World

Fincen Files — By suitcase and by wire: How Reza Zarrab smuggled Russia’s money


September 21, 2020 10:53:28 am





BY OCCRP and COURTHOUSE NEWS SERVICE



Best identified for laundering billions of {dollars} for Iran, infamous gold smuggler Reza Zarrab’s ties to Russia acquired solely passing point out when he was prosecuted within the U.S. in 2016.

That was an enormous oversight.

A brand new investigation by OCCRP and Courthouse News Service reveals that Russia was central to Zarrab’s money community even earlier than he started working for Iran. The profitable enterprise is clear in hundreds of financial institution switch data obtained by OCCRP and has been described in interviews by a Zarrab insider who says he smuggled tens of millions of {dollars} to Russia.

Federal prosecutors from the Southern District of New York declined touch upon this investigation.

Zarrab, whereas nonetheless in his early-20s, was the co-owner of Bella Investments Company LLC, a Dubai-based “investment company” that secretly dealt with round $1.25 billion in suspicious wire transactions involving Russian and offshore entities. Several transactions had been tied to the large tax fraud uncovered by the late Russian whistleblower Sergei Magnitsky.

Bella Investments additionally acquired funds from offshore firms which have been linked to slave labor in Azerbaijan and to petroleum illegally shipped to President Bashar al-Assad’s Syria.

Yet Bella Investments was scarcely talked about when the U.S. prosecuted Zarrab and Mehmet Hakan Atilla, a senior govt at Turkey’s state-owned Halkbank, which facilitated Zarrab’s felony scheme.

Investigators apparently knew concerning the firm. Court papers present that when U.S. authorities seized Zarrab’s digital gadgets in 2016, Bella Investments was used as a key phrase search time period. The FBI additionally requested the U.S. Treasury to go looking its data for Bella Investments a month after Zarrab’s arrest.

Bella Investments was additionally on a listing of firms and folks that was proven to potential jurors who had been advised their names may come up in Atilla’s trial. It by no means did.

Under a brand new title and managed by Zarrab’s uncle and cousin, Bella Investments was nonetheless actively registered in Dubai, 2.5 years after Zarrab’s responsible plea in U.S. District Court. Three different firms bearing very comparable names, in the meantime, have been established by Zarrab’s kinfolk in Turkey, North Macedonia and Italy, displaying the household’s money community extends into Europe.

Bella Investments’ continued presence in Dubai highlights the Zarrab household’s capacity to take advantage of the United Arab Emirates’ lax regulatory framework to maneuver a whole lot of tens of millions of {dollars} – seemingly with few questions requested.

The wire switch exercise additionally includes Standard Chartered, the British multinational financial institution that U.S. officers labelled a “victim bank” and unwitting confederate in Zarrab’s schemes. Documents present Bella Investments pushed tens of millions in suspicious funds by way of an account on the British banking large’s UAE department.

A whole lot of it was suspicious money flowing from Russia.

The ‘Old System’

In 2008, Russia badly wanted money. Its central financial institution recorded internet capital outflows of practically $133.6 billion that yr as a weak economic system, falling oil costs and ruble depreciation prompted unprecedented flight of money from the nation.

Much of that money was held by reliable traders looking for extra steady markets, however some ended up within the accounts of a Dubai-based firm run by Zarrab, an obscure 25-year-old Turkish-Iranian money exchanger, and his associate, Ahmed Ali Hassan Taher, the Emirati proprietor of Dubai’s Al Azhar Money Exchange.

Companies managed by Zarrab in Turkey would later pump tens of tens of millions of {dollars} by way of Al Azhar, banking information obtained by OCCRP present. Al Azhar’s web site not works, however an archived web page from 2011 lists a number of Iranian banks, together with Bank Mellat which was sanctioned by the U.S. on the time. Unlike his former associate, Taher has not been charged or sanctioned by the U.S. Taher couldn’t be reached for remark.

Established in May 2007, Bella Investments would over the following 4 years course of some $1.25 billion in wire transfers from abroad firms in round two dozen nations. Around half got here from Russia, principally in 2008.

On paper, the wire transfers had been justified as funds to Bella Investments for a variety of products, equivalent to dwelling home equipment, dried fruit, securities and textiles. Many had been vaguely outlined as “consumer goods” or “industrial equipment.” Often data referenced solely a “contract” or “invoice,” or no function was said in any respect.

In actuality, the corporate was used to launder funds by way of quite a few offshore financial institution accounts around the globe.

Adem Karahan, a Zarrab insider who smuggled tens of tens of millions of {dollars} in money to Moscow and operated Turkish shell firms that wired funds to Bella Investments, stated the corporate had no actual enterprise exercise.

“Bella was set up for money transfer,” Karahan stated in an unique interview. When requested if the corporate performed any actual business exercise, he replied: “No, it didn’t.”

Karahan gave OCCRP financial institution statements for Turkish shell firms that formally listed him as shareholder or approved consultant however he says had been truly managed by Zarrab. The statements present funds to Bella Investments.

In whole, Karahan was concerned in seven Zarrab shell firms. Asked if any had actual business exercise, he replied: “No, absolutely not.”

On the witness stand in U.S. District Court in 2017, Zarrab testified beneath oath that he by no means laundered Russian money.

“Isn’t it also true that you were involved in money laundering involving Russia prior to 2010?” requested an lawyer representing the Halkbank govt, Atilla.

“No, that isn’t right, ma’am,’’ Zarrab responded.

“Wasn’t your chauffeur stopped at the border with $150 million in cash in connection with your dealings in Russia?” the lawyer pressed. “Yes or no?”

“No, ma’am; that is not correct,” Zarrab stated.

But Karahan stated he and others routinely smuggled money into Russia.

“Me and my friend took $4 million, after that $8 million,’’ he said. “We went a lot to Russia.”

Karahan recalled as many as 20 journeys to Russia had been made round 2009 and 2010, and shared Russian visas that affirm his journey there in 2010. He stated that on one event he needed to bribe officers who found the illicit money.

“During that (trip) custom police stopped us at Sheremetyevo airport,’’ he said. “We were questioned. In exchange with $1,000 they set us free.”

Karahan stated different couriers who dealt with Russian money included Yücel Özcil, a Turkish nationwide who in 2017 was described in a U.S. court docket as Zarrab’s safety guard. Özcil’s Facebook account reveals photographs of Moscow’s Red Square uploaded in September 2010, when the smuggling was happening. Özcil didn’t reply to a request for remark.

Another affiliate was Vidadi Badalov, an Azerbaijani nationwide who took supply of the money in Russia, Karahan stated. Data obtained by OCCRP by way of the U.S. Freedom of Information Act reveals that three Turkish firms formally registered to Badalov and Karahan wired greater than $42 million to Bella Investments in 2010.

“Vidadi Badalov was Reza Zarrab’s man in Russia,” Karahan stated. Badalov didn’t reply to a request for remark.

Karahan estimates as a lot as $300 million in money was smuggled into Russia. Zarrab himself travelled to Russia in 2007 and 2010, based on passport stamps famous in U.S. court docket filings.

While monetary data obtained by OCCRP solely now present the true quantity of Zarrab’s Russian enterprise within the years earlier than his arrest, the smuggling operation was revealed in 2013 by a leaked report believed to have been ready by Turkish legislation enforcement investigating high-level bribery of presidency officers. In their extensively circulated report, the investigators described what they referred to as Zarrab’s “Russia-based old system” for transferring money to Russia.

“In order to meet the Russian banks’ need for hot money, they’ve been transferring money through shell companies with commission through the (old) system they’ve developed,” they wrote.

“In order to take the monies earned abroad through unknown legal/illegal sources into Russia, they may be brought into our country from Dubai.”

The “Iran-oriented new system,” Turkish legislation enforcement stated, concerned laundering money for Iran.

Zarrab was arrested in Turkey in December 2013 in relation to alleged bribery to additional money laundering linked to Iran. He later testified within the U.S. that he hung out in jail earlier than bribing his technique to freedom.

Huseyin Korkmaz, who led the 2013 investigation, testified within the U.S. that felony expenses had been introduced in opposition to him, and in opposition to one other prosecutor and investigators who had been probing alleged corruption by Turkish President Recep Tayyip Erdoğan, who was prime minister on the time, and different ministers. Zarrab later testified that Erdoğan was in on the scheme to assist Iran evade sanctions. Korkmaz stated in court docket that he was reassigned and then jailed earlier than fleeing Turkey.

‘Classic Red Flags’

Turkish police didn’t seem find out about Bella Investments and lacked entry to the hundreds of financial institution wire data that U.S. authorities later collected and utilized in prosecuting Zarrab and Atilla.

But paperwork and information obtained by OCCRP present that Turkish authorities had been heading in the right direction.

The “old system” seems to have relied on dozens of shell firms registered in Russia and in low-transparency jurisdictions, such because the British Virgin Islands, Belize and Seychelles. These firms over 4 years wired a whole lot of tens of millions of {dollars} to Bella Investments alone.

Most of the $1.25 billion was despatched in 2008, with round half coming instantly from the Russian financial institution accounts of Russian firms that had been usually created simply months earlier than the money switch.

Bank data recommend these transfers had been additionally justified as fee for all kinds of products, vaguely outlined as client objects, industrial tools, dwelling home equipment, or fruit and greens. In some instances there was a reference to a contract or bill with little or no additional info.

Ross Delston, a U.S.-based anti-money laundering skilled who trains monetary professionals to detect suspicious exercise, stated banks’ compliance items ought to have questioned these transfers.

“The information of this matter current basic crimson flags that banks are presupposed to establish for potential money laundering or different monetary crime,’’ he stated.

Delston famous that Bella Investments had solely not too long ago been fashioned, and was – on paper – coping with all kinds of products, which is atypical for an funding firm. Furthermore, funds had been being transferred from “higher-risk offshore financial centers.”

“All of these are red flags, indicators of possible criminal activity,” Delston stated.

The Russian firms included Investconsulting LLC, which was established in 2007 and shuttled greater than $136 million to Bella Investments within the first half of 2008. Banking data say solely that the money was for the “contract of sale of purchase of securities” and reference an obvious contract date.

Another Russian agency, Ariya LLC, was created in April 2008. It rapidly initiated a collection of wire transfers to Bella Investments totalling about $99 million over 4 months, ostensibly for “home appliances.” The money got here from an account at Interregional Investment Bank, whose senior managers had been accused simply months earlier of embezzling Russian state assets.

A member of the financial institution’s board of administrators, Igor Kruglyakov, was described in Russian media as a long-term enterprise affiliate of Sergei Chemezov, the highly effective head of Rostec, Russia’s state protection conglomerate. Chemezov, who has been beneath U.S. sanctions since 2014, is a private buddy of Russian President Vladimir Putin from their days as KGB brokers in Dresden within the Nineteen Eighties. Rosoboronexport, a state-owned weapons exporter that Chemezov headed till late 2007, was a key consumer of Interregional Investment Bank that yr.

One after one other, newly established Russian firms wired tens of tens of millions of {dollars} to Bella Investments’ Dubai financial institution accounts. Most funds went to banks within the UAE, together with Standard Chartered’s Dubai department.

Standard Chartered advised OCCRP its info is restricted as a consequence of consumer confidentiality, and declined to remark additional.

The companies included TD Medius LLC, which was established in November 2007 and despatched $78.6 million over simply 4 months in 2008. Investment Financial Company LLC, in the meantime, transferred $71.55 million between September 2007 and November 2008 referencing a “contract of sale and purchase of securities” and additionally dried fruit.

Monolitgruppplyus LLC, established in December 2007, despatched practically $34 million over two months in 2008. The funds got here from an account with First Czech-Russian Bank, which was later shut down by Russia’s central financial institution in July 2016. The financial institution had a gap in its steadiness sheet value a number of a whole lot of tens of millions of {dollars}.

The financial institution additionally gained notoriety for extending a 9.4 million euro ($12 million) mortgage to Marine le Pen’s right-wing Front National get together in 2014 after conventional French banks reportedly refused credit score, prompting accusations of Russian interference in European elections.

Bella Investments was additionally paid round $32.7 million “for goods” by two-month-old Spetsremstroy LLC starting in September 2008. Another $20 million got here from Megapolis LLC – ostensibly for dwelling home equipment – in March 2008, three months after the corporate was fashioned.

The Magnitsky Connection

Bella Investments’ Dubai financial institution accounts on the identical time had been being flooded with a whole lot of tens of millions of {dollars} from shell firms in New Zealand, the Seychelles, Marshall Islands, Panama, Belize and the British Virgin Islands.

Contracts for “foodstuff” or “trade equipment” had been generally used to justify the funds. In one case, an organization registered in tropical Belize paid Bella Investments $26.37 million in common funds for “clothes from fur.”

Such transactions “could be consistent with trade-based money laundering, using trade transactions as a cover for a flow of wire transfers that needs some sort of rationale, in essence a cover story for the bank’s consumption,” Delston stated.

Several of the businesses that transacted with Bella Investments had been concurrently making funds to shell firms intently tied to Russia’s infamous Magnitsky case.

For instance, Bella Investments acquired about $599,000 on March 26, 2008 from BVI-registered Seomest Development Inc. On the identical day, Seomest wired greater than $287,000 to a different BVI agency, Protectron Company Inc., which despatched practically $636,000 on to U.Ok.-based Roberta Transit LLP.

OCCRP in 2016 revealed that Protectron and Roberta Transit had been a part of the Magnitsky fraud. Roberta Transit acquired a share of the stolen funds from two Moldovan shell companies through one other firm in February 2008.

In whole, Seomest wired greater than $31 million to Bella Investments between March and October 2008 with obscure references as “for equipment,” “building equipment” or “spare parts,” if any function was said in any respect.

Beginning in April 2008, Bella Investments started receiving massive transfers from BVI-registered Rotavest Global Inc., with most funds left unexplained and others labelled “for trade equipment.” The identical month, Rotavest Global made two wire transfers to UK-registered Damac Limited.

OCCRP associate RISE Moldova in 2019 uncovered a fee to Damac from an offshore firm beneath investigation within the Magnitsky case.

Between April and October 2008, Rotavest wired greater than $33.5 million to Bella Investments.

And in August 2009, Bella Investments despatched over $24,000 on to Itan Invest Corp., a Belize shell firm recognized in US court docket displays as having moved Magnitsky fraud money by way of a Lithuanian checking account.

While banking info obtained by OCCRP reveals {that a} whole of round $1.25 billion was wired to Bella Investments, reporters had been in a position to affirm over $656 million in outgoing transfers, and a lot of that was despatched to Asia Exchange Centre, a Dubai forex change owned by Emirati businessman Ali Omran Salim Al Owais.

The change, whose license was revoked by UAE’s central financial institution in 2013 reportedly for regulatory violations, additionally acquired a whole lot of tens of millions of {dollars} in wire transfers from Al Nafees Exchange LLC, a UAE firm co-owned by Zarrab’s father and additionally named in Zarrab’s U.S. indictment. Owais, Asia Exchange Centre’s proprietor, declined remark for this text.

Delston, the anti-money laundering skilled, stated a UAE change provides one other layer of apparent threat.

“These businesses can be major avenues for money laundering since they are typically more lightly regulated than banks and can have large inflows and outflows of funds throughout the globe in much the same way as banks but with less scrutiny,” Delston stated. “This is another high-risk activity involving [Bella Investments].”

‘Spreading Corruption on Earth’

Bella Investments, now referred to as Rukn Al Mumtaz Investment Company LLC, was nonetheless lively in April. Zarrab’s uncle, Ahad Khabbaz Tamimi, and cousin, Bahram Khabbaz Tamimi, took over 49 p.c possession of the corporate in 2013 and are its present administrators, data present.

Zarrab’s kinfolk didn’t reply to a request for remark submitted by way of his counsel.

The different 51 p.c is held by Mousa Daoud Mohamed Tahir Al Maazmi, the Emirati CEO of The Best Businessmen Services LLC, an organization formation agent in UAE. Mousa Tahir didn’t reply to an emailed request for remark.

The Khabbaz Tamimis had been additionally concerned in Turkish companies that Zarrab used to launder money. These included Royal Denizcilik, which issued pretend invoices for shipments of meals objects to justify multi-million-dollar money transfers with Iran.

Zarrab has testified that the invoices masked phantom meals shipments.

“None of the companies that I’m drawing on this diagram here would ever be involved in sending actual food because there was no actual trade out there,” Zarrab defined in U.S. District Court. “This was just an accessory in order to be able to carry out the money orders.”

Royal Denizcilik was additionally linked to suspicious funds from Russia, banking information present. For instance, Torgovyi Dom Promtsentr LLC, a Russian agency created in 2009, wired round $15 million to Royal Denizcilik within the final three months of 2010, ostensibly for “industrial equipment”. The identical Russian agency additionally wired money to Bella Investments and two different Turkish shell companies managed by Zarrab.

Karahan, the Turkish courier, recalled that Zarrab’s uncle was additionally chargeable for arranging proxy shareholders for firms, a tactic generally used to cover useful possession.

“He was bringing partners from Iran and made me set up the company,” Karahan stated.

Zarrab, the Khabbaz Tamimis and one other cousin of Zarrab, Shahram Khabbaz Tamimi, had been shareholders in Zafer Kuyumculuk, a Turkish jewellery firm. Its approved consultant was Ertugrul Bozdogan, whom Karahan stated accompanied Zarrab to a gathering with President Mahmoud Ahmadinejad in Tehran in 2011. Turkish legislation enforcement in 2013 stated Bozdogan was a member of Zarrab’s felony organisation.

After his arrest in 2016, Zarrab acquired a virtually nine-minute telephone name from Ahad, who urged his nephew to disclaim guilt regardless of his want to cooperate with prosecutors in return for a lighter sentence.

“You should not do that,” Ahad stated, based on a translated transcript of their name. “What’s the difference between 10 and 20 years?”

“There is a huge difference between 10 and 11 years. Godspeed,” replied Zarrab. “Do you know what a year means to me?”

The Khabbaz Tamimis have operated a number of firms beneath variations of Bella Investment’s new title, Rukn Al Mumtaz Investment Company LLC, firm registries present.

These embrace Turkey-registered Mümtaz Kuyumculuk, which was established in 2009 and nonetheless seems to be lively this yr. Banking information reveals the corporate in 2010 and 2011 acquired greater than $2.4 million in wire transfers from Gunes General Trading LLC and Al Nafees Exchange LLC — each named in Zarrab’s U.S. indictment. Mümtaz Kuyumculuk in 2011 paid $78,246 to Giordini SRL, an Italian luxurious jeweller, banking information reveals.

Other firms which have operated beneath the identical model are Mumtaz Investments in North Macedonia, and Italy-registered Momtaz SRL, a valuable stones and metals firm.

Their associate in Momtaz SRL was Vahid Mazloumin, an Iranian forex exchanger referred to as the “sultan of coins.”

Mazloumin was executed by the Iranian state in 2018 after being convicted of unlawful forex buying and selling and different monetary crimes referred to as “spreading corruption on earth.”

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