Trends In International Litigation : International Business Lawyer & Attorney : Ed Joffe : Joffe & Joffe Law Firm : Miami, Florida Global Customs & Trade Issues

Mahmoud Reza Banki, a 33 year old management consultant at a major New York consulting firm -- was arrested last Thursday on an Indictment charging him with violating the Iran Trade Embargo and with operating an unlicensed money transfer business between the United States and Iran.

According to the Indictment Banki, a United States citizen and resident of New York, allegedly provided money transmitting services to residents of Iran by operating a "hawala," a type of informal value transfer system in which money does not physically cross international boundaries through the banking system. In the hawala system, funds are transferred by customers to a hawala operator, or "hawaladar," in one country, and corresponding funds, less any fees, are disbursed to recipients in another country by hawaladar associates on that end. Banki allegedly received wire transfers totaling approximately $4.7 million from companies and individuals --located in, among other places, Saudi Arabia, Kuwait, Latvia, Slovenia, Russia, Sweden, the Philippines, and the United States-- in a personal bank account he maintained for this purpose at Bank of America in Manhattan.

Generally, Banki did not know the wire originators personally. He received the funds with the understanding that an equivalent amount of Iranian currency would, in turn, be disbursed to intended recipients residing in Iran. Banki informed an Iran-based co-conspirator when funds had been received, and the co-conspirator then disbursed the funds, less any fees, in Iran. Banki allegedly used certain of the funds transferred into his Bank of America account to make joint investments in the United States with the Iran-based co-conspirator. Among other things, Banki used the funds to purchase a $2.4 million condominium in Manhattan; to invest in securities for his own benefit and that of the co-conspirator; and to make payments on his credit card accounts, including approximately $55,000 in one month alone in the summer of 2007.

BANKI is charged with violating the International Emergency Economic Powers Act( IEEPA), together with Executive Orders and United States Department of Treasury regulations; conducting an unlicensed money transmitting business; and conspiracy to commit those two crimes. If convicted, BANKI faces a maximum sentence of five years in prison on each of the conspiracy and unlicensed money transmitting counts, and 20 years in prison on the IEEPA violation count.

This case is being handled by the Office's Complex Frauds and Asset Forfeiture Units. Assistant United States Attorneys E. Danya Perry and Jason Hernandez are in charge of the prosecution. The charges and allegations contained in the Indictment are merely accusations, and the defendant Mahmoud Reza Banki is presumed innocent. 

Earlier today theNew York Post reported that Mr. Banki was denied bail.

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Nathan Vardi reported in Forbes.com that  Credit Suisse reached an agreement with the U.S. Government and the Manhattan District Attorney’s Office to pay $536 million in monetary penalties, the largest of its kind, in connection with violations of the International Emergency Economic Powers Act and New York State law.

According to the U.S. government and the Manhattan District Attorney's Office, Credit Suisse became one of the main conduits for Iranian banks and financial firms to gain access to the U.S. banking system.  Credit Suisse first started dealing with rogue regimes that were sanctioned by the U.S. government in 1986, when the Zurich-based bank began to assist Libyan customers in evading sanctions by executing payment orders without stating their names, according to U.S. authorities. Later Credit Suisse started to refine its methods, processing payments for clients in sanctioned countries with payment messages that concealed the identity of customers by using false codes. Credit Suisse did this kind of business for other clients in countries that faced U.S. sanctions, including Sudan, Libya, Burma, Cuba, and Charles Taylor's Liberia, the Treasury Department says. But Credit Suisse's biggest rogue clients were in Iran, who as the years went on had to deal with enhanced U.S. sanctions. Credit Suisse employed elaborate procedures for altering payments to hide the involvement of sanctioned Iranian clients from U.S. banks involved in transactions, including stripping out the names of sanctioned parties from payment instructions. Upon request, Credit Suisse not only omitted Iranian bank customer names and identification codes from payment messages sent to U.S. correspondent banks, the Swiss bank also used cover payment messages, eventually doing so for Iranian clients 95% of the time. Then Credit Suisse's employees went into overdrive. With the global financial system cracking down on illicit transactions, Credit Suisse's "specially designated payment team," as it liked to call itself, started to manually review all payments involving Iran before they were sent to U.S. financial institutions, removing any Iranian reference. The time-intensive method was then marketed to sanctioned clients as a special service and subsequently improved with several additional procedures in the face of new money laundering regulations. Credit Suisse provided clients with a pamphlet explaining how they could evade detection.

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