{"id":4474,"date":"2016-04-07T00:00:00","date_gmt":"2016-04-07T00:00:00","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/stories\/parade-of-the-blacklisted-marches-through-firms-client-list-and-syrias-civil-war\/"},"modified":"2016-04-07T00:00:00","modified_gmt":"2016-04-07T00:00:00","slug":"parade-of-the-blacklisted-marches-through-firms-client-list-and-syrias-civil-war","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/parade-of-the-blacklisted-marches-through-firms-client-list-and-syrias-civil-war\/","title":{"rendered":"Parade of the blacklisted marches through firm’s client list – and Syria’s civil war"},"content":{"rendered":"

Picture:\u00a0Painted portrait of Aylan Kurdi. (Thierry Ehrmann, Flickr)<\/em><\/p>\n

One morning in mid-2014, before the summer sun had reached its peak, two elderly men in Aleppo, Syria, sat on plastic chairs, chatting quietly and drinking black coffee.\u00a0 From his perch outside his food stall, Sabri Wahid Asfur and his friend Abu Yassin watched their neighbours go about their day.<\/p>\n

Suddenly, bombs hit the ground, scattering bricks and debris. Seconds later, they exploded, sending thousands of pieces of shrapnel \u2014 nails, rebar \u2014 in all directions. The crudely made barrel bombs had been designed for maximum human damage.<\/p>\n

As the smoke lifted, Asfur reached for Abu Yassin.<\/p>\n

\u201cI looked at my friend when I recovered my vision and saw his body in shreds,\u201d Asfur remembers. \u201cHe was exhaling his last breath.\u201d<\/p>\n

The attack was one of hundreds of aerial bombings that Syrian President Bashar al-Assad\u2019s regime has carried out during the country\u2019s six-year civil war, killing thousands of its own people. The deadly air campaign would not have been possible, US authorities have charged, without a network of companies that dodged international embargoes by supplying the oil and gas that kept the military aircraft in sky.<\/p>\n

Three of the companies that the US alleges helped supply the fuel were customers of a global law firm, Mossack Fonseca & Co, which helped the companies incorporate and maintain offshore branches in Seychelles, a tax haven in the Indian Ocean.<\/p>\n

The law firm continued doing work for at least one of these closely-linked companies after the three of them were blacklisted by the American government for supporting Syria\u2019s war machine \u2013 joining dozens of other Mossack Fonseca customers sanctioned by the US Treasury Department\u2019s Office of Foreign Assets Control.<\/p>\n

Mossack Fonseca, which is based in Panama but has offices around the world, has worked with at least 33 individuals or companies that have landed on the Treasury Department\u2019s OFAC list, according to an analysis of the firm\u2019s internal files by the International Consortium of Investigative Journalists, the German newspaper S\u00fcddeutsche Zeitung and other media partners.<\/p>\n

In some cases, individuals and companies had ceased to work with Mossack Fonseca before being sanctioned. In other cases, the entities were active customers when the sanctions were put in place.<\/p>\n

The reporting partners reviewed more than 11 million documents \u2014 emails, client accounts and financial records \u2014 that show the inner workings of Mossack Fonseca from 1977 to December 2015.<\/p>\n

For years, the records show, Mossack Fonseca has earned money creating shell companies that have been used by suspected financiers of terrorists and war criminals in the Middle East; drug kings and queens from Mexico, Guatemala and Eastern Europe; nuclear weapons proliferators in Iran and North Korea, and arms dealers in southern Africa.<\/p>\n

\u201cIt sounds almost like a corporate death wish taking on that many horrible people,\u201d said Jason Sharman, a political scientist at Australia\u2019s Griffith University and co-author of a groundbreaking study of anonymous companies. \u201cYou\u2019d think that, even if they were cynical, they\u2019d be reluctant dealing with US sanctioned entities and taking on the United States.\u201d<\/p>\n

Mossack Fonseca denies wrongdoing.<\/p>\n

A spokesman told ICIJ that the firm relies on intermediaries such as banks and other law firms to review the backgrounds of the customers that they refer to Mossack Fonseca. These middlemen are supposed to notify the firm \u201cas soon as they have knowledge of a client of theirs having been either convicted or listed by a sanctioning body,\u201d the spokesman said. \u201cLikewise, we have our own procedures in place to identify such individuals, to the extent it is reasonably possible.\u201d<\/p>\n

The time it takes to resign varies by jurisdiction, the spokesman said, and some authorities require the agent to remain in place to prevent interference with an investigation.<\/p>\n

The spokesman added that Mossack Fonseca has \u201cnever knowingly allowed the use of our companies by individuals having any relationship with North Korea, Zimbabwe, Syria and other countries\u201d that have been listed as sanctioned. If it did discover it had unknowingly represented a company that was being used for unlawful purposes, he said, the law firm would take \u201cany measures that are reasonably available to us\u201d to deal with the issue.<\/p>\n

Fuel for war<\/em><\/strong><\/p>\n

OFAC, the US Treasury Department\u2019s blacklist enforcement unit, announced a series of sanctions in 2014 barring US citizens from dealing with individuals and companies suspected of supporting the Syrian regime.<\/p>\n

One of the companies was Pangates International Corporation Limited, a petroleum products specialist headquartered in the United Arab Emirates that had been a Mossack Fonseca customer for more than a decade.<\/p>\n

OFAC put Pangates on its blacklist in July 2014, charging that Pangates had supplied the Syrian government with 1,000 metric tons of \u201cavgas\u201d \u2014 aviation fuel necessary to operate military aircraft.<\/p>\n

\u201cCertainly any armed Syrian Air Force aircraft will be using\u00a0avgas,\u201d said Jane\u2019s Defence Weekly Europe Editor Nick de Larrinaga.<\/p>\n

Pangates is part of the Abdulkarim Group, a sizeable Syrian company with offices in Damascus. OFAC also sanctioned two other Mossack Fonseca clients with alleged ties to the Abdulkarim Group or its directors \u2014 Maxima Middle East Trading Co and Morgan Additives Manufacturing Co.<\/p>\n

In addition, it sanctioned two Syrian citizens linked to the companies.<\/p>\n

OFAC identified Ahmad Barqawi as general manager of Maxima Middle East Trading Co. and Wael Abdulkarim as Pangates\u2019 managing director. It said Wael Abdulkarim had \u201cworked to arrange numerous shipments of base oils and aviation gasoline to Syria.\u201d<\/p>\n

In June 2014, Pangates, Maxima and the Abdulkarim Group worked with a Russian oil and gas firm to obtain oil destined for Syrian government-controlled refineries, according to OFAC.<\/p>\n

A representative of Morgan Additives told ICIJ that the basis of its blacklisting by OFAC was \u201cin error.\u201d<\/p>\n

Barqawi resigned as the company\u2019s manager before the OFAC listing and Wael Abdulkarim resigned when the sanctions were announced, the representative said. Morgan Additives is not currently owned or controlled by Wael\u00a0Abdulkarim, the representative added.<\/p>\n

None of the other companies or individuals sanctioned in connection with the Syrian air war responded to repeated requests for comments via email, registered mail and telephone.<\/p>\n

In a previous comment to media, Pangates acknowledged delivering oil to Syria but claimed not to know about its ultimate destination or purpose.<\/p>\n

\u201cWe are selling to non-Syrian firms who are not on the EU and US sanctions list,\u201d the company told Reuters. “We do not know exactly who is finally using the fuel but according to our information the product is used for civil humanitarian purposes.”<\/p>\n

The secret files show Pangates\u2019 relationship with Mossack Fonseca began in 1999, when the law firm incorporated Pangates in Niue, the Pacific island nation where Mossack Fonseca once had exclusive rights to incorporate offshore companies.<\/p>\n

When authorities in Niue shut down the island\u2019s offshore registration industry in the wake of complaints about money laundering, Pangates moved to Samoa and, in 2012, to Seychelles. At one point, the company valued itself at $7.5-million.<\/p>\n

Nine months after the US first sanctioned Pangates, Mossack Fonseca was still handling the company\u2019s paperwork, certifying that it was a Seychelles company in good standing. Later still, Mossack Fonseca helped Pangates close its Seychelles business and sent it a bill for $1\u00a0100 to cover its fee for that service. It asked Pangates to pay online or through Mossack Fonseca\u2019s bank account in New York.<\/p>\n

It was not until August 2015 \u2014 more than a year after sanctions against Pangates had been announced \u2014 that Mossack Fonseca acknowledged the blacklisting and scrambled to find ownership details, utility bills or any other identifying information from the Dubai administrators of Pangates and Maxima Middle East. Mossack Fonseca finally reported that the companies were on international sanctions lists to Seychelles regulators in August 2015.<\/p>\n

Assad\u2019s cousin\u00a0<\/em><\/strong><\/p>\n

The files show that Mossack Fonseca also worked with Rami Makhlouf, a cousin of Syria\u2019s dictator, Assad. As early as 2008, US Treasury officials had flagged Makhlouf as a \u201cregime insider\u201d who \u201cimproperly benefits from and aids the public corruption of Syrian regime officials.\u201d Treasury froze Makhlouf\u2019s US assets and banned US companies or people working with him. Later that year, in a widely reported announcement, the US Treasury Department blacklisted some of his companies.<\/p>\n

Although he had long been a customer of Mossack Fonseca, the firm\u2019s emails at the time record no mention of the sanctions. That changed in 2010, when British Virgin Island authorities demanded information on Drex Technologies S.A., a company owned by Makhlouf that Mossack Fonseca had incorporated ten years earlier. Mossack Fonseca employees looked for \u2014 and quickly found \u2014 information that had circulated widely for years, including details of Makhlouf\u2019s political ties and alleged smuggling.<\/p>\n

At this point, the files reveal, Mossack Fonseca\u2019s head of compliance wanted to drop Makhlouf immediately. But one of Mossack Fonseca\u2019s partners resisted, hoping the firm would not lose the business.<\/p>\n

That partner, Chris Zollinger, wrote colleagues that \u201cthere are allegations (rumors), but not any facts or pending investigations or indictments.\u201d He noted a colleague\u2019s earlier notes from a conversation between Mossack Fonseca and HSBC, the UK-headquartered bank that served as Makhlouf\u2019s financial manager, in which the bank assured the law firm that HSBC\u2019s Geneva and London offices \u201cknow about Mr. Makhlouf and that they are comfortable with him.\u201d<\/p>\n

If HSBC didn\u2019t have an issue with him, Zollinger said, \u201cthen I think we can also accept him.\u201d<\/p>\n

However, he ultimately agreed with dropping the firm after further urging from his colleagues and mounting official investigations into Makhlouf\u2019s business empire.<\/p>\n

Zollinger recently told S\u00fcddeutsche Zeitung: \u201cIn retrospect my comment in the e-mail was wrong, which I regret.\u201d He added that, as registered agent, Mossack Fonseca had \u201cno influence on the transactions or the business of the company\u201d linked to Makhlouf.<\/p>\n

Makhlouf did not respond to requests for comment.<\/p>\n

\u201cThis is dangerous!\u201d<\/p>\n

Mossack Fonseca took a more aggressive attitude toward Petropars Limited, a company controlled by the Iranian government that was sanctioned by the US Treasury in June 2010.<\/p>\n

The relationship between Petropars and Mossack Fonseca began in 1998, nearly 20 years after the Iranian revolution, when Mossack Fonseca incorporated Petropars in the British Virgin Islands.<\/p>\n

Petropars was known to watchers of Iranian politics as an intermediary between foreign companies and Iran\u2019s oil ministry. With offices in Dubai and London, it was also a player in the development of Iran\u2019s multibillion-dollar South Pars natural gas field.<\/p>\n

Three years before Mossack Fonseca began work for Petropars, President Bill Clinton, citing Iranian support for terrorism and its quest for weapons of mass destruction, banned US involvement with Iranian oil. Not bound by the US prohibition, Mossack Fonseca helped Petropars to issue shares in a Tehran-based oil investment company in 1998.<\/p>\n

Petropars\u2019 links to the Iranian government were highlighted as early as 2001 when Iranian authorities investigated and then charged board members of the company in connection with \u201cirregularities\u201d in lucrative gas contracts. By 2002, the news had made headlines in The Economist and The New York Times.<\/p>\n

The 2001 corruption allegations \u201cput Petropars on the map,\u201d says Georgetown University political scientist Paasha Mahdavi.\u00a0 \u201cEven before any of the allegations emerged, it wouldn\u2019t have required too much digging to know this is a company whose majority, at the very least, is controlled by government officials.\u201d<\/p>\n

Petropars remained a customer of Mossack Fonseca until 2010, when Jurgen Mossack, one of the firm\u2019s founders, learned that his company\u2019s British Virgin Islands post office box had been listed as Petropars\u2019 address in OFAC\u2019s blacklist entry for the company.<\/p>\n

After an internet search, a company employee in the BVI office, Marcia DaCosta, recommended that the firm cut Petropars loose.<\/p>\n

\u201cIt is a decision that may be 12 years too late,\u201d added another employee, Daphne Durand, \u201cbut one that must be taken in light of the circumstances.\u201d<\/p>\n

The firm\u2019s founders \u2014 Mossack and Ram\u00f3n Fonseca \u2014 agreed.<\/p>\n

\u201cThis is dangerous!\u201d Mossack emailed. \u201cEverybody knows that there are United Nations sanctions\u00a0against Iran, and we certainly want no business with regimes and individuals from such places! Not because of OFAC, but out of principle. Anybody having had to do anything with this company, at absolutely all levels, should have realised immediately that the names associated with it were Iranian names. A red flag should have been raised immediately.\u201d<\/p>\n

The firm resigned as registered agent of Petropars in October 2010. Mossack blamed the London office, which had processed Petropars\u2019 paperwork and should have conducted what the financial industry calls \u201cdue diligence\u201d \u2014 checking on customers\u2019 identity and making sure they\u2019re not involved in questionable activities.<\/p>\n

\u201cIt would appear Mossack Fonseca UK are not doing their Due Diligence thoroughly (or maybe none at all),\u201d Mossack said.<\/p>\n

Early this year, as a result of the deal that lifted economic sanctions against Iran in exchange for that country’s disabling key parts of its nuclear program, the United States removed Petropars and other Iranian-controlled oil companies from the OFAC blacklist.<\/p>\n

The companies they keep<\/em><\/strong><\/p>\n

The files show that despite repeatedly admitting internally that its existing checks and balances had failed, Mossack Fonseca did not introduce a comprehensive policy to comply with OFAC sanctions rules until July 2015.<\/p>\n

\u201cGlobal companies that don\u2019t have the appropriate compliance systems in place allow actors like terrorist organizations, drug cartels and human traffickers to continue operating and to engage in illicit and damaging behavior,\u201d said Eric Lorber, senior associate at the Financial Integrity Network who advises financial institutions on complying with OFAC. \u201cBetween 2005 and 2007 is when any global company, especially one with interests in the US, should have really been paying attention. That\u2019s really when OFAC put the world on notice.\u201d<\/p>\n

“It’s like the accountant of Al Capone \u2014 a firm that clearly has chosen to service rogue regimes,\u201d said Emanuele Ottolenghi, senior fellow with the Foundation for the Defense of Democracies in Washington, D.C., commenting not on Mossack Fonseca, which was not named at the time of the conversation, but on a description of its practices.<\/p>\n

An OFAC spokeswoman declined to comment for this story, saying it is OFAC\u2019s policy to not talk about current or future investigations.<\/p>\n

In 2012 \u2014 years after Mossack Fonseca\u2019s first brushes with sanctioned companies \u2014 the firm audited its London office. The final report concluded the U.K. office had \u201cno procedure in place\u201d for handling high-risk politicians, family and associates and \u201csearches using search engines are not being conducted\u201d to screen potential clients.<\/p>\n

Audits of Mossack Fonseca offices in Singapore, Thailand, Brazil and Dubai faulted them on poor record keeping, background checks and procedures for handling politicians, family and friends.\u00a0 Each office scored poorly across every measure of performance, receiving ratings of \u201cunsatisfactory\u201d or \u201croom for improvement,\u201d which indicated either \u201cserious failings\u201d or \u201csome weaknesses.\u201d<\/p>\n

The Dubai office, which represented Pangates and other companies sanctioned for aiding Syria\u2019s air war, was rated \u201cunsatisfactory\u201d on every measure. Basic internet searches to check out customers\u2019 backgrounds were not conducted, the audit said.<\/p>\n

In 2009, for example, the firm admitted in internal communications that it had incomplete records on a company later sanctioned for \u201cmanaging millions of dollars of transactions in support of the North Korean regime\u2019s destabilizing activities.\u201d<\/p>\n

Also in 2009, Mossack Fonseca ended its relationship with Zimbabwean businessman John Bredenkamp.<\/p>\n

Bredenkamp, on the firm\u2019s books since 1997, had been described in 2002 by a United Nations expert panel as \u201cexperienced in setting up clandestine companies and sanctions-busting operations.\u201d In 2008, months before Mossack Fonseca cut ties, Bredenkamp was sanctioned by OFAC for allegedly being a \u201ccrony\u201d of Zimbabwe dictator Robert Mugabe and a \u201cwell-known Mugabe insider.\u201d<\/p>\n

Bredenkamp did not respond to requests for comment, but he has consistently denied allegations concerning him and his companies and has denied having supported President Mugabe. In 2012, Bredenkamp successfully overturned European Union sanctions against him and his companies.<\/p>\n

One company, Tremalt Limited, purchased equipment for armies in the Democratic Republic of Congo, the United Nations alleged. It took seven years before a Mossack Fonseca employee reported internally that an Internet search implicated a separate company the law firm said was owned by Bredenkamp \u201cin a series of allegations concerning arms deals.\u201d<\/p>\n

The files also show that in April 2011, Mossack Fonseca learned that OFAC had accused financiers of Hezbollah \u2014 a Middle East terrorist group that has used child soldiers and fired rockets into populated towns \u2014 of using a Mossack Fonseca shell company.<\/p>\n

The company was reportedly part of a \u201cnetwork linked to terrorism,\u201d the law firm\u2019s compliance chief, Sandra de Cornejo, wrote. It had taken Mossack Fonseca months to notice OFAC\u2019s listing. It cut ties with the company, Ovlas Trading S.A., in May 2011.<\/p>\n

\u201cWhat I do not understand is why the initial Due Diligence did not reveal these issues to begin with!\u201d Jurgen Mossack berated colleagues in an email. \u201cSurely the Due Diligence process is flawed somewhere.\u201d<\/p>\n

Lawyers representing Ovlas Trading said the BVI company was formed for tax-saving reasons as part of a food import and export business. The company has been \u201cmostly dormant,\u201d the lawyers said.<\/p>\n

\u201cAt no time was Ovlas BVI involved in any money laundering, terrorist financing, narcotics, or other illicit activity,\u201d the company\u2019s lawyers said.<\/p>\n

A major international accounting firm conducted a forensic investigation into Ovlas\u2019 business, the lawyers said, and found \u201cno evidence\u201d of any activity described by the US Treasury Department. The company\u2019s owner has \u201cpublicly stated that he has not been and is not a supporter of Hezbollah,\u201c and efforts to have the sanctions lifted are ongoing.<\/p>\n

Mossack Fonseca did have guidelines for sanctions before 2015, including a risk matrix that included pariah states and countries under embargo as well as a \u201cMossfon Black List\u201d of countries that required special attention.<\/p>\n

But the files reveal Mossack Fonseca\u2019s management did not follow up on recommendations that the firm introduce more stringent policies on OFAC screenings. In 2010, in response to the Petropars debacle, Marcia DaCosta, a compliance specialist, had suggested \u201ca comprehensive Compliance Policy is needed in relation to our approach to sanctioned countries and individuals.\u201d<\/p>\n

In a 2015 memo, citing \u201crecent changes in our organization\u201d and \u201cregulatory matters,\u201d Mossack Fonseca announced it would drop 35 potentially risky companies \u201cas soon as possible.\u201d They included businesses purportedly dealing in oil in Belarus and Russia, mobile phones, juice, tomato paste and cheese in the Middle East, investment companies in Uganda and Guinea, shipping in West Africa and real estate in Lebanon and Zimbabwe.<\/p>\n

Mossack Fonseca would not act as the agent for any companies with activities in countries on the OFAC list, such as Sudan and South Sudan, and would be more cautious in other countries subject to limited sanctions, the memo said.<\/p>\n

Several offshore experts said that sanctions enforcers in the US and elsewhere haven\u2019t paid enough attention to offshore middlemen like Mossack Fonseca, despite their key role in creating the companies that enable wrongdoing.<\/p>\n

This is partly because of limited resources available to pursue cases, experts say, according to Daniel Reeves, former lead investigator for the Internal Revenue Service\u2019s offshore compliance initiatives.<\/p>\n

But things can change, Reeves said.<\/p>\n

\u201cThere was a time when people wouldn\u2019t go after banks,\u00a0they wanted to go after their\u00a0customers,\u201d he noted. Since then, investigations targeting banks such as HSBC and UBS produced historic fines punishing them for their work on behalf of criminals, sanctions-busters and tax evaders. \u201cSo maybe the next step is corporate service providers,\u201d he said.<\/p>\n

Frederik Obermaier contributed to this story. Additional reporting by Rozana FM, a Syrian radio station in exile with 70 in-country citizen journalists.<\/p>\n

<\/a>
\nThe amaBhungane Centre for Investigative Journalism provided this story. Like it? Be an amaB supporter<\/a> and help us do more. Know more? Send us <\/em>a tip-off.<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Global law firm\u2019s customers include suspected financiers of terrorism, nuclear weapons proliferators and gunrunners.<\/p>\n","protected":false},"author":2,"featured_media":22368,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-4474","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stories"],"acf":[],"_links":{"self":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4474","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/comments?post=4474"}],"version-history":[{"count":0,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4474\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media\/22368"}],"wp:attachment":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media?parent=4474"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/categories?post=4474"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/tags?post=4474"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}