Backstabbed: How Iraq helps Iran skirt sanctions

Nobody has been as good at tracking the painful truth of Iraqi-facilitated evasion of international sanctions on Iran as financial crime consultant Kenneth Rijock.  Consider:

• The Kurds in northern Iraq have “allowed both rampant money laundering, and widespread facilitation of global Iran sanctions evasion” though their banks. In central Iraq, U.S. dollars are flowing in bulk from Baghdad to Iran… more>>
• Lebanese banks and Bank Melli, a sanctioned Iranian bank, are operating in northern Iraq.  EU and North American businesses that use Lebanese banks may not be taking sufficient steps to prevent their transactions from benefiting Iranian end-users… more>>
• “Iraq blatantly disregards UN sanctions on Iran” in accepting an Iranian-flagged vessel‘s shipment at its Um Qasr port, for example… more>>
• Five Turkish banks in Iraq may be facilitating Iran’s sanction dodging behavior… more>>
• Iran will reap $16 billion annually from a new natural gas deal with Iraq… more>>

Reading about the dangerous anti-money laundering (AML) and combating the financing of terrorism (CFT) policies of Iraq may be upsetting to those who have made personal sacrifices fighting for Iraqi freedom, but we have to face the current facts.  How does Rijock describe the Iraq invasion?  “Military success, yes; but AML/CFT utter failure.”

Health care fraudsters sent $1.1 million to Iran

Hossein Lahiji, Co-defendant

Hossein and Najmeh Lahiji, a naturalized U.S. citizen and his wife, have been indicted for medical billing fraud in Texas, and for sending the illicit proceeds to Iran in violation of U.S. sanctions.  Dr. Lahiji even accepted payments for medical treatment he claimed to perform in Texas while he was actually in Tehran.

The Lahijis funneled the dirty money through Espadana Exchange, an “unlicensed money remitting business”—ie, hawala business.  Iran sanctions expert and D.C. attorney Erich Ferrari has previously advised Iranian-Americans to “Just Say No” to engaging in hawala, also called havaleh, transactions destined for Iran.  Evidently, the Lahijis didn’t take his advice.

The couple’s trial was scheduled to begin yesterday.  The U.S. attorney’s office has these details:

McAllen Urologist and Wife Charged in Heath Care Fraud Scheme and Conspiracy to Violate Iranian Sanctions

HOUSTON – A federal grand jury has returned a four-count, superseding indictment against urologist Hossein Lahiji M.D. and his wife, attorney Najmeh Vahid Lahiji, both of McAllen and San Antonio, United States Attorney Kenneth Magidson announced today. The second superseding Indictment, returned late yesterday, charges the couple with conspiracy to commit health care fraud, health care fraud and for conspiring to violate Iranian sanctions.

The Lahijis are set to appear in Houston tomorrow morning at 9:45 before U.S. District Judge Mary Milloy.

This indictment alleges the Lahijis conspired to violate Iranian Sanctions by transferring approximately $1.1 million to Iran. The Lahijis allegedly utilized an unlicensed money remitting business called the Espadana Exchange to avoid the United States banking regulations and to allegedly make it appear they were not violating the United States embargo with Iran. The indictment alleges the defendants sent some of the monies representing profits of their alleged illegal health care fraud scheme to Iran for the purpose of making an investment on behalf of Hossein Lahiji and Najmeh Vahid Lahiji in real estate rental property in Iran, all in violation of the Iranian sanctions.

“The Internal Revenue Service (IRS) will tenaciously pursue individuals who violate international emergency economic powers statutes,” said IRS-Criminal Investigation (CI) Special Agent in Charge Lucy Cruz. “IRS-CI’s unique skill set is to unravel the often concealed complex networks used to disguise international financial crimes.”

The health care fraud scheme alleged in this indictment accuses Hossein and Najmeh Lahiji of conspiring to defraud multiple health care benefit programs by submitting false and fraudulent claims in connection with the use of unlicensed and unqualified medical personal and for billing for medical services not rendered.

Money trail news: recommended reading

• Of course, old chap, Bank Saderat has financed Iran’s nuclear program. But that doesn’t give you the right to impose economic sanctions, says an EU court… more>>
• The web, smartcards, and cell phones were sold as glittering innovations that would empower the world’s poor. Now Bangladesh is desperately wading through massive rivers of fast-moving data in time to catch the next terrorist transaction… more>>
• Nine men have been convicted of fundraising for the jihadist Islamic Movement of Uzbekistan. An overdue update to this story from Paris… more>>
• Iranian state-run newspaper claims it has proof that Saudi Arabia is funding Al Qaeda fighters of Syria’s al-Nusra Front.  Even a broken clock is right twice a day… more>>
• A Muslim Brotherhood group is helping coordinate events in Tunisia thanks to some money from an unexpected source.  The British taxpayer… more>>

Harvard wins legal battle against terror victims

In 2003, victims of an Iranian-sponsored terrorist attack were awarded a multi-million dollar judgment, but have yet to be compensated by Iran.  When the victims sought proceeds from Iranian artefacts kept by museums in Massachussetts,  Harvard and the Boston Museum of Fine Arts balked. In a recent decision, the First Circuit Court of Appeals has sided with the museums.

The shrewd Rick St. Hilaire unpacks this complex and fascinating case at his cultural heritage blog.  Read it all here…

Both sides made good arguments in this case, and the museums have legitimately argued that the pieces are not “owned” by Iran, and Iran never claimed to own them.

But one wonders whether the museums could have worked out an arrangement with the plaintiffs to compensate them with a portion of ticket sales based on the commercial benefits of the Iranian antiquities, rather than battling the victims in federal court.

Critics of Iran have previously called for the seizure or liquidation of Iranian property in the U.S. to compensate the victims of Iranian-backed terrorist attacks.

Black money news: recommended reading

• Jiminy cricket! Our friend El Grillo says a “Stockholm suicide bomber falsely claimed student loans to fund his terrorist activity.”  The latest case of debt financing the jihad… more>>

• The good news is that Indian financial institutions are getting better about filing suspicious transaction reports. The bad news is that it makes it look like India has experienced a 300 percent increase in terrorist financing activity since last year.  Maybe they have… more>>

• Which way is the wind blowing?  Towards Iran.  Just ask Europe about its renewable energy sanctions waiver for Iranian wind power.  Thanks to Willauer Prosky for sending this in… more>>

• International financial watchdog FATF is supposed to counter the financing of terrorism. But lately it seems more focused on getting countries to pass meaningless laws and high-fiving itself… more from Dr. Rachel Ehrenfeld>>

• Money Jihad has covered the illicit wildlife trade, particularly in cheetahs by rich Arab buyers. But even we didn’t know how extensive the cheetah market has become in Dubai.  No reporting yet on how the smugglers use the revenues… more>>

UBS can’t be sued for currency transfer to Iran

Hamas and Hezbollah’s victims face a setback in a new appellate ruling on Rothstein v. UBS AG.  From the New York Law Journal on Feb. 20:

Victims of Terror Cannot Sue UBS AG, Second Circuit Concludes

By Mark Hamblett

American victims of terror attacks inside Israel failed to state a claim against a bank under the Anti-Terrorism Act for violations of currency restrictions designed to isolate Iran and prevent money from flowing to Hamas and Hizbollah, the U.S. Court of Appeals for the Second Circuit ruled last week.

Upholding a lower court, the Second Circuit said UBS AG cannot be sued for damages from rocket attacks and bombings launched on Israel from 1997 to 2006 by Hamas and Hizbollah under the act, (ATS), 18 U.S.C. §2331 et seq. UBS AG was fined $100 million in 2004 by the Federal Reserve for transferring currency to Iran, and the plaintiffs in Rothstein v. UBS AG, 11-0211, claimed there was a sufficient causal connection between the transfers of funds and the attacks.

Southern District of New York Judge Jed Rakoff had dismissed the case based on a lack of standing and failure to state a claim under the act. On Thursday, Judges Amalya Kearse, Raymond Lohier and Christopher Droney disagreed with Rakoff on the standing issue, with Kearse writing that the complaint successfully alleged that “plaintiffs’ injuries in bombings and rocket attacks conducted by Hizbollah and Hamas were fairly traceable to UBS’s provision of U.S. currency to Iran.”

But “fairly traceable” was not the same thing as “proximate cause” the court said. “We are not persuaded that Congress intended to permit recovery under §2333 on a showing of less than proximate cause or that the Complaint contains plausible allegations that UBS’s transfers of U.S. Currency to Iran proximately caused plaintiffs’ injuries,” Kearse said.

While this decision may appear to undermine the legal effort to bankrupt terrorism, this case shouldn’t preclude other victims of terrorism from suing banks that facilitate transfers to terrorist organizations.  Alison Frankel of Thomson Reuters reports:

…Lawyers for terror victims told me that Rothstein is distinguishable from the other ATA cases against banks. UBS was not accused of transferring money directly to terror groups but of indirectly funding terrorism through money transfers to Iran, a state sponsor. The other ATA cases accuse banks of engaging in banking activities directly on behalf of groups like Hamas. “Had UBS supplied cash money directly to Hamas, the outcome would have been different,” said Robert Tolchin, who represents the Rothstein plaintiffs. “I don’t think the decision will be too broadly applicable.”

Illicit finance news: suggested reading

• Shariah Finance Watch writes that the latest sanctions by Treasury against the leader of Al Qaeda in North Africa are “purely political theater”… more>>

• World traveler Richard Chichakli, the Syrian-American who helped Viktor Bout run guns to Hezbollah, seeks bail. Australian judge: “Bit of a flight risk, aren’t you?” more>>

• Need to get a supply shipment to Afghanistan?  On your way, be sure to dock in Bandar Abbas, Iran, just like the Americans.  Starr asks, “Why is the United States Subsidizing Iran?”  more (or here)>>

• If Mazaheri thought he could smuggle a 70 million dollar check, what else has Iran’s former central bank chief gotten away with?  Ken Rijock investigates… more>>

• One man’s search for Noah’s ark could help bankrupt terrorism… more>>

Cyber-terrorists target bank software next

After attacking banks’ websites last fall, hackers “may graduate from crude DDoS attacks to more sophisticated ones that secretly penetrate banks’ systems and then steal or delete data,” reports The Economist.

Furthermore, “If 20,000 machines started hammering British payment gateways on the last weekend before Christmas, people wouldn’t be able to shop except with cash,” warns an information technology security professor quoted in the article.  This is the second prediction or warning we have heard about potential cyber-attacks on financial targets during 2013 holiday season.

Read the full article—“War on terabytes”—here.

Banks have spent centuries perfecting physical security through alarm systems, tamper-proof vaults, armed guards, armored trucks, but they have a lot of catching up to do to guard their networks against the economic warfare being waged by overseas hackers.

Many experts and government officials blame last fall’s digital attacks (depicted in the excellent RivalHost infographic below) on Iran.  That hasn’t been proved yet, but longtime readers may recall that Iranian leaders declared 2011 as “The Year of Economic Jihad,” and that Ahmadinejad said “that economic jihad should be realized in every aspect of all Iranian’s lives.”

Under attack from Iran, banks seek federal help

Having spent millions of dollars to defend themselves from a hostile foreign power, American banks are now asking the federal government for assistance.  U.S. officials say that all options are being weighed including retaliation.  Here’s a two-minute interview on the subject with reporter Siobhan Gorman on the radio program The Wall Street Journal This Morning last month:

Hopefully they won’t have to use it, but the Pentagon would have good reasons for keeping a cyber-counteroffensive plan on its shelf.

View previous Money Jihad coverage of the allegedly Iranian-based technological assaults here, here, and here.

TCF goofs on golden gopher terror transactions

TCF Bank Stadium at Univ. of Minn.

Iranian students at the University of Minnesota engaging in possible terrorist financing activities have been allowed to maintain accounts with TCF Financial Corp. until now, as lapses in the bank’s compliance program have come to light during a federal probe.

Several of accounts will be closed despite “concerns that innocent people were being profiled.”  It is unclear why individual account holders should be concerned or who is raising the concerns, since the bank (not depositors) is the party receiving the penalty.

TCF will pay a $10 million fine as part of a consent order with the federal government for its compliance shortcomings, which included filing slipshod suspicious transaction reports (STRs) of “poor quality.”

Hat tip to Sal Imburgia for sending this in.  From the Minneapolis Star Tribune:

TCF to pay $10 million for lapses in monitoring suspicious transactions

By Jennifer Bjorhus

Jan. 26–TCF Financial Corp. will pay $10 million for lapses in monitoring suspicious bank transactions, including potential terrorist financing.

The fine, announced Friday by the Office of the Comptroller of the Currency, caps a long-running probe of the Wayzata bank’s compliance with the Bank Secrecy Act. TCF mishandled mandatory reports regarding questionable dealings, a key tool for law enforcement to prevent money laundering and other illegal activity, federal officials said.

At issue were cash transactions that appeared to be manipulated, and wire transfers where the source and purpose of the funds were unknown, the OCC said.

The Bank Secrecy Act requires financial institutions to make sure illegal money doesn’t flow through their organization, and regulators have stepped up enforcement in the past few years.

Last month, British banking giant HSBC agreed to pay $1.9 billion to settle an investigation focused on laundering money from drug traffickers in Mexico and conducting transactions with sanctioned countries, such as Iran and Cuba. More recently, the Federal Reserve hit JPMorgan Chase & Co. with a cease-and-desist order requiring it to beef up compliance.

As for TCF — the third-largest bank in Minnesota with $19 billion in assets — regulators said the lender botched its required reports.

Between November 2008 and July 2010, TCF was late filing 2,357 reports of suspicious transactions, according to the consent order from the OCC. The filing goes on to say that in 13 cases, involving about $7.2 million, the bank failed to properly file reports “related to transactions indicative of possible terrorist financing.”

The reports to law enforcement were of “poor quality,” it said. In some cases the bank didn’t check the “terrorist financing” box on reports when the narrative section referenced possible terrorist activity, and in other cases the narrative didn’t make clear what sort of suspicious activity had taken place.

In addition to paying the fine, TCF agreed to refile the 13 reports and do employee training, according to the consent order.

TCF issued a statement Friday saying it overhauled its program for complying with the Bank Secrecy Act. It called the settlement a “significant step” toward resolving the consent order that regulators issued against the bank in 2010.

Banks simply haven’t taken suspicious activity reports seriously enough, and the tougher enforcement is overdue, said bank analyst Nancy Bush, a contributing editor of SNL Financial in Charlottesville, Va.

“Banks have every way in the world to track this stuff,” Bush said. “They certainly know what comes in and what goes out of their banks on a daily basis.”

Bush said she thought TCF’s $10 million fine was relatively small: “It seems to be more symbolic than anything else.”

TCF CEO William Cooper was traveling late Friday and couldn’t be reached for comment. In an interview, spokesman Jason Korstange said the bank did a “very, very thorough examination of all our accounts.”

“Ultimately we did not find any terrorist activities,” Korstange said.

The settlement sheds some light on the mysterious letters the bank sent last month to about a dozen students at the University of Minnesota who are from Iran. The letters, in which TCF warned it might close their accounts, triggered concerns that innocent people were being profiled.

Korstange said the bank is still working through that matter. TCF has an exclusive agreement with the university to offer checking accounts linked to school photo ID cards.

Iran financing Gaza’s jihad by land, sea, and air

Whether through Sudanese ports, Libyan overland routes, the Rafah border crossing, or smuggling tunnels, Iran has been reasserting its role as the leading regional state sponsor of terror against Israel by funneling arms to Gaza.

Were reports of imminent financial collapse of Iran premature?  If Iran can fund weapons shipments to Gaza to the degree alleged by Israeli officials in this report, it would seem so.