CHAPTER 7

Two Money-Laundering Cases

Money Laundering in Turkey

Some cases that MASAK has shared with public to increase public’s and authorities’ awareness to such crimes include:

   1.  Historical Artifacts Smuggling

Transfers of large sums within the bank caused the research. MASAK found a criminal organization including 12 people who smuggled $300,000 of valued historical artifact. The sale proceeds were transferred to the criminals’ bank accounts in Turkey. The bank in the country that launderers smuggled the historical artifacts from informed the bank in Turkey about the transfers. During the research related bank accounts were investigated by the authorities. The criminal were caught smuggling historical artifacts and could not present a rational declaration and document about the source of the transfers.

As a result, the authorities decided that $300,000 came from the criminal activity and transferred to the bank accounts to Turkey. The crime was reported to the Public Prosecutor’s Office. The authorities sentenced the criminals and confiscated the financial proceeds.

   2.  Illegal Drug Trafficking

The case is reported by the Security Authorities to MASAK.

A citizen (X) of a foreign country, was involved in drug trafficking. He transferred the money that he obtained from the illegal activity to different bank accounts in many countries including Turkey. MASAK’s investigation revealed that X transferred from $10,000 to $150,000 to 8 different people and 5 companies in Turkey. No documentation was justifying those transfers. As a result of the investigation, the companies and the accounts’ owners were deemed to have sourced their funds from drug trafficking. The case was reported to the Public Prosecutor.

   3.  Receiving Undeserved Tax Refunds from the government

Some people received high sums of money in undeserved tax refunds from the government in the beginning of a fiscal year.

The United States Tax Administration investigated an incident of this kind during a tax audit and reported it to MASAK to investigate the event as a money laundering case. As a result of the investigation, MASAK found that three people, the Invoice maker, the Launderer, and the Restorer, invented an export organization to receive unjust tax refunds from the government.

    •  The Invoice maker provided fake invoices for the export firms in a different city resulting in the undeserved tax refunds. He also received a commission for the fake invoices he supplied to the firms and transferred the commissions to his relatives’ bank accounts.

    •  The Launderer’s role was to open bank accounts on behalf of his relatives’ and his employees’ name to disguise the source of the money that was obtained by a criminal activity.

    •  The last member of the criminal organization was the Restorer who acted as an accountant for the companies within the organization. He purchased a property with the money he gained on behalf of his wife.

As a result of the investigation, the members of the criminal organization were deemed to have received unjust tax refunds and gain illegal income. The criminals launder the earnings through purchasing various movable and immovable properties.

   4.  Gaining proceeds through coercion and intimidation.

A group of people took 10,000 TL 1($3,388 USD), and a car from 6 people using coercion and intimidation. The case was sent for investigation to MASAK as a money laundering case.

They were found to share those illegal proceeds. They also bought a new vehicle for their group with the remaining funds. The crime was detected and referred to the Public Prosecutor’s Office.

Money Laundering in the Lebanese Canadian Bank

Federal Register 2011, the daily journal of the United States Government, provides information on a money laundering case in a Lebanese Canadian Bank.2

    •  Information about the bank:

The bank was located in Beirut, Lebanon and had the network of 35 branches in the same country. The representative office is located in Montreal, Canada. The bank has more than 600 employees and has the eighth largest assets among the other Lebanese banks. The privately owned bank was originally established in 1960 with the name as Banque des Activités Économiques. The financial institution provides a large range of financial and investment services to corporate and retail customers. The value of bank’s total assets in 2009 was more than$5 billion.

In 2013 the Lebanese Canadian Bank agreed to pay $102 million in settlement after an investigation and legal action by the Drug Enforcement Administration and US Treasury and other US government authorities, which found that the Bank was involved in funding Hizbollah and other terrorist organizations and also money laundering for the narcotics community. The US authorities also believed that some of LCB’s senior managers had assisted certain customers a scheme to launder narcotics payments by layering it cashflows related to used car trading between the United States and Africa, from which a share of cashflow was diverted to Hizbollah, but the US Authorities declined to reveal the basis for this claim and it was denied by Hizbollah. On 3 March 2011 it was announced that the bank was to merge with French bank Société Générale. The sale was effected by a transfer of most its assets to Société Générale’s Lebanese unit.

    •  Information about Lebanon:

Lebanon has one of the most important banking sectors within the Middle Eastern region. According to the government treasury’s information, the Lebanese banking system improved its asset quality, sustained sufficient liquidity and capitalization through the years. The major banks within the region also have relationships with U.S. financial institutions. Conversely, currency risks appear on the balance sheets of the banks. Moreover, the unstable political environment of the region creates an inefficient arena for banks to function. The country faces money laundering and terrorist financing activities because of its location and political instability according to U.S. department of States’ Narcotics Control Strategy Report published in 2010. According to the World Bank, 21% of the Lebanese Gross Domestic Product (GDP) in 2009 of approximately $7billion USD is related with trade-based money laundering activities.

In addition to the information above,

    •  Lebanon has some important cash smuggling issues because of no cross-border currency reporting requirements.

    •  Lebanon has not agreed to the UN Convention which includes Suppression of the Financing of Terrorism. However, domestic laws forbid any activity that involves terrorism financing.

    •  Hezbollah, considered as a terrorist organization, which Lebanon calls a political party, is not subject to anti-terrorist financing laws. Consequently, in 1997 the United States government declared Hezbollah a Foreign Terrorist Organization. Moreover, in 2001, the terrorist organization was also designated as Specially Designated Global Terrorist by USA government.

Based on the information about the country and the bank, federal agencies and relevant divisions involved in the investigation of money laundering activities, suspected that the Lebanese Canadian Bank (LCB) was involved in money laundering activities. According to the US Financial Crimes Enforcement Network (FINCEN) report in 2011, money launderers functioning in countries in Europe, South America, Africa, and Middle East have utilized the bank. Apparently, the terrorist organization Hezbollah used the network for financial support to its illegal activities. In addition, the managers of the Lebanese Canadian Bank were aware of this situation and activities.

After revealing such criminal activities, FINCEN discovered that:

   1.  Drugs (Cocaine) are transported from Colombia and Panama to Europe and the Middle East through networks in Africa.

   2.  The funds raised from the drug sales went to Lebanon.

   3.  Money is moved to U. S. currency-based accounts to buy second-hand vehicles from American dealers.

   4.  The used vehicles were sent to Benin and Congo, Africa.

   5.  Finally, money obtained from the sales of the used vehicles went back to Lebanon.

At the end, the dirty money was laundered after the last step was completed.

Criminal activity’s success may occur because of:

    •  Management support,

    •  Failure in internal controls, and

    •  The lack of banking rules application.

The Lebanon Canadian Bank lost its credibility because of its involvement in money laundering. The ownership of this financial institution has changed after the incident.

____________

1Turkish Lira [1 USD = 2.95 Turkish Lira] – August 2016

2Now defunct See: https://en.wikipedia.org/wiki/Lebanese_Canadian_Bank

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