U.S. Embassy feared corruption in Dominican Pension Fund
DominicanToday.com - The United States Embassy in Santo Domingo cautioned Washington against investing in Dominican Pension Fund Administrators (AFP) on an alleged high possibility of losing it to fraud and corruption, states cable number 35414, sent to the State Department June 27, 2005.

The warning is contained in a cable released by WikiLeaks and published by local news source sin.com.do, and adds: “The United States government shouldn’t invest in pensions Dominican (AFP - Pension Fund Administrators) due to the extremely high possibility  losing the funds due to the fraud and corruption. Based on the present state of the things in DR, the American embassy in Santo Domingo urges the Department (State, NT) not to authorize the participation in the local Social Security system. The embassy in Santo Domingo urgent the Department to approve our request to place the local personnel pension money in a pension fund located in the U.S.

In the cable, that forms part of more than 2,000 WikiLeaks provided to SIN, the U.S. Embassy in Santo Domingo warns that the Dominican AFPs are controlled by private Dominican banks, and that these banks have been subject to lax regulatory controls that have consistently failed in assuring that the bankers abide by the laws and regulations in effect.

“The banking industry’s position, power and impunity allow it to conduct transactions with each other. The actions that would normally lead to legal action in the US by abuse of privileged information and corrupt practices occur frequently and are part of a ‘normal way of doing business in DR,” it said.

“Dominican banks aren’t restricted by the regulatory controls that limit investment in industries not related to the banks. In fact, the investments on the part of Dominican banks in news media, trader firms and insurance companies are the norm instead of the exception. Half a dozen  Dominican banks controls the great majority of the financial transactions within Dominican Republic.” adds the cable.

PART OF WIKILEAKS’ CABLE RELEASED BY SIN

27 June 2005 Hertell 35414

35414

C O N F I D E N T I A L SECTION 01 OF 06 SANTO DOMINGO 003370

SIPDIS

DEPARTMENT FOR WHA, WHA/EX, WHA/CAR, HR/OE

E.O. 12958: DECL: 06/24/2015

TAGS: AMGT, KJUS, PGOV, DR, Banking

SUBJECT: U.S. TAXPAYERS WILL LOSE MONEY IN DOMINICAN AFPS

REF: A. EMAIL CORRESPONDENCE KUBISKE/ESTRADA/BOOTH MAY 05

B. 04 SANTO DOMINGO 2694

C. 04 STATE 070041

D. 03 STATE 87287

E. 03 SANTO DOMINGO 1476

F. 01 STATE 36095

G. 01 STATE 36080

Classified By: DCM Lisa Kubiske, reasons 1.4 (b) & (d).

1. (SBU) The USG should not invest in Dominican pension funds (AFPs - Administradoras de Fondos de Pensiones) because the likelihood of losing the funds due to fraud and corruption is extremely high.  Based on the current state of affairs in the Dominican Republic, Embassy Santo Domingo strongly urges the Department to authorize non-participation in the Local Social Security System (LSSS).  Embassy Santo

Domingo urges the Department to concur with our request to place locally engaged staff pension monies into US based pension funds.  This cable replies to Department request (reftels) for information additional to that contained in reftel B.

AFPs controlled by banks

2.  (SBU)  AFPs in the Dominican Republic are controlled by privately owned Dominican banks.  Dominican banks have been subject to lax regulatory controls that have consistently failed to ensure that the banks are complying with applicable laws and regulations.  Dominican banks are not constrained by regulatory controls that limit investment in non-banking related industries.  In fact, investment by Dominican banks in media outlets, insurance companies, and securities firms is the norm rather than the exception. Half a dozen Dominican banks control the vast majority of the financial dealings within the Dominican Republic.

Banks' role in the Dominican Republic

3.  (SBU) The banking sector's domination of Dominican business, along with its pervasive role in financial transactions in the country, has put it in a position of great power in the country.  This power position means the banking industry influences not only banking related businesses and industries, but the judicial and executive branches of government as well.

Insider dealing

4.  (SBU)  The position, power and impunity of the banking industry allows it to engage in self-dealing transactions. Actions that would commonly be prosecuted in the United States as insider trading and corrupt practices are everyday occurrences and a part of "normal business practice" in the Dominican Republic (see below for examples).  Subjecting U.S. taxpayer money and the future financial well-being of USG employees to such a system would be negligent at best.  To place pension funds in Dominican banks knowing the history of the banks, banking industry, regulatory structure, and judicial system, could open the USG to civil suits by locally engaged staff.

Go back | Date: 31 Aug 2011
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