Press Release / July 3, 2007

Germany must launch full inquiry into Turkmen funds in German banks

Global Witness calls on the German government to launch a full inquiry into accounts held in German banks by the Central Asian dictatorship of Turkmenistan, because of unanswered questions about what the money was used for.

Last week, Turkmenistan's new President Gurbanguly Berdymukhamedov raised new questions about the role of German banks when he called for the abolition and audit of ‘the International Fund of Saparmurat Niyazov'. The Associated Press reported that the fund, set up in 1993, is ‘managed by German banks'.

Before his death in late 2006, Niyazov ruled Turkmenistan as a repressive dictatorship with a reputation for corruption. As Global Witness revealed in April 2006, he had de-facto personal control over government bank accounts at Deutsche Bank that contained major revenues from the sale of Turkmen natural gas.

The existence of these bank accounts was confirmed to Global Witness by Germany's banking regulator Bafin and later, by Deutsche Bank itself. In answer to concerns about possible corruption, the German banking regulator Bafin said in January 2007 that it had performed a sample investigation (stichprobenartige Untersuchung) of these accounts.

Bafin told Global Witness that according to the sample probe, Deutsche Bank is acting in accordance with German banking laws in regard to the Turkmen state accounts. Deutsche Bank has stated to Global Witness that it was not managing any accounts held by Niyazov personally and had no relationship with the International Fund of Saparmurat Niyazov.

But a leading financial law expert, consulted by Global Witness, warns that the Bafin probe is not enough to show that money was not misused by Niyazov. "The claim to have completed a ‘Stichprobe' provides little basis for confidence. This is a random sample audit technique which is entirely reasonable in a commercial context, but means next to nothing in a case like this. There should be a comprehensive audit of the outflow of funds to ascertain whether any money was diverted for personal purposes, as opposed to state use," said Scott Horton, chair of the committee on international law at the New York City Bar and an expert on international law rules affecting accountants.

Germany, as this year's host of the G8 and a president of the European Union, has a crucial role in supporting transparency and good governance in the countries of Central Asia. Global Witness has today written to Bafin, calling for a full investigation of all Turkmen accounts at German banks, and calls on the German government to ensure that the questions about German banks' dealings with Turkmenistan are fully answered.

The controversy has also cast a shadow on the credibility of the Global Compact, a voluntary code of conduct for corporations launched by the United Nations. Deutsche Bank is a member of the Global Compact, which meets this week in Geneva, and has cited its membership in a letter to Global Witness concerning its relationship with Turkmenistan.

"Without a proper system for checking what members like Deutsche Bank are doing in places like Turkmenistan, the Global Compact is little more than a marketing tool. Its members may only be paying lip-service to the principles they claim to support," said Patrick Alley, director of Global Witness, who is attending the meeting in Geneva.

For further information please contact:

Tom Mayne or Sophia Hoffmann on: +44 (0) 207 2726731 or +44 (0)7872 620955