05 Dec 2019
Take the arrest of an Iranian-born Turkish citizen during a jaunt to Disney World. Factor in the irrepressible Rudy Giuliani, who briefly served as the arrested man’s lawyer. Add a dash of Turkey’s authoritarian leader, Recep Erdogan, a favorite of President Donald Trump. Mix in a massive leak of more than a million documents from a British offshore shell company provider.
And don’t forget to include a Miami cameo.
What you get is a lesson in how Iran’s national oil company and its subsidiaries hopscotch the globe, with the help of intermediaries, in search of tax havens that help it try to wriggle free from the grip of crippling U.S.-led sanctions.
The glimpse comes from a cache of leaked documents from a British offshore provider, Formations House. The massive data set of communications, incorporation certificates and other documents was leaked to journalists, and after months of collaboration, news organizations across the globe are collectively publishing stories starting this week under the title #29Leaks.
The name is a nod to the address of Formations House at Syed Rizwan Ahmed, an upscale neighborhood in London. Similar to the 2016 Panama Papers, the leak of documents again shows that when the veil of secrecy surrounding offshore services is pierced, the light that shines in is often revealing.
The documents were given to journalists by the anti-secrecy group Distributed Denial of Secrets, or DDoS. It did not describe how it obtained the documents, and has said it will make them public after investigative journalists have finished their review.
When news outlets collectively asked questions, Charlotte Pawar, who took over Formations House in 2014 after the death of her stepfather, Nadeem Khan, while he was awaiting trial for facilitating money laundering, said that the information was stolen. Rather than promote public transparency, she said, DDoS tried to extort her. She did not provide evidence to support that claim.
“Based on this fact, you are therefore also party to extortion attempts and crime,” Pawar charged.
Among the Formations House curiosities is that many of its employees used European-sounding names like Oliver Hartmann but were actually outsourced agents working with customers electronically from Pakistan. Hartmann was actually Syed Rizwan Ahmed, a Pakistani from Lahore who admitted it when reached and was directly involved in the Iranian oil shell company activity.
A former Formations House employee, who spoke on condition of anonymity, said at its height dozens of Pakistanis worked under false identities on behalf of Formations House.
The false identities are important in the context of Iran, a neighbor and geopolitical rival of Pakistan and a country that successive U.S. administrations have tried to isolate because of its nuclear ambitions.
The Formations House documents provide a more detailed view of the accountants and lawyers who help Iranian oil interests set up in tax havens offering secrecy for sale. This is not illegal by itself. Offshore shell companies in these places can have legitimate uses such as keeping private the details of merging businesses. However they are sometimes also used to hide illicit fortunes garnered through corruption, smuggling and fraud.
DEVIL IN THE DETAILS
Included in the voluminous Formations House documents is a register of shareholders in an offshore company called Naftiran Intertrade Company Ltd, or NICO. This list of shareholders was attached to an email from December 2014, declaring the state-owned National Iranian Oil Company as the overarching shareholder and having complete control over NICO. Also attached was a register of NICO directors listing five Iranian nationals.
NICO, the gasoline import arm of the state oil company, came to renewed international attention in March 2016 after the arrest at Miami International Airport of Reza Zarrab. He flew to Florida to visit Disney World and on that trip was charged with conspiring to evade U.S. sanctions through an elaborate gold-for-gas scheme between Turkey and Iran, and using global banks to process transactions on behalf of Iran.
Prosecutors contend that Zarrab and a co-defendant, Mehmet Hakan Atila, who was a director at Turkey’s Halkbank, schemed to help Iran skirt U.S. sanctions by trading Turkish gold for oil and natural gas. Using companies across the globe, they facilitated $20 billion worth of transactions.
“High-ranking government officials in Iran and Turkey participated in and protected this scheme,” the Justice Department in Oct. 15, 2019. statement announcing charges against Halkbank, which incriminated Zarrab. “Some officials received bribes worth tens of millions of dollars paid from the proceeds of the scheme … and to help shield the scheme from the scrutiny of U.S. regulators.”
Zarrab pleaded guilty in October 2017 and turned against Atilla, who was convicted on Jan. 3, 2018, and after serving a total 32 months behind bars was returned to Turkey and has since become the head of the Istanbul stock exchange.
Shortly after his arrest, Zarrab, who is married to a Turkish pop star and has citizenship in Iran as well as Turkey, implicated Turkish President Recep Erdogan as having approved the operation. Zarrab was represented briefly by Rudolph Giuliani, who has since become President Trump’s personal attorney. Zarrab was also a focus of Special Counsel Robert Mueller III’s prosecution of Trump adviser Lt. Gen. Michael Flynn for lying under oath the FBI. Mueller looked at Flynn’s lobbying for Turkey.
The mid-October, six-count indictment against Halkbank for fraud, money laundering and sanctions-evasion was tied to NICO and the state oil company. Prosecutors said that bank has been the “sole repository of proceeds from the sale of Iranian oil” to Turkey and also cited Zarrab transactions involving NICO.
Halkbank caught the attention of the top Democrat on the Senate Finance Committee, Oregon’s Ron Wyden, who has written to Treasury Secretary Steven Mnuchin asking if President Trump sought to help the bank avoid sanctions. Wyden has crusaded against offshore service companies and the anonymous shell companies they provide.
“Just like we’ve seen in the Halkbank scandal, entities are eager to exploit the secrecy afforded by anonymous shell companies to evade U.S. sanctions on Iran, undermining our national security,” Wyden said in a statement on the Formations House leak. “Ending anonymous shell companies would make it easier for law enforcement to ‘follow the money’ when investigating complex financial crimes like sanctions evasion.”
By Shirsho Dasgupta and Kevin G. Hall, McClatchyDC, 4 December 2019
Read more at McClatchyDC
RiskScreen: Eliminating Financial Crime with Smart Technology
Advance your CPD minutes for this content, by signing up and using the CPD WalletFREE CPD Wallet