By Stelios Orphanides
A FBME Bank (Cyprus) customer with links to shell companies implicated in the Syrian chemical weapons development programme and the Magnitsky case, repeatedly transferred funds to the Russian state seven years ago, a document suggests.
Maribo Group Ltd, a British Virgin Islands (BVI)-registered company that shared the same address with Balec Ventures Inc. and Tredwell Marketing Ltd, transferred on at least 22 occasions funds in excess of $36.6m to Russia’s ministry of finance, a report drafted by accounting firm Ernst & Young (EY) in 2014 and obtained by the Cyprus Business Mail said. All three BVI companies banked with FBME.
The report was commissioned by Hogan Lovells US LLP law firm on behalf of FBME, the Tanzanian lender barred by US authorities from transacting in dollars. The EY report identified Balec as a company related to the Damascus-based Scientific Studies Research Centre (SSRC), an organisation developing weapons of mass destruction for the Syrian regime.
It also linked Tredwell to Quartell Trading Ltd, also a BVI-registered shell company, and the UK-registered Nomirex Trading Ltd, to the false tax refund of $230m granted to individuals identifying themselves as officers of Hermitage Capital Management. The case was named after Sergei Magnitsky, the Russian lawyer who uncovered the fraud ten years ago and died in prison in 2009 after accusing Russian officials of a cover-up.
In addition to sharing the same BVI address, PO Box 3321, Drake Chambers, Road Town, Tortola, both Maribo and Balec transacted with Tredwell which the Central Bank of Cyprus suspected of being a front company of the SSRC. Both Quartell and Nomirex, which served as intermediaries in the transfer of a total of $5.4m of the false tax refund, also transacted on various occasions with Balec.
“Maribo signed commission agreements with Russian companies to buy Syrian made consumer goods for the settlement of the debt of Syria to Russia,” EY said in its report prepared in the second half of 2014. “The outgoing total to the Ministry of Finance of Russia was $33.6m and occurred between 2/2/2010 (February 2, 2010) and 11/24/2010 (November 24, 2011), prior to the issuance of comprehensive US economic sanctions against Syria”.
Syrian leader Bashar al Assad is a close ally of Russia’s Vladimir Putin. Western countries have accused Assad’s troops of being behind attacks with chemical weapons that caused hundreds of casualties.
Maribo, whose ultimate beneficial owner (UBO) was Ammar Jbeili (Dzhbeyli), a Moscow-based Syrian national and holder of a Russian passport, maintained business relations to parties in Syria prior to the eruption of the civil war in the country. While it ceased trading with them after the outbreak of the civil war in March 2010, its subsequent operations did manage to raise red flags on several other occasions, according to the EY report.
With executive order 13582, former US President Barack Obama increased sanctions against Syria barring US citizens from investing in the Middle East country, direct or indirect exporting, re-exporting, selling, or supplying services to Syria, importing Syrian oil and oil products, and approving, financing, facilitating or guaranteeing transactions such transactions carried out even by non-US citizens.
The EY report also highlighted gaps in the lender’s “know-your-customer” (KYC) processes, that are key in applying anti-money laundering regulations, and said that FBME closed Maribo’s account on April 10, 2014. In July 2014, US authorities described FBME, meanwhile stripped of its banking licences in both Cyprus and Tanzania, as a financial organisation of money laundering concern with links to terrorism.
“An inquiry from JP Morgan Chase, N.A. (“JPMC”) sent by Deutsche Bank was for a SWIFT payment of $250,000 on 05/11/2012 (May 11, 2012) between Maribo and Mallah Yammine Trading (“Mallah”) and asks about any relation between Syria and Mallah,” the EY report said adding that a week later Maribo’s UBO Jbeili informed FBME that Mallah’s address was “Principal Propriety St, Bulding No. 2806 (Wakef Maronite), Muaalem Center, Office No., Kabelias, Almonzania, Lebanon”.
As JP Morgan Chase continued to withhold the funds fearing a possible violation of US sanctions imposed gradually over the summer of 2011, FBME responded with an additional message dated May 29, 2012 informing the New York-based banking and financial services provider that “Mallah did not have any relation to Syria”. In addition, FBME, provided the names and nationalities of Mallah’s shareholders which included two Lebanese and a Saudi.
Three other transfers by Maribo to Mallah between June and August 2012 totalling $684,000, again prompted JP Morgan Chase to inquire about possible ties between Mallah and Syria, the EY report said. FBME responded again that Mallah had no interest or relation to Syria.
“Invoices in the file indicate that Mallah is based in Lebanon,” the report said. “FBME requested confirmation of the address and ownership of Mallah from the UBO of Maribo to include in the response to the inquiry. The inquiry response also stated that Mallah had no specific meaning and no link to Syria”.
“However the Bank noted that Mallah did not return a full or partial match to any entry on the SDN (specially designated nationals) list,” into which the US Department of Treasury places individuals, groups and entities such as suspected terrorists and drug dealers, the accounting firm said.
Activity on Maribo’s account continued until April 2, 2014 and the company continued to transfer funds to Mallah until December 7, 2012. Mallah was the recipient of eight payments in 2011 and 2012 from Maribo totalling $1.7m.
In 2010, prior to the outbreak of the Syrian civil war – and before engaging in business with Mallah – Maribo was transacting with Husam Alden Farwati Bn Mohammad (“Husam”), presented in two contracts dated August 10, 2010 and September 20, 2010 as a buyer for polyester textured yarn, according to the EY report.
An invoice issued to Husam dated November 10, 2010, for €1.04m contained a hand-written transaction number that matched an incoming transaction of $999,950 five days after the invoice day from Kamal Exchange Co LLC, an Amman, Jordan-based financial intermediary, EY said. While the payment details included Husam’s name, the alleged Aleppo based textile trader, the address in the transaction spreadsheet stated a PO box in Amman.
The report said that in addition to the above deal, four other transactions from Kamal to Maribo including three through Deutsche Bank Trust Company Americas (DBTCA) and one processed via a non-US correspondent bank, used the address in Jordan.
“The payment details for the 4 additional transactions can be linked to counterparties found in the file, 2 of which have a Syrian address, 1 a Lebanese address and 1 lists Mr. Jbeili,” the report said adding that all transactions involving Kamal occurred in 2010.
The accounting firm’s report said that while additional transactions from Kamal to Maribo between May 10, 2010 and November 15, 2010, totalled $14.8m, “EY did not note any transactions listing Syria in the address or related to Kamal after the issuance of comprehensive U.S. economic sanctions against Syria on 08/18/2011 (August 18, 2011)”.