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Banks drawn into reputational laundering networks to obscure illicit gains

By Mark Ford on June 13, 2022

Reputation launderers, notably public relations agencies and law firms, are distorting the financial crime and sanctions risk profiles of kleptocratic regimes and oligarchs seeking to launder and protect their illicit gains according to academic and investigative researchers.

Banks can also be drawn into reputation laundering networks they say, not only in established financial centres with sophisticated networks such as London, New York and Dubai, but also those operating in Paris, Lisbon and Uzbekistan.

Scope and scale

In a suite of five essays, the researchers shed light on the scope and scale of and offer recommendations for countering the effects of reputation laundering, the process in which politically exposed persons (PEPs) and entities associated with them attempt to distance themselves from the illicit source of their wealth.

Public relations and law firms, as well as banks, schools and universities, media outlets, businesses, and other entities all find themselves subject to these kleptocratic pressures.

European banks

Reputation laundering has made significant inroads into French banks, legal firms, and public relations agencies and other firms, building on a longstanding pattern of informal elite networks with Francophone Africa and, later, the Gulf states according to an essay on reputation laundering in Paris and Lisbon.

It says that in both capitals, political communications and other public relations agencies are hired to improve the visibility and respectability of their autocratic clients, which in turn makes it less politically costly for French and Portuguese elites to maintain close and high level diplomatic relations with them.

Angolan connections

Portugal’s bilateral relationship with former colony Angola is examined in another essay. Initially, the researchers say Angolan reputation laundering efforts in Lisbon were largely limited to work by law firms and some banks because Angolan officials did not seek the high profile later sought by many oligarchs.

This escalated in the aftermath of the 2008 financial crisis into a thorough penetration of Portuguese elite circles (including nearly all service provision sectors as well as parts of the political system) by oil-rich Angolan elites.

Uzbekistani banks

In Uzbekistan, private commercial banks continue to be operated by PEPs, shadowy oligarchs, and, “perhaps most worryingly, individuals implicated in money laundering and corruption scandals”, another essay says.

It argues that the rebranding of the country as market friendly and transparently governed since 2016 when Shavkat Mirziyoyev became president, relegates significant ongoing human rights, corruption, and governance issues to the margins of international concern.

The suite of five essays published by International Forum for Democratic Studies at the Washington-based bipartisan non-profit National Endowment for Democracy foundation, Waking up to Reputation Laundering as a Mechanism for Transnational Kleptocracy, can be found here.