Israeli arms manufacturers paid millions to Azeris through Russian bank
28 Oct 2020

Last month, The Times of Israel reported that Israel’s largest aerospace manufacturer, Israel Aerospace Industries, transferred at least $155 million in 2012-2014 to two companies that were reportedly used as a secret slush fund for Azerbaijan’s kleptocratic elite.

A new report published earlier this month on Russian investigative reporting website Important Stories reveals that a second Israeli state-owned arms manufacturer, Israel Military Industries Ltd (IMI Systems Ltd), transferred close to $5 million in 2017 to one of these two same “slush fund” companies.

In addition, Important Stories has reported, the bank accounts for these two offshore companies were serviced by the Russian bank International Financial Club, which is part owned by the wife of Sergei Chemezov, the CEO of Russia’s state-owned arms manufacturer and exporter, Rostec. In other words, a bank that is partly owned by the wife of a US-sanctioned Putin ally performed a key role in suspicious payments from two state-owned Israeli arms manufacturers to offshore companies reportedly controlled by members of the Azeri elite.

The Important Stories report is based on a suspicious activity report (or SAR) filed by The Bank of New York with the Financial Crimes Enforcement Network of the United States Department of the Treasury (FinCEN) in December 2017. The SAR became public as part of a leak of FinCEN documents that the BuzzFeed news site shared with the International Consortium of Investigative Journalists (ICIJ) and with 108 other media outlets and some 400 journalists around the world. Important Stories is the ICIJ’s partner in Russia.

The submission of a suspicious activity report to FinCEN does not mean that the individual or company mentioned in the document has done anything illegal. The transactions described in such reports can be part of entirely legitimate business activities that happened to conform to patterns that aroused the suspicion of the financial institution reporting them.

According to the Important Stories report, in December 2017, The Bank of New York filed an SAR concerning a $5 million payment from IMI Systems Ltd. to the British Virgin Islands company Jetfield Network.

Jetfield Network was founded in New Zealand in 2009 and was later incorporated in the Marshall Islands in February 2012. It originally described itself as engaged in commerce, including the buying and selling of construction equipment, but later branched out into “consulting services.”

The company’s beneficiary is Javid Huseynov, an Azeri man born in 1961. Huseynov is also the beneficiary of Larkstone Ltd., a company incorporated in Estonia, according to reporting by journalist Uri Blau and Hashomrim-the Center for Media and Democracy, which is ICIJ’s partner in Israel. Huseynov does not have much of a public profile and the Important Stories report suggested that he may be a nominee owner.

As reported by Blau and Hashomrim, Jetfield and Larkstone together received over $150 million in payments from Israel Aerospace Industries in 2012-2014, shortly after the company signed a $1.6 billion arms deal with Azerbaijan.

Important Stories further revealed that from June 2016 to May 2017 Israel Aerospace Industries paid $ 2.8 million to a British Virgin Islands firm called. Bakinshaat Group Ltd., whose website describes it as a construction company involved in government projects in Azerbaijan. According to Important Stories, all three companies, Jetfield, Larkstone and Bakinshaat Group, had bank accounts with International Financial Club.

Jetfield and Larkstone were revealed in a 2017 expose by the Organized Crime and Corruption Reporting Project (OCCRP) to be central nodes in what became known as The Azerbaijani Laundromat.

The OCCRP revealed that Jetfield and Larkstone paid money into companies that were used as a slush fund by cronies of the regime of Azerbaijani President Ilham Aliyev to purchase luxury goods as well as to buy good PR for the regime.

For instance, more than 2 million euros that left Azerbaijan, with a portion going through Jetfield, reportedly ended up in 2012 in the bank account of Italian politician Luca Volontè, Rome’s representative to the Parliamentary Assembly of the Council of Europe (PACE). Italian police suspect that in exchange for the payment, Volontè tried to soften the European Council criticisms of human rights violations in Azerbaijan. The investigation, launched in 2015, is ongoing.

According to Important Stories, it is odd that while Jetfield Network is registered in the British Virgin Islands, it was serviced by the Russian bank International Financial Club.

International Financial Club’s main shareholder is a businessman by the name of Mikhail Prokhorov (he owns 47.8%). Interestingly 6.5% of the company’s shares are owned by Ekaterina Ignatova, the wife of the head of Rostec, Sergei Chemezov.

Chemezov is CEO of Rostec, the state-owned Russian conglomerate that controls weapons manufacturing in Russia. Chemezov is under US Treasury Department sanctions for being a Russian government official and is barred from entering the United States. The Treasury Department has described Chemezov as “a trusted ally of President Putin, whom he has known since the 1980’s when they lived in the same apartment complex in East Germany.”

By Simona Weinglass, The Times of Israel, 27 October 2020

Read more at The Times of Israel

RiskScreen: Eliminating Financial Crime with Smart Technology

Count this content towards your CPD minutes, by signing up to our CPD Wallet

FREE CPD Wallet