UAE central bank failed to prevent Iran sanctions evasion
Leaked documents show Dubai-based Gunes General Trading processed $142m (£110m) in suspicious transactions through the UAE financial system in 2011 and 2012.
The activity was flagged by a British bank, but the firm was
able to continue using local financial institutions.
In 2016, the US said it was involved in a major
sanctions-busting scheme.
The Central Bank of the UAE did not respond to the BBC's
request for comment.
Gunes General Trading has been wound up within the last two
years. The BBC has been unable to reach anyone for comment.
The documents - known as the FinCEN Files - were leaked to
BuzzFeed News, then shared with the International Consortium of Investigative
Journalists (ICIJ) and BBC News Arabic.
What sanctions were being evaded?
The US first imposed sanctions on Iran during the 1979-1981
Tehran hostage crisis.
Since then, successive US administrations have introduced
measures intended to compel Iran to change its behaviour, such as limiting its
nuclear programme. One of these measures was to cut off Iranian banks from the
global banking system used to make payments in dollars in 2012.
US prosecutors alleged that Gunes General Trading was part
of a network controlled by Turkish-Iranian gold trader Reza Zarrab that
conducted hundreds of millions of dollars' worth of transactions on behalf of
the Iranian government and other Iranian entities that were barred under US
sanctions.
There were no further concerns raised about the company's
activities following Zarrab's arrest in the US.
In 2017, Zarrab pleaded guilty to fraud, conspiracy and
money laundering charges. He is yet to be sentenced.
Banks based in the UAE rely on big US-based banks to monitor
and approve their US dollar payments - a service known as "correspondent
banking".
Correspondent banks are required to alert authorities to
potential instances of criminal activity, such as money laundering or terrorist
financing, by filing a document known as a suspicious activity report (SAR).
Among the FinCEN files is an SAR that shows the New York
branch of UK-based Standard Chartered Bank contacted the Central Bank of the
UAE in 2012 after noticing hundreds of suspicious transactions by Gunes General
Trading. The reports did not say any of this activity was linked to sanctions
evasion by Iran.
SARs are a way to alert government regulators and law
enforcement to irregular activity that should be investigated, although they
are not necessarily evidence of wrongdoing.
The central bank told Standard Chartered that "the case
has been passed on to law enforcement authorities" and that "accounts
were closed in September 2011".
But Standard Chartered flagged that the company was able to
"continue its suspicious activity" by "utilizing various
accounts that [it] maintains with other banks".
In fact, the central bank failed to stop Gunes General
Trading using two other accounts with two UAE state-owned banks - Rakbank, the
national bank of the northern emirate Ras al-Khaimah, and the National Bank of
Dubai (NBD).
The FinCEN files show Gunes General Trading was able to
process a further $108m of transactions flagged as suspicious until September
2012, the majority of them through Rakbank.
Rakbank said that because of confidentiality it does not
comment on specific transactions but it complies with anti-money laundering and
sanctions regulations and has strict policies in place to monitor this.
NBD did not respond to the BBC's request for comment.
In April 2013, the US Bank of New York Mellon filed a SAR
saying that following a US government inquiry into Gunes General Trading, it
believed the company was conducting transactions in a manner designed to evade
sanctions against Iran.
"Government authorities must both investigate alleged
cases of financial crime and protect the integrity of the financial
system," said Tom Keatinge, director of the centre for financial crime and
security studies at the Royal United Services Institute (Rusi).
"This case brings into question the extent to which the
UAE Central Bank took the second part of this responsibility seriously.
Criminal actors thrive as a result of failures to share information, and this
appears to be a prime example of such a failing."
The FinCen Files is a leak of secret documents which reveal
how major banks have allowed dirty money to be moved around the world. They
also show how the UK is often the weak link in the financial system and how
London is awash with Russian cash.
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