Jyske Bank, Denmark’s third-largest by assets, held several accounts and completed hundreds of transactions for Rifaat Assad, an uncle of Syrian President Bashar Assad, over the course of a decade despite clear indications of egregious illicit finance, legal documents show.
On June 17, six years after the anti-graft advocacy group Sherpa lodged a complaint against him, a court in Paris sentenced Assad, 82, to four years in prison for embezzling and laundering Syrian state funds into Europe to build an €800 million real estate empire that includes €90 million of properties in France, €695 million in Spain, €10 million in the U.K. and assets still to be evaluated in Gibraltar.
Investigators identified 12 financial institutions as handling Assad’s funds, including Societe Generale and BNP Paribas in France, RCB Bank and Bank of Cyprus, SBS, which merged with UBS in 1998, Audi Bank and Banque Cantonale de Geneve in Switzerland, and Wurttemberger Hypo and Deutsche Bank in Germany.
But another institution is omnipresent throughout the 99-page sentencing document: Danish lender Jyske Bank’s branch in Gibraltar. Founded in 1989, the branch, which employs almost 100 staff, served Rifaat Assad’s family and at least seven of their firms: Sounoune, Cesara Ltd, Cesara Holdings, Eoma Holdings Ltd, Lanya Ltd, Biditis Ltd, and Europort International.
The sentencing document includes a list of red flags related to these accounts that should have drawn Jyske Bank’s suspicion and compelled the bank to act accordingly.
The conviction marks a “turning point” for cases of ill-gotten gains, said Laura Rousseau, head of the illicit-finance program at Sherpa, but also exposes a general lack of due diligence among the legal and financial industries, especially at Jyske Bank, which for years apparently ignored what one AML specialist described as “an accumulation of striking red flags.”
From the beginning of his relationship with Jyske Bank, Assad failed to demonstrate how he managed to amass his fortune after leaving Syria in 1984 under duress following a failed coup against his brother, Hafez Assad, whom he had helped take power in 1970.
The 82-year-old defendant told the court that his fortune was gifted to him by Saudi Arabia’s King Abdullah bin Abdulaziz al-Saud but provided evidence that only $40 million was the product of the now-deceased monarch’s generosity towards him.
French investigators referenced in the sentencing document instead sourced most of his money back to a $200 million embezzlement from the Central Bank of Syria and $100 million “loan” provided by Libya, whom Syria later reimbursed through a trade-based misinvoicing scheme.
“All the companies created or bought by Rifaat Assad to manage his real estate assets were set up in tax havens that were completely opaque … and without economic justification,” according to the sentencing document. “This behavior reveals an assumed willingness to conceal.”
Investigators also linked more than 30 firms, shell companies and trusts domiciliated in Curacao, Panama, Lichtenstein, Cyprus, the British Virgin Islands, Guernsey, the Bahamas, Luxembourg and Gibraltar back to Assad, who used them to manage his real estate assets.
“There were serious mistakes committed when these bank accounts were opened, and after they were, the bank didn’t do its job nor want to know more,” Luc Retail, former head of AML compliance at La Banque Postale, told ACAMS moneylaundering.com.
‘Striking red flags’
Even without questioning the origin of Rifaat Assad’s fortune or his predilection for doing business behind companies in financially secretive jurisdictions, Jyske Bank likely would have known he was not a typical client when he opened his first account with the lender in 2006.
In addition to being the Syrian president’s uncle, Rifaat Assad for decades has also carried the nickname, “the butcher of Hama,” for allegedly commanding the militia that massacred as many as 40,000 people, mostly civilians, in Hama, Syria, in 1982.
“Even if he was not considered a PEP [politically exposed person] at this time, he should have been treated as high-risk, triggering enhanced due diligence and ongoing monitoring,” said Jennifer Hanley-Giersch, a manager at Berlin Risk. “It’s not only about money laundering, but also reputational damage—do you really want to have the ‘butcher of Hama’ on your books?”
In early 2010, suspicious activity prompted French lender Societe Generale to close the account of Rifaat Assad’s wife, Salma Makhlouf, after staff flagged withdrawals of €100,000 in cash each month from funds sent by a Gibraltar company, Eoma Holdings, in regular installments.
Between 2002 and 2006, a total sum of €5 million was withdrawn from the account, according to the French lender’s estimates.
Rifaat Assad’s network responded to the closure by sending “guards” to Gibraltar to withdraw the remaining cash and bring it back in amounts less than €10,000 per person to avoid having to declare the funds to customs authorities, a former assets manager told investigators.
In 2008, the network began withdrawing similar sums of cash from Jyske Bank.
“He obviously was not going to spend this money in Gibraltar, he was going to take it out of this jurisdiction,” Retail, the former compliance officer at La Banque Postale, told moneylaundering.com. “The duty to advise should have led the bank to propose a [wire] transfer, and the client’s refusal would have triggered suspicion.”
Jyske Bank also apparently failed to stay abreast of any negative news, a common element of know-your-customer processes.
In May 2016, more than two years after Sherpa, the anti-graft group, filed a complaint in France that resulted in a barrage of negative media coverage of Assad, the lender opened an account for Cesara Ltd Gibraltar, listing him as the beneficial owner.
Other details of the company on their own could have raised suspicion: its director, Ginette Louise Blondel, and its sole designated shareholder, Fiduciary Trust Limited, both appeared several times in leaked offshore-banking records published three years prior by the International Consortium of Investigative Journalists.
“The accumulation of striking red flags should have led the bank to double-check these accounts on a regular basis,” Hanley-Giersch said. “But that obviously was not the case, otherwise the relationship would not have lasted that long.”
Seven months after opening an account for Cesar Ltd Gibraltar, Jyske Bank rejected a request for information from Spain’s financial intelligence unit for data on an unnamed foreign client with substantial real estate investments on the Costa del Sol.
The profile matched Assad, according to the sentencing document, but Jyske Bank withheld cooperation after concluding that it only obligations to disclose private transactional and customer data to Gibraltar’s FIU.
Six years later, in April 2013, the Court of Justice of the European Union forced the bank to comply with the Spanish FIU’s request and pay a €1.7 million penalty.
“Even if the bank could argue that it is legally not obliged to answer questions from Spain, it cannot ignore that something fishy was going on,” Retail said. “This request for information should have lead the bank to take action and carry out an internal review for this type of profile.”
The bank finally took action by freezing a transaction and probably filing a suspicious activity report sometime after May 30, 2017, the day that French authorities moved to seize Assad’s properties in the U.K. He had been under criminal indictment in France since June 2016.
“Jyske Bank has no comments on existing, prior or alleged customers,” Jens Lauritzen, director of the lender’s private banking operations, told moneylaundering.com in an email. “[Jyske Bank] lives up to the law and regulations in all jurisdictions, and investigates its existing and prospective customers in accordance with the above, no matter what status they might have.”
See nothing, say nothing?
In November 2017, Denmark’s Financial Supervisory Authority inspected Jyske Bank’s compliance program and a year later disclosed findings that it had fallen short of mitigating its high exposure to money laundering.
The FSA consequently ordered Jyske to update its risk assessment and AML policies after finding that the lender “lacks sufficient certainty that its foreign entities comply with local legislation and that the bank has an overview of the group’s total money laundering risk.”
The regulator, which is now dealing with the misbehavior of Denmark’s largest lender, Danske Bank, in the Baltics, did not impose a fine on Jyske Bank, but disclosed plans this month to require that high-level compliance officers have a minimum of five years’ AML experience.
Jyske Bank finalized the sale of its Gibraltar subsidiary in April. According to the lender, the decision had nothing to do with the Rifaat Assad case and “was made for strategic reasons” involving its domestic market, “with property finance as the driver.”
Financial institutions were not alone in enabling Rifaat Assad and his relatives, according to the sentencing document, which assigns ethical, if not legal, culpability to a real estate assets manager and an accountant in France, and lawyers in Luxembourg, Switzerland and the U.K.
Stratego Trust, a domiciliary firm in Luxembourg, provided services to five of his companies and continued to do business with the Assad corporate network as recently as June 2018, only five years after Sherpa filed its first complaint in France.
Contact Gabriel Vedrenne at firstname.lastname@example.org
|Topics :||Anti-money laundering , Counterterrorist Financing , Know Your Customer|
|Document Date:||June 29, 2020|