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Chinese Metals Dealer Indicted for Dodging Sanctions in Iranian Weapons Deals
By Matt Squire , MoneyLaundering.comNew York state prosecutors charged a blacklisted Chinese metals dealer Tuesday with illegally circumventing U.S. economic sanctions through shell companies to utilize Manhattan banks.
Li Fang Wei and his Dalian, China-based company Limmt Economic Trade Co. conducted dozens of illegal transactions between November 2006 and September 2008 with New York banks, according to the 118-count indictment filed by the Manhattan District Attorney’s office. The transactions involved deals to further Iran’s purported nuclear weapons program, according to the indictment.
The transactions with Limmt, which was blacklisted by the U.S. Treasury Department in June 2006, involved at least six New York banks that processed the money movements based on fraudulent information provided by the Chinese firm, according to the indictment.
“Our banks have high standards and sophisticated systems to stop these transactions, but this conduct was specifically designed to defeat their systems,” said Manhattan District Attorney Robert Morgenthau, in a statement.
The Bank of New York Mellon, Citibank, JPMorgan Chase & Co., Wachovia Bank, Bank of America and American Express Bank, Ltd. cleared wires for shell companies run by the metals dealer, according to the indictment. In a statement, Morgenthau’s office thanked the compliance departments of the banks and London-based Standard Chartered Bank.
Calls to the financial institutions seeking comment were not returned by press time. A spokesperson with Morgenthau’s office declined to clarify the extent that the banks cooperated in the investigation.
Wire payments cleared by the U.S. banks involved a group of Chinese banks that held accounts for Limmt front companies, according to the indictment. The Manhattan D.A.’s office said Tuesday that it was investigating the Chinese banks over their role in the purported scheme.
The facts of the D.A.’s indictment shows how there is little that a bank can do to identify sanctioned entities using false names and front companies when screening for individuals and companies blacklisted by the Treasury Department’s Office of Foreign Assets Control (OFAC), said David Caruso, managing director of Dominion Advisory Group, a consulting firm in Centreville, Va.
“Mr. Morgenthau has clearly identified the glaring weakness in the OFAC sanctions program,” said Caruso. “The question remains how many other people on the OFAC list are able to do what this Chinese company did and go undiscovered.”
In 2006, the U.S. Treasury Department banned U.S. companies from dealing with Limmt over the company’s purported selling of tungsten and high-strength steels to Iranian military arm, the Defense Industries Organization (DIO), according to court documents. Such materials are used in both commercial and military applications, but the use of shell companies leaves “not much doubt that the use is for weapons,” said Morgenthau, in a statement.
Since its sanctions designation, the Chinese company has continued to sell the material through aliases and fronts, working at times with a number of DIO subsidiaries established by the Iranian government to buy and make weapons systems, according to court documents.
In conjunction with the indictment, OFAC designated Iranian subsidiaries Amin Industrial Group, Khorasan Metallurgy Industries, Shahid Sayyade Shirazi Industries and Yazd Metallurgy Industries, several of the aliases allegedly used by Limmt and Li.
The Manhattan D.A.’s office was made aware of the transactions between DIO and Limmt as part of its investigation into Iranian money illegally being funneled through U.S. banks, according to a report in The New York Times.
Morgenthau said in a statement that the Limmt case parallels his office’s investigation into U.K.-based Lloyds TSB Bank’s stripping of data from wire transactions with blacklisted Iranian banks in order to avoid detection by compliance departments. On January 9, Lloyds agreed to pay $350 million as part of a deferred prosecution agreement with U.S. Justice Department and Morgenthau’s office to settle the charges.
The prosecutor office has said that its investigation into Lloyds also outgrew from its investigation into the illegal movement of Iranian money.
In 2006, Morgenthau’s office began an investigation into the relationship between the Iranian government and the Alavi Foundation and Assa Corp., two New York companies that owned 650 Fifth Avenue in Manhattan. The U.S. Treasury and Justice departments seized the assets of Assa Corp. on December 17 for allegedly serving as a front company for blacklisted Iranian financial institution Bank Melli.
Li Fang Wei and his Dalian, China-based company Limmt Economic Trade Co. conducted dozens of illegal transactions between November 2006 and September 2008 with New York banks, according to the 118-count indictment filed by the Manhattan District Attorney’s office. The transactions involved deals to further Iran’s purported nuclear weapons program, according to the indictment.
The transactions with Limmt, which was blacklisted by the U.S. Treasury Department in June 2006, involved at least six New York banks that processed the money movements based on fraudulent information provided by the Chinese firm, according to the indictment.
“Our banks have high standards and sophisticated systems to stop these transactions, but this conduct was specifically designed to defeat their systems,” said Manhattan District Attorney Robert Morgenthau, in a statement.
The Bank of New York Mellon, Citibank, JPMorgan Chase & Co., Wachovia Bank, Bank of America and American Express Bank, Ltd. cleared wires for shell companies run by the metals dealer, according to the indictment. In a statement, Morgenthau’s office thanked the compliance departments of the banks and London-based Standard Chartered Bank.
Calls to the financial institutions seeking comment were not returned by press time. A spokesperson with Morgenthau’s office declined to clarify the extent that the banks cooperated in the investigation.
Wire payments cleared by the U.S. banks involved a group of Chinese banks that held accounts for Limmt front companies, according to the indictment. The Manhattan D.A.’s office said Tuesday that it was investigating the Chinese banks over their role in the purported scheme.
The facts of the D.A.’s indictment shows how there is little that a bank can do to identify sanctioned entities using false names and front companies when screening for individuals and companies blacklisted by the Treasury Department’s Office of Foreign Assets Control (OFAC), said David Caruso, managing director of Dominion Advisory Group, a consulting firm in Centreville, Va.
“Mr. Morgenthau has clearly identified the glaring weakness in the OFAC sanctions program,” said Caruso. “The question remains how many other people on the OFAC list are able to do what this Chinese company did and go undiscovered.”
In 2006, the U.S. Treasury Department banned U.S. companies from dealing with Limmt over the company’s purported selling of tungsten and high-strength steels to Iranian military arm, the Defense Industries Organization (DIO), according to court documents. Such materials are used in both commercial and military applications, but the use of shell companies leaves “not much doubt that the use is for weapons,” said Morgenthau, in a statement.
Since its sanctions designation, the Chinese company has continued to sell the material through aliases and fronts, working at times with a number of DIO subsidiaries established by the Iranian government to buy and make weapons systems, according to court documents.
In conjunction with the indictment, OFAC designated Iranian subsidiaries Amin Industrial Group, Khorasan Metallurgy Industries, Shahid Sayyade Shirazi Industries and Yazd Metallurgy Industries, several of the aliases allegedly used by Limmt and Li.
The Manhattan D.A.’s office was made aware of the transactions between DIO and Limmt as part of its investigation into Iranian money illegally being funneled through U.S. banks, according to a report in The New York Times.
Morgenthau said in a statement that the Limmt case parallels his office’s investigation into U.K.-based Lloyds TSB Bank’s stripping of data from wire transactions with blacklisted Iranian banks in order to avoid detection by compliance departments. On January 9, Lloyds agreed to pay $350 million as part of a deferred prosecution agreement with U.S. Justice Department and Morgenthau’s office to settle the charges.
The prosecutor office has said that its investigation into Lloyds also outgrew from its investigation into the illegal movement of Iranian money.
In 2006, Morgenthau’s office began an investigation into the relationship between the Iranian government and the Alavi Foundation and Assa Corp., two New York companies that owned 650 Fifth Avenue in Manhattan. The U.S. Treasury and Justice departments seized the assets of Assa Corp. on December 17 for allegedly serving as a front company for blacklisted Iranian financial institution Bank Melli.