud, embezzlement, misappropriation of public funds and corruption, allegedly handed out illegal building contracts in return for cash from property developers in Marbella.
When the scandal broke in 2006, the Spanish Government was forced to dissolve Marbella council. Mr Roca is awaiting trial along with 28 others.
Of course, dirty — or undeclared — money is something of a national custom in Spain. During property deals, the real value is never declared to the tax authorities. Instead, envelopes stuffed full of cash are passed between buyer and seller, while the notary or lawyer witnessing the tras*action, conveniently leaves the room.
Just how much “dirty money” entered Spain in the boom years is impossible to say. But annecdotal evidence suggests that 40 per cent of all €500 bills in existence are circulating in Spain. They are called “Bin Ladens” because like the world's most wanted man, one knows what they look like, but no-one has ever seen one. These €500 bills fill the envelopes in “black money” property deals.
But though criminals may have exploited the boom years to launder millions, experts say they were not the catalyst of Spain's construction boom. Fernando Fernandez, an economist who is rector of the University of Nebrija in Madrid, said: “There was a lot of ‘black money' in Spain anyway. But money-laundering did not drive the property boom.” Professor Fernandez said the boom was caused by low interest rates, the rush of foreigners anxious to buy investment properties and the immigration boom, which provided a workforce and a group of potential buyers. “Strict banking rules in Spain have stopped criminal activities from flourishing,” he added.
Mark Stucklin, a property consultant who runs Everything you need to know about Spanish property and buying property in Spain, believes that conditions favoured money laundering during the boom. “There was already a lot of 'black money' around which was undeclared and there was a boom on so it was a perfect opportunity for criminals or perhaps terrorists to launder cash and have a legitimate result from it — in the form of property.”
But he adds: “The boom was driven by reckless lending from abroad and you can see this was from legitimate sources as the present current account deficit amounted to about 10 per cent of GDP. If this was from illegitimate sources, it would not show up on official accounts.”
President Obiang
— Teodoro Obiang Nguema Mbasogo was born in Acoacan in Equatorial Guinea in 1942. A career soldier, he rose through the ranks when the tiny West African state was still a Spanish colony
— Obiang has held a number of posts, including governor of the notorious Black Beach prison, where British mercenary Simon Mann was later jailed after the failed 2004 coup attempt
— Obiang was promoted in the 1970s by President Macias, whom he later deposed in a bloody coup in 1979. Macias was later executed
— Although opposition parties are permitted, Obiang's style of rule has become more authoritarian with members of the opposition either jailed or forced into exile
— The United Nations Commission on Human Rights accused Obiang of overseeing the torture
— At times he has referred to himself as a god and likes to be known as El Jefe (The Boss). Obiang was granted an audience with Pope Benedict XVI in 2005
How Spain built on the boom in dirty money - Times Online
December 16, 2008
How Spain built on the boom in dirty money
Dodgy dictators and Russian mafiosi all beat a path to the Costas to launder their ill-gotten gainsGraham Keeley in Madrid
One of Africa's most unsavoury dictators, he shares the same dubious claim to fame as a number of Russian mafia bosses, crooked Spanish council officials and British criminals.
Teodoro Obiang Nguema, President of Equatorial Guinea, stands accused of siphoning off $26 million (£17.5 million) from state money and laundering it through a series of properties in Spain over a three-year period.
As Antonio Salinas Garcia, Spain's anti-corruption prosecutor, began examining allegations against President Obiang and 11 members of his family and high-ranking political officials, the spotlight is once more on how much Spain's spectacular ten-year building boom was driven by “dirty money”.
Experts agree that criminals may not have been the dynamo driving the boom, but they capitalised on the goldrush mentality that infected Spain. With house prices doubling in ten years between 1997-2007, many were desperate to grab a piece of the action. Some unscrupulous local authorities turned a blind eye to front companies set up by criminals or even took backhanders to grant building licences.
Keen to hide the spoils from prostitution, extortion, and drug dealing, organised criminals channelled millions into buying property. Meanwhile, police and judicial authorities were often overwhelmed by the scale and sophistication of criminal activities. On the Costa del Sol, where estate agents believed they had a licence to print money, anticorruption magistrates suddenly found themselves having to deal with scores of cases.
The group Pro-Human Rights in Spain (APDHE) last week claimed Obiang used millions from a state petrol company to buy homes in Madrid, Asturias and the Canary Islands. They alleged that the African dictator, who came to power in a bloody coup in 1979, tras*ferred money from Equatorial Guinea, a former Spanish colony, to several accounts in Riggs, the US bank. From there it was tras*ferred to an account at the Banco Santander in Spain.
Manuel Olle, president of APDHE, said: “We have filed this complaint with anti-corruption public prosecutors. We hope that they will agree to investigate these facts.” After a US Senate inquiry, Riggs was fined $16 million in 2005 for breaching money-laundering laws. Banco Santander denied any wrongdoing and said that it complies fully with Spanish regulations combating money-laundering.
The Police and judiciary have long been aware of how the tentacles of Russian crime groups spread across Spain during the construction boom. The mafia exploited a lack of judicial muscle to launder the millions of ill-gotten gains.
Gennadios Petrov, the alleged head of the Tambovskaya-Malyshevkaya crime gang, was arrested in June in Majorca. In a big police operation, codenamed Troika, 20 members of the gang led by Mr Petrov were arrested in Majorca, Málaga, Alicante, Valencia and Madrid.
Police seized €200,000 (£178,000) in cash, 23 luxury cars and a Dalí painting. Bank accounts containing €414 million were frozen. Mr Petrov and 17 others were charged with a variety of offences including money-laundering, murder, extortion, drug dealing, illicit association, falsification of documents and tax fraud.
The arrests were the latest in a string of police operations targeting the illicit activities of the Russian mafia, many of whose leading members have moved their entire operations to Spain in recent years.
But they are not the only criminals who have spotted a potential way of hiding the profits of their illicit enterprises. British criminals, who set up home on the so-called “Costa del Crime”, also laundered millions in property deals in Spain.
A spokesman for the Serious and Organised Crime Agency said: “Property ownership [by criminals] in many countries, including Spain, is common. Serious organised criminals invest their ill-gotten gains in property, often held in the names of relatives or associates to conceal the true ownership.
“However, these investments leave audit trails making them vulnerable to law enforcement detection, and we have had many operational successes with our partners.”
Spanish councils, seeing a chance to make fast money — legally or illegally — also got in on the game, with some unfortunate results. One such was Juan Antonio Roca, the former head of urban planning at Marbella city council, who is allegedly at the centre of a €200-million civic corruption scandal. Mr Roca, who faces charges of money laundering, fraud, embezzlement, misappropriation of public funds and corruption, allegedly handed out illegal building contracts in return for cash from property developers in Marbella.
When the scandal broke in 2006, the Spanish Government was forced to dissolve Marbella council. Mr Roca is awaiting trial along with 28 others.
Of course, dirty — or undeclared — money is something of a national custom in Spain. During property deals, the real value is never declared to the tax authorities. Instead, envelopes stuffed full of cash are passed between buyer and seller, while the notary or lawyer witnessing the tras*action, conveniently leaves the room.
Just how much “dirty money” entered Spain in the boom years is impossible to say. But annecdotal evidence suggests that 40 per cent of all €500 bills in existence are circulating in Spain. They are called “Bin Ladens” because like the world's most wanted man, one knows what they look like, but no-one has ever seen one. These €500 bills fill the envelopes in “black money” property deals.
But though criminals may have exploited the boom years to launder millions, experts say they were not the catalyst of Spain's construction boom. Fernando Fernandez, an economist who is rector of the University of Nebrija in Madrid, said: “There was a lot of ‘black money' in Spain anyway. But money-laundering did not drive the property boom.” Professor Fernandez said the boom was caused by low interest rates, the rush of foreigners anxious to buy investment properties and the immigration boom, which provided a workforce and a group of potential buyers. “Strict banking rules in Spain have stopped criminal activities from flourishing,” he added.
Mark Stucklin, a property consultant who runs Everything you need to know about Spanish property and buying property in Spain, believes that conditions favoured money laundering during the boom. “There was already a lot of 'black money' around which was undeclared and there was a boom on so it was a perfect opportunity for criminals or perhaps terrorists to launder cash and have a legitimate result from it — in the form of property.”
But he adds: “The boom was driven by reckless lending from abroad and you can see this was from legitimate sources as the present current account deficit amounted to about 10 per cent of GDP. If this was from illegitimate sources, it would not show up on official accounts.”
President Obiang
— Teodoro Obiang Nguema Mbasogo was born in Acoacan in Equatorial Guinea in 1942. A career soldier, he rose through the ranks when the tiny West African state was still a Spanish colony
— Obiang has held a number of posts, including governor of the notorious Black Beach prison, where British mercenary Simon Mann was later jailed after the failed 2004 coup attempt
— Obiang was promoted in the 1970s by President Macias, whom he later deposed in a bloody coup in 1979. Macias was later executed
— Although opposition parties are permitted, Obiang's style of rule has become more authoritarian with members of the opposition either jailed or forced into exile
— The United Nations Commission on Human Rights accused Obiang of overseeing the torture
— At times he has referred to himself as a god and likes to be known as El Jefe (The Boss). Obiang was granted an audience with Pope Benedict XVI in 2005
How Spain built on the boom in dirty money - Times Online
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