Published On:Monday, February 08, 2010

By NEIL HARTNELL

Tribune Business Editor

A BAHAMAS-BASED offshore bank held a 35 per cent equity interest in a joint venture with a "notorious arms dealer" in war-torn Angola, a US Senate committee report has revealed, while it and its Nassau-based affiliates provided account facilities to the same country's Central Bank to help it "avoid possible Mareva injunctions".

A report by the US Senate's Permanent Investigations subcommittee on how politically-connected Africans were able to access the US financial system, and use it to move millions of dollars in funds from questionable sources, also shone the spotlight on to the activities of the Bahamas-based subsidiaries of global banking giant, HSBC.

The report, which has been studied by Tribune Business, detailed how a Bahamian affiliate of HSBC, Equator Bank Ltd, held a 35 per cent ownership interest in a Bahamas-domiciled company that ran a trucking operation in Angola.

The company, called Triang Ltd, delivered fuel for Angola's diamond industry, and the US Senate report revealed how one of Equator Bank's equity partners in the venture was an entity called Brenco. Its ultimate owners was arms dealer Pierre Falcone and his business partner, Arcadi Gaydamak.

HSBC admitted that as its Bahamian subsidiary, Equator Bank had invested $4 million into Triang's operations, including a $3.9 million loan in 1997.

Its involvement came despite Falcone's reputation, the US Senate report describing him as "a notorious arms dealer" well-known for selling weaponry to Angola during its bloody civil war, and his close ties to the country's president.

Falcone, the report said, has "long been the subject of criminal investigations in France", having been imprisoned for one year in 2000. He then became a global fugitive from an arrest warrant in 2004, and was again convicted by the French courts in 2007 and 2009, the latter occasion on charges of illegal arms dealing, tax fraud and money laundering. Falcone is now serving a six-year prison sentence.

While there is nothing to suggest that HSBC or Bahamas-based Equator Bank did anything wrong in their relationship with Falcone, the US Senate committee report noted that there had been numerous wire transfers between the arms dealer's companies and the Bahamian institution's parent, HSBC Equator Bank, in London.

The report detailed how, "for a seven-year period from 1997 to 2004, an HSBC affiliate [Bahamas-based Equator Bank] had participated in a joint business venture in Angola with Mr Falcone through a company called Triang Ltd.

"According to HSBC, Triang Ltd was incorporated in May 1997 in the Bahamas, and for the next seven years ran a trucking operation that transported fuel for the diamond industry in Angola," the report added.

"HSBC told the subcommittee that ownership of Triang was as follows: Brenco held a 30 per cent ownership interest; Jose Recio, an Angolan businessman, held a 35 per cent ownership interest; and the final 35 per cent ownership interest was held by Equator Bank, a Bahamas-based bank affiliated with HSBC Equator Bank in London."

HSBC, the report said, admitted that Brenco was beneficially owned by Falcone and Gaydamak in a June 13, 2007, interview.

And the report added: "HSBC indicated that Equator Bank Ltd maintained its ownership interest in Triang until 2004, when it sold its interest to Jose Recio. HSBC told the subcommittee that, during Equator Bank's ownership of Triang, it also contributed $4 million to its operations, $3.9 million of which was in the form of a loan in 1997."

Equator Bank is not listed in the Bahamian telephone directory, and HSBC is currently in the throes of liquidating and winding-up its Bahamas-based operations, judging from several recent newspaper advertisements.

However, Equator Bank's involvement in Angola did not stop with Falcone. It also held accounts for the Angolan central bank, which was revealed during the US Senate's report on how the bank's governor sought to move $50 million into the US for placement into an investment scheme, although there was nothing to suggest that the Bahamian bank or its officials did anything wrong.

"In a development unusual for a Central Bank, Banco Nacional de Angola (BNA) also maintained an offshore account at a 'sister bank' of HSBC Equator Bank Plc, called Equator Bank Ltd, in the Bahamas," the report found.

An HSBC internal e-mail uncovered by investigators detailed how the BNA account in the Bahamas was first opened in the 1980s. Then, in 2000, BNA moved to open a second account in the Bahamas at HSBC Bahamas or HSBC Nassau.

An October 2, 2000, e-mail between Equator Bank's London and Nassau offices explained that the new account was necessary because the latter had "accepted the maximum amount of deposits it could from BNA".

The e-mail, detailing Equator Bank's 20-year relationship with BNA, said the Bahamian bank had earned more than $80 million from "revolving short-term trade credit lines" that were repaid from Angola's oil revenues.

"Over the past several weeks, Equator Bank has received $103.6 million on deposit from BNA," the e-mail read. "On September 29, we received a further $24 million which BNA requested us to place with Equator Bank.

"Unfortunately, we cannot accept these funds in Nassau as they would cause us to contravene our trigger ratios. We are currently holding the funds [in London], but know that BNA prefers to keep their deposits in an offshore account to avoid possible Mareva injunctions. It is for this reason that we approached HSBC Nassau, with whom Equator Bank shares an office."

HSBC replied that it would open a Nassau account for BNA and accept the deposit if the necessary account opening documents were provided, and "no regulatory notifications are required".

When asked about the reference to Mareva injunctions by US Senate investigators, HSBC said it was a "legitimate choice" for clients to place assets in jurisdictions where their assets would not have liens placed on them.

And when asked about whether HSBC maintained accounts for BNA in the Bahamas, the bank said "it was unable to answer questions about a client's non-US banking activities and that it was constrained further by secrecy laws in the Bahamas".