25 Aug 2020
By Martin Young, Kelly Bloss, Šarūnas Černiauskas, Jason Papakheli, Aparna Surendra, Eric Barrett, and Roshanak Taghavi (OCCRP) and Joachim Dyfvermark and Linda Larsson Kakuli (SVT)
OCCRP –By all outward appearances, Hatam Khatoun Nema was a small-time money changer working from a nondescript office in Järfälla, a workaday Stockholm suburb.
In reality, the Swedish-Iranian businessman ran an obscure Hong Kong company, H M E A CO., LIMITED, that laundered hundreds of millions of dollars through a web of shell companies and businesses stretching from Singapore to Panama.
A major customer of Nema’s operation was the Islamic Republic of Iran. Between 2012 and 2014, he helped move payments for the oil that Iran sold to China, its most important trading partner and geopolitical ally.
The network allowed Chinese energy companies to hide the oil payments, which could bring U.S. scrutiny and possible sanctions for violating restrictions on dollar-based trading with Iran.
To circumvent crippling international economic sanctions aimed at stifling its nuclear program, Iran has long engaged in subterfuge to continue oil exports. Iran’s efforts to access the proceeds of its oil exports have pushed large swathes of its trade and foreign exchange market underground, entrusting enormous wealth to international criminal networks.
The illicit money flows have made massive fortunes for those willing to take risks.
Reza Zarrab, a Turkish-Iranian money launderer who became infamous after his 2016 arrest in Miami, pleaded guilty to bank fraud and money laundering in moving money for Iran. For years Zarrab rubbed shoulders with Turkey’s elite, including President Recep Tayyip Erdoğan, and flaunted outrageous wealth and an excessive lifestyle around the world.
But while Zarrab and his wife, a famous Turkish pop star, lived in the limelight, no one noticed the likes of Nema, whose low-key operation from a gray bungalow on the outskirts of Stockholm did much the same work for the same client.
Unlike Zarrab, Nema has faced no charges for helping Iran evade sanctions. He remains at large.
OCCRP, Sweden’s Sveriges Television (SVT), the U.S. Courthouse News Service, NBC News, and other media partners spent months examining financial records, including bank transactions from the U.S. investigation of Zarrab, of Turkey’s state-owned Halkbank, and of the bank’s former director, Mehmet Hakan Atilla, who helped Zarrab move billions of dollars for Iran. It’s unclear if U.S. officials were even aware of Nema’s network. Prosecutors declined comment for this story.
The records reveal multiple covert financial networks, including Hong Kong-based groups centered on Nema’s HMEA.
He incorporated the company in March 2012, less than a month after President Barack Obama signed an executive order prohibiting U.S.-linked banks from handling most transactions involving Iran.
The pressure was meant to bring Iran to the negotiating table — and it did. In July 2015, the U.S., Iran, China, Russia, the UK, and the European Union announced the Joint Comprehensive Plan of Action, popularly known as the Iran deal, which envisaged an end to Iran’s nuclear activities in exchange for the lifting of economic sanctions.
But even while participating in the negotiations, China continued its dollar trade with Iran through underground networks and proxy companies.
Claiming only HK$10,000 (less than US$1,300) in registered capital, and with no stated business purpose, HMEA moved at least $450 million between 2012 and 2014, the period covered by transaction records obtained by OCCRP.
The money, which flowed through accounts at seven international banks, included at least $100 million in transactions with oil industry-related companies, and at least $130 million in transfers through obscure entities linked to criminal networks and sanction-busting schemes.
Created by company services provider Richful Deyong International Business (China) Limited, HMEA had a prestigious address in Lippo Centre, an iconic skyscraper in Hong Kong’s central business district.
But at least one major bank sent account statements directly to Nema’s home in Stockholm.
“What we’re looking at appears to have the characteristics both of money laundering and sanctions evasion,’’ said Ross S. Delston, an attorney and anti-money laundering expert based in Washington, D.C. “It’s difficult to say without a lot more facts, and would require an investigation by law enforcement agencies in multiple countries that might take months or years.”
Strangled by years of U.S. and UN sanctions, the Iranian economy was firmly in the doldrums by 2012. The country’s GDP shrank 7.4 percent that year as a result of a slump in oil exports, a crucial source of government revenue. The Iranian rial collapsed and has never recovered.
To beat the sanctions and move money internationally, Iran turned to various underground networks, including those run by organized crime syndicates. Financial experts say that even the Iranian government may not know where all of its money ended up.
“There is no singular government agency coordinating such sanction-evasion schemes,” said Ali Dadpay, a University of Dallas associate professor of finance who studies China-Iran economic relations. “Different organizations and bodies are involved in different types of schemes in different countries…”
The two countries are now finalizing a multi-billion economic and security deal, which could reportedly see massive Chinese infrastructure investment in exchange for discounted Iranian oil.
In many ways, the agreement would simply formalize a longstanding geopolitical alliance.
China takes advantage of Iran’s economic isolation. With little competition, the world’s largest petroleum importer is able to buy Iranian oil at favorable prices and has filled the financial vacuum left by sanctions.
Operations like HMEA’s allow the system to work.
“While the rest of the world shunned dealing with Iran, in China entrepreneurs from the private sector were willing to offer services to move money through China,” Dadpay said.
“Government officials in different sectors are often involved in these efforts. Some of them have been charged by personally benefiting from opportunities offered by the opaque movement of funds,’’ Dadpay said. “But the smuggling networks themselves are often established by small business networks, whose services are used by state actors to move money across borders.”
In July 2013 alone, HMEA transferred at least $100 million between major Iranian and Chinese oil interests.
Read more at OCCRP
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