https://www.asiasentinel.com/econ-business/fbme-bank-help-porn-ring-launder-money/

Cyprus Bank Said to Help Porn Ring Launder Money - Asia Sentinel August 11, 2017

The head of the credit card division of the notorious Tanzania-based FBME Bank allegedly helped an international child pornography ring launder money through the bank’s Cyprus unit, according to a 52-page privileged and confidential report prepared by the international investigations firm Kroll International.

The Kroll report, which was made available to Asia Sentinel, was prepared for the multinational law firm DLA Piper UK to investigate the charges against the Cyprus branch of FBME on behalf of the Cyprus Central Bank. It alleges that in addition to facilitating payments for child pornography, FBME’s credit card unit, headed by Michel Norbert Saab, helped an Iranian-born US citizen set up a bewildering array of shell companies to engage in a wide variety of shadowy operations and to evade compliance issues globally.

One of the companies, CE Cash, was linked to more than 19,000 active domain names which appear to peddle adult entertainment and “neutraceuticals,” or suspect health supplements. Other scams were tied to online dating sites in which customers’ credit cards were charged and they were unable to recoup their money.

As Asia Sentinel reported in July, the Cyprus unit of FBME allegedly has among its depositors and transferees an extensive list of illicit international operators at the margins of the global financial system including the Russian Mafia, allegedly backed by Russian President Vladimir Putin, the Yakuza, Indonesian, Japanese and Thai money launderers, Somali pirates, phishing scams, international drug syndicates and manufacturers of sarin nerve gas for Syrian President Bashir Assad. Hezbollah, the Shi’ite organization labeled a terrorist group, is believed to have routed its financial operations through shell entities found in the bank’s 6,500 accounts.

According to the Kroll report, senior management of FBME, including Michel Saab, collaborated with third parties to launder the proceeds of potentially illegal activity from 2010 until the bank was placed under special administration by the Cyprus Central Bank in July of 2014.

As the report indicates, funds to facilitate the child pornography ring were systematically channeled through fake merchant accounts “to disguise high fraud ratios from detection by Visa and MasterCard.” An Iranian-American US citizen named Hamid Reza Seyed Akhavan, known as Ray, who is said to be based in California. in the name of an entity called Medina Networks, appears to be deeply involved as a close friend of Michel Saab.

“While Kroll was not able to obtain visibility of the source of all the funds which were flowing through this scheme, the network of associates linked to Akhavan were found to have links to online pornography, dating scam websites, fraudulent websites selling dubious health supplements and gambling,” the report states. “Furthermore the lack of transparency and frequent large movements between accounts held by numerous shell companies in often offshore jurisdictions are characteristic of money laundering activity.”

The Kroll operatives examined information drawn from laptops, personal computers, “thin client computers” and email boxes for Michel Saab, the senior vice president of FBMECS (Card Services) Theo Savvides, Guy El-Khoury, the CEO of the card services unit, and Tatiana Ermilova, the operations manager at FBMECs.

Akhavan’s brother, Ardeshir, is co-director of a company called TCR Marketing LLC, which “is involved in web services and marketing, including hosting of pornographic content” from an address in Calabasas, California. Kroll confirmed that the report, registered to the Akhavan brothers, “was found to be linked to a series of pornographic and gambling URLs and was a defendant in a criminal case relating to internet spamming in 2006, which settled for US$500,000.”

One particularly damning email between Michel Saab and Akhavan refers to an individual identified only as “DS,” Saab writes. “I wanted to thank you for your offer to help settle our issue with DS. Just to give you a little color into the background of the matter, I am willing to settle at a reasonable rate with DS (say 35 percent – which is reasonable given that the money they are claiming is from aggregating child porn and other nefarious activities.) To tell you the truth I am in extremely guilty conscience about even settling with DS given that I know he knowingly facilitate (sic) child pornography – a crime that should be dealt with through a court system, and result in an indefinite incarceration. On the other hand I also have an immediate responsibility to over 100 employees working at FBME Card Services and I need to focus on business development.”

In a bid to escape “know-your-customer” disclosure regulations, FBMECS used an incorporation agent to create 16 new companies for the Akhavans although, according to the emails, “these companies…actually never had a bank account opened at FBME. That is because we could not provide all of the specific and much more strict KYC documents for the shareholders that were required to open the bank account.”

In addition, the report shows, Michel Saab helped Akhavan and his associates set up another 27 shell accounts known as UBOs (ultimate beneficial ownerships) in the UK to “bypass possible compliance issues.”

The Tanzanian parent FBME, which is owned and operated by Lebanese brothers Ayoub-Farid and Fadi M Saab – Michel Saab’s father — has been fighting a July 2014 order by the US Financial Crimes Enforcement Network (FinCEN), that FBME is “a financial institution of primary money laundering concern” and prevented it from conducting US dollar transactions through the US SWIFT system. Virtually all global financial transactions flow through the SWIFT system. In April 2017, a US judge finally ordered the bank shut down. The Saabs have continued to fight the order in court, proclaiming their innocence.

One source told Asia Sentinel that it is likely that some of the depositors in FBME will never show up to reclaim their holdings because doing so would bring them to the attention of the international law enforcement community.

Among other issues Kroll dealt with were these, according to the report:

• “The high volume of high value activity in numerous bank accounts linked to Akhavan. One account in the name of Medina Networks, a company linked to Akhavan, made SWIFT payments totaling US$87.7 million, part of which was to other companies associated with Akhavan in the period 1 January 2013 to 30 May 2014.

• “The use of prepaid cards to push money through the merchant accounts. Prepaid cards are commonly used as an entry point in the placement phase of the money laundering process, i.e., for placing illicitly obtained cash into the financial system.

• “Miscoding of credit card transactions in order to disguise transactions relating to illegal activity as legitimate trade.

• “The misrepresentation of the experience and qualifications of the Compliance Officer of FBME to FinCEN. As reported by the Cyprus Mail, the compliance officer, Lilit Khachatryan, was a divorced housewife who forged her qualifications, including a degree from Harvard University.

• “The systematic channeling of funds through fake merchant accounts to disguise high fraud ratios from detection by Visa and MasterCard

A long string of other actions have been taken against the bank. On Dec. 21, 2016, the Central Bank of Cyprus revoked FBME’s banking license and ordered the bank liquidated. As Asia Sentinel reported on July 31, the Supreme Court of Bermuda ordered the Bermuda arm of the brothers’ empire liquidated as well following an investigation by KRyS Global, an international fraud investigation and dispute resolution firm, that showed the unit was nothing more than a post office box and that all of its business was actually transacted in Cyprus.

The Saabs last week issued a statement threatening to sue all news organizations including Asia Sentinel, although not by name, for allegedly misreporting on the bank’s affairs. Michel Saab also wrote a letter threatening suit but has not followed up with legal action.