Banker, trader helped Iran evade sanctions – how blacklisted governments launder billions
04 Jan 2018

The news on Thursday that Turkey has reacted angrily to the conviction of banker Hakan Atilla raises some questions around a stunning case.

Atilla, a deputy general manager at Turkey-based Halkbank, was convicted of bank fraud and conspiracy to defraud the United States for his alleged role in helping Iran evade US sanctions, disguising financial transactions as humanitarian food payments.

Turkey’s foreign ministry has dismissed the allegations, which Atilla also denies. The Iranian Embassy in London declined to comment.

According to prosecutors, the scheme enabled Iran to evade strict US sanctions and launder billions through Turkey, with the knowledge of senior government officials and the help of individuals like Atilla and Turksih gold dealer Reza Zarrab, who had a central role in the scheme.

How does a government launder billions?

Once it is hit with serious sanctions, such as in Iran’s or North Korea’s case, a sanctioned state is usually faced with the awkward problem of trying to move around its money through legal banking channels from which it is barred.

The cases of Atilla and Zarrab shed light on how a government can shift billions illegally.

The tale has an interesting start.

It is understood that Zarrab’s father, a well-off Iranian businessman, was part of a team tasked to help Iran evade US sanctions.

Reza got to learn that Iran’s central bank and oil company needed to get hold of their money, which they could not access because of sanctions.

According to the prosecution, Zarrab (Reza) devised a scheme which basically involved moving Iran’s money in Turkey into his own company, then using the money to buy gold and export it to Dubai.

The gold would then be sold in Dubai and the cash used to make dollar-based payments to entities designated by Iran, sometimes through accounts at banks in New York.

Zarrab went on to do this through other countries too. He reportedly got commission of $4 per $1000, making a total of $150 million for himself. Iran is estimated to have moved billions from Turkey and other countries with the help of Zarrab and others.

After gold, Zarrab devised a scheme where the cash flows were disguised as payments linked to humanitarian food shipments.

Attilla is alleged to have a played a role in ensuring that US banks would not be able to detect that the funds originated from Iran.

What the experts said

Is it common for governments to launder cash, do they usually do it with the knowledge and approval of other governments, and what about the state-owned banks that have to break the rules?

KYC360 asked the experts their general views.

Dr Anna Bradshaw, partner at Peters and Peters in London and financial sanctions specialist:

The sanctions against Iran are different in scope depending on whether they are imposed at the UN level or at the regional or national level.

The regional and national sanctions are more extensive than the UN sanctions.

The more extensive the sanctions regime the more likely there is to be significant variations between countries and the more scope for circumvention activity.

When you are looking at sanctions-busting by governments it becomes a more politically charged question than you would encounter for more straightforward examples of wrongdoing – for example, where Heads of State or government are seeking to launder misappropriated State funds for their personal benefit or where countries maintain weak anti-money laundering controls in order to profit from the corresponding increase in business generated by their financial centres.

Where restrictions are imposed on the ability to access otherwise lawful State assets, either by countries who are themselves the targets of sanctions or by countries who have not subscribed to extended sanctions, it seems almost inevitable that creative attempts will be made to extract the assets from the reach of the sanctions regime in question.

The willingness of other countries to assist in such exercises could, conceivably, be motivated by financial gain but is more likely to reflect political considerations.

A London-based solicitor with ties to Iran (preferred not be quoted)

It happens more often than we are currently aware. There are other governments and institutions that are involved in transactions that are not entirely kosher.

Look at North Korea and Syria, how do we think that these regimes get money in and out?

There must be vast sums going in and out and it’s my view that certain activities must be taking place under the noses of other governments and state-owned entities. [Such] governments turn a blind eye.

It is also happening in Western states too, right under their noses, but highly likely without their knowledge.

For example, there are likely to be government departments in Syria channelling funds through London in sophisticated and clandestine ways, without the knowledge or assistance of UK authorities.

States agree to assist other governments to launder money because of political ties. These are usually allies and the political relationship is a key factor.

It usually will involve state-owned banks, and these will be forced to comply with orders from the top, you can’t say no to the boss.

By Irene Madongo

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