Alleged HSBC $500 million suspicious activity report

The fallout from the alleged $500 million attempted fraud involving the National Bank of Angola and a HSBC bank account in the UK was quite dramatic, and now allegations of funds mismanagement have ignited a financial crime investigation that has quickly spread across four countries, and shows no signs of slowing down.

The scandal has already claimed one high profile scalp, when the son of the former President of Angola was indicted on fraud charges.

Now, one of his closest associates and business partners appears to be in increasingly hot water as authorities in Angola, the UK, Switzerland and Mauritius launch investigations into potential financial crimes.

The background to this is complicated, but here’s the short version: José Filomeno dos Santos, son of former Angolan president José Eduardo dos Santos, has been charged in Angola for his role in an alleged attempt to fraudulently transfer half a billion dollars out of a Standard and Chartered account belonging to Angola’s National Bank to a HSBC bank account in the UK.

HSBC flagged the transaction as suspicious, froze the account and alerted authorities.

The FCA declined to comment on the ongoing investigation.

When asked why Standard and Chartered had failed to report the transaction before the money left their account, a bank spokesperson also declined to respond beyond saying that: “This matter is subject to a criminal investigation in the UK, and Standard Chartered Bank is closely cooperating with [Angola’s National Bank] and UK law enforcement.”

‘Twisted’ trail of the SAR

The history of the $500m SAR is in itself quite interesting, if not gripping.

It emerged that, late last year, a top Angolan politician summoned the finance minister and central bank governor to a meeting.

There he told them of an offer of a programme from a consortium that could provide Angola with much needed funding — US$35 billion in credit.

All the Angolan government had to do to access this $35 billion credit line was transfer $1.5 billion as a guarantee to the mysterious investor consortium making the offer, he explained.

The politician then instructed both men to travel to London with José Filomeno dos Santos, who was then head of the Angolan sovereign wealth fund Fundo Soberano de Angola (FSDEA), to discuss the potential deal.

The finance minister reportedly expressed concerns about the deal, and that it was seemingly strange’ that dos Santos appeared to be negotiating on the side of the consortium instead of Angola.

His concerns were reportedly dismissed and he with the central bank governor had to endorse the deal.

Shortly after the fateful meeting, the central bank then transferred the $500m as part of the $1,5 billion ‘credit guarantee’ that the consortium demanded upfront.

The $500m left the Angolan central bank’s Standard Chartered account and ended up in a UK-based HSBC account where, as explained, it was flagged up as a suspicious activity report (SAR).

It also emerged that there were allegedly faked Credit Suisse documents attesting to liquidity.

UK authorities froze the $500m using the Criminal Finances Act and later returned it to the Angolan government.

The matter is not yet settled in Angola, where Dos Santos and several other individuals face criminal charges over the issue.

Dos Santos has reportedly said he is cooperating with authorities.

Meanwhile, the new Angolan government is aggressively pursuing additional potential financial crimes connected to dos Santos and his associates.

Sovereign wealth worries

During his father’s time in office, dos Santos the younger was put in charge of Angola’s sovereign wealth fund, the FSDEA.

He promptly handed over management of the $5 billion fund to a little-known asset manager named Quantum Global Group, which happens to be run by dos Santos’s close associate Jean-Claude Bastos de Morais.

Bastos is an Angolan-Swiss businessman with a previous conviction in Switzerland for financial mismanagement.

Dos Santos was removed from his position with the FSDEA in January after the Paradise Papers revealed that Bastos had been paid over $41 million for just 20 months of work managing the fund – and that some of that “managing” allegedly involved funnelling money into projects which benefited himself.

With dos Santos fired and charged with fraud, the Angolan authorities now appear to have set their sights on wresting control of the FSDEA back from Bastos and Quantum Global.

Asset freezes here and there

In April 2018, Angolan officials paid a visit to their counterparts in Mauritius, where a substantial portion of Quantum Global’s business interests are based.

Shortly after, dozens of Mauritian bank accounts connected to Quantum Global were frozen and the licenses for seven of its funds were suspended.

Days later the FSDEA officially sacked Quantum Global, expressing concern over how the fund was being managed.

“FSDEA has great concerns about Quantum Global’s approach to investment of the FSDEA funds, as it believes that is not fully aligned with the principles for which the FSDEA was established,” the fund said in a statement.

The FSDEA is also enlisting UK courts to help regain control of its assets. The fund has reportedly applied to a London tribunal for a so-called “Norwich Pharmacal” order.

The order obliges banks to share information with the fund about any accounts held in its name or on its behalf.

A UK High Court has already granted a global freezing order on any such accounts.

Quantum Global is not taking this lying down, however.

In recent weeks the fund manager has been waging a pitched PR battle against what it calls “intimidating tactics” and “unwarranted assaults” on its reputation, arguing that removing the FSDEA’s funds will be “destroying value in its own investments.”

Quantum has categorically denied its involvement or the involvement of Bastos in the $500 million alleged fraud attempt.

Swiss raid

If facing down legal challenges in the UK and Mauritius were not enough, the offices of Quantum Global and Bastos’s other company Turtle Management have also been raided in his native Switzerland in connection to potential money laundering.

A spokesperson for the Swiss Attorney General said: “The Office of the Attorney General of Switzerland opened criminal proceedings in April 2018 in response to reports of money laundering by persons unknown connected with alleged offences involving assets held by the National Bank of Angola and the Fondo Soberano de Angola, the Angolan sovereign wealth fund.

“As part of the criminal proceedings being conducted against persons unknown on suspicion of money laundering, on 16 May 2018, the OAG with support from [federal police] conducted searches at several locations in Switzerland.”

Quantum Global has yet to release a public statement on the Swiss raids, and did not respond to questions for this article.

On May 25th, a representative from a Swiss public relations firm representing Mr. Bastos also declined to respond to questions.

Later that same day, Angolan local media reported that Bastos had been questioned by Angolan authorities, and had had both his Angolan and Swiss passports confiscated as he tried to leave the country through Angola’s Quatro de Fevereiro International Airport.

Bastos has reportedly been forbidden from leaving Angola whilst Angolan authorities continue their investigations.
There is a great deal which is as yet unknown about this rapidly developing case.

Allegations and counter-allegations continue to fly between Quantum Global and the Angolan government.

As the investigations across four countries pick up steam, however, one thing is very clear: neither side is backing down without a fight.

Melbourne-based Elise Thomas has a background in international affairs and a strong interest in financial crime, data and technology issues.