By: John Berthelsen

The US Treasury Department has initiated a wide-ranging campaign against money laundering across the globe and is leaning on governments particularly in Cyprus, Beirut, Singapore and the Gulf states including Dubai in an attempt to stop the flow of billions of dollars that wash through the financial system every day from Russia, Iran and China.

Although planning for the campaign, headed by the department’s Marshall Billingslea, Assistant Secretary for Terrorist Financing and Financial Crime, began during the administration of former US President Barack Obama, the Trump administration is seeking aggressively to stop the flow of illegally gained money from the three countries into UK and French real estate, small German banks and the Gulf states.

It is uncertain how much of the new assertiveness can be traced to the US initiative. A spokesman for the Treasury Department said only that the department is “undertaking initiatives against money laundering in several different countries as part of an ongoing process.”

However, banks from Cyprus to Singapore to the long-standing boltholes for hot cash in the Caribbean are being told to clean up their act or lose access to the Belgium-originated Society for Worldwide Interbank Financial Telecommunication – the SWIFT system, as it is known, through which almost all of the world’s financial transactions travel. Hundreds of billions of dollars a day move through the system, which enables the world’s financial institutions to send and receive secure information about financial transactions.  The SWIFT system has come to dominate the world’s movement of money.

Sources speculate that the US aggressiveness played a role in the demand last week by the UK government, also triggered by the poisoning of the former Russian spy Sergei Skripal and his daughter Yulia, that Russian oligarch Roman Abramovich, the owner of the Chelsea Football Club, explain the source of his vast wealth before he is granted a new UK visa. The UK government has launched a further crackdown on wealthy investors into the UK.  Offshore destinations of illicit funds in the Cayman Islands, Guernsey, Jersey, Gibraltar and Nassau are also under the microscope.

The amount of money spirited out of developing countries is astonishing. The Washington, DC-based NGO Global Financial Integrity, in a 2017 report, estimated that illicit currency flows in and out of the developing world amounted to at least 13.8 percent of total trade, or US$2 trillion, in 2014, the last year for which reliable data were available. An astonishing US$3.97 trillion in illicit funds left China between 2000 and 2011 alone, according to Global Financial Integrity.

Laundered money has been pouring out of Russia for the better part of two decades as oligarchs made rich by the Putin regime have looted a long string of government-linked companies, particularly in oil and gas. The money has gone into expensive homes along the Cote d’Azur in France as well as London, and New York and Beverly Hills in the US. At one point, realtors in New York said roughly 30 percent of condominium sales were going to buyers who listed international addresses including – notably – the family of the now-disgraced former Prime Minister of Malaysia, Najib Razak, as well as Viktor Khrapunov, the former mayor of Almaty, Kazakhstan’s capital city, who has been accused of stealing hundreds of millions of dollars from the country.

With the Trump administration on a rampage against Iran, US authorities are seeking to shut down Iranian funds flowing into Dubai, Bahrain, Kuwait and Qatar as well as banks in Asia including Woori Bank and Industrial Bank of South Korea, according to Bloomberg News Service, which cited documents and testimony on how Iran siphoned US$1 billion from escrow account funds to evade US-imposed sanctions. Other banks that have been hit with compliance lapses included the Agricultural Bank of China, one of the country’s Big Four banks as well as

Songhua Bank of South Korea and Mega International Commercial Bank of Taiwan, according to Bloomberg. 

The campaign to lean on Middle Eastern banks could well cause a liquidity crisis in the region including Dubai and Qatar, two of the region’s biggest banking centers, as well as in Lebanon, equally with Cyprus a repository of laundered funds that have flown into financing of terrorist activities by Hezbollah and other groups.  One source speculated that uncertainty over a liquidity crisis was spurring unsettled emerging markets over the past couple of months, with Argentina again facing crisis.

The problems for Cyprus are enormous.  Stelios Orphanides, writing in the Cyprus Business Mail on May 29, said that there is “increasing concern in the ranks of professionals and entrepreneurs in Cyprus over the impact of stricter anti-money laundering and terrorist financing practices being applied, amid fears that recent US pressure on the islandʼs financial and business service providers to take US sanctions more seriously into account, may have a transformative effect on the economy.”

The problems are exemplified by the notorious FBME Bank, headquartered in Tanzania although at least 90 percent of its business was conducted in Nicosia before it was shut down by the US Treasury Department’s Financial Crimes Enforcement Network, or FinCEN last October after a three-year campaign. The bank, owned by Fadi and Ayoub-Farid Saab, was the repository of funds from such notorious characters as Dmitry Klyuev and Andrei Pavolov, key suspects in the looting of Hermitage Capital, once controlled by William Browder before he was driven out of Russia. Dozens of outlaw organizations allegedly banked at FBME, although the Saabs continue to deny any wrongdoing.

The Hermitage looting and its aftermath resulted in the so-called Magnitsky Act, passed in the US Congress after Sergei Magnitsky, an associate of Browder’s, was beaten to death in a Russian jail while he was attempting to investigate the theft. As a result, a list of top Russian officials were barred from transacting financial business through the SWIFT system.  Natalia V. Veselnitskaya, the Kremlin-backed lawyer who met with Donald Trump Jr. and others in Trump Tower in June of 2016, was attempting to get the Magnitsky Act reversed. That meeting is now a subject of the investigation by Robert Mueller into Russian attempts to subvert the 2016 election that brought Trump to power.

FBME was the subject of a 2016 series of stories by Asia Sentinel that described the alleged laundering of millions of US dollars out of the Indonesia-based Bank Mutiara, formerly known as Bank Century, which was looted by its owner, Robert Tantular, and others during the global financial crisis of 2009.  Bank Mutiara was taken over by the Tokyo-based J Trust financial conglomerate, heavily backed by Nobuyoshi Fujisawa.  J Trust and the Saabs have threatened multiple lawsuits against Asia Sentinel over the stories. Asia Sentinel stands by its reporting.

Another of the primary targets of the campaign is Singapore, which by one report has the equivalent of US$368 billion from Indonesia in its banks – 40 percent of the island republic’s total bank deposits. In one astounding heist, more than  US$13.5 billion was looted from the Indonesian central bank’s recapitalization lifeline to 48 ailing banks during the 1997-1998 Asian financial crisis. As the government poured money into the banks in the attempt to save them, the bankers were stealing it and moving the money to Singapore. 

According to a 2007 Asia Sentinel story, some 18,000 Indonesians described as “rich” live in Singapore. They were said to be worth a combined total of US$87 billion, more than Indonesia’s entire annual government budget at the time.

Indonesia’s Corruption Eradication Commission is said to be investigating the movement of as much as US$1.5 billion from Bank J Trust, the former Bank Mutiara, which was sold to the Japanese financial services corporation J Trust Group. J Trust is heavily backed by Taiyo Pacific Partners, the Washington State-based investment fund whose chief investment officer was Wilbur Ross, now President Donald Trump’s commerce secretary. The Indonesian bank is believed to be connected to some of the country’s most powerful politicians. KPK targets are said to ionclude Boediono, the former central bank governor and vice-presidential running mate of former President Susilo Bambang Yudhoyono.

Others are said to be Rafat Ali Rizvi, a British citizen who at one point faced the possibility of a death penalty for helping to loot Bank Century, the carcass from which Bank Mutiara was fashioned, and Hesham Al Warraq, a Saudi national who was also a major shareholder in the bank. Only Robert Tantular, the president of Bank Century, has been jailed.  

Other countries’ leaders have used Singapore as a piggy bank as well, including Myanmar, whose generals moved millions of stolen funds out of their country into Singapore banks. The Singaporeans were so grateful that in 2009, they named an orchid planted in their spectacular Singapore Botanic Garden for Thein Sein when he paid a visit.  More recently, Singapore cracked down on Swiss banks BSI Bank and Falcon Private Bank and withdrawing their licenses in 2016 for acting as conduits for billions of dollars funneled from the scandal-ridden 1Malaysia Development Bhd. Two other banks – the Singapore-based DBS and the major Swiss bank UBS were hit with heavy fines.