Iran Scam to Evade Terror Sanctions Busted, NYC Official Says

June 20, 2011 — -- Eleven companies, including Iran's state-sponsored shipping line, were indicted in New York City today for allegedly conspiring to evade U.S. sanctions on trade with Iran by duping major U.S. banks in order to funnel more than $60 million through the Manhattan banks.

"The defendants falsified the records of banks," said Manhattan District Attorney Cy Vance, who filed the indictment, in a conference call, "and in so doing the defendants deceived the Manhattan banks."

The conspiracy indictment seeks to enforce a U.S. ban on trading with Iran that was imposed because, according to the federal government, the country harbors terrorists and participates in the proliferation of weapons of mass destruction.

Iran's national shipping company is alleged to play a key logistical role in that nation's ballistic missile program as well as to serve as a conduit for supplying weapons to terrorist organizations.

The Islamic Republic of Iran Shipping Lines (IRISL), its regional offices and affiliates as well as five individuals were charged in the 319 count indictment with using corporate shells and aliases to "exploit the services of financial institutions located in Manhattan," said Vance.

According to the indictment, the state-sponsored shipping company allegedly sent or received scores of illegal payments through Manhattan banks by using alias names and corporate alter egos in Singapore, the United Arab Emirates, and the United Kingdom.

Among the banks whose security measures were circumvented in the alleged conspiracy were JP Morgan Chase, Standard Chartered Bank, Bank of New York Mellon Corp, HSBC, Deutsche Bank Trust Company Americas, Bank of America, Citibank and Wachovia (now Wells Fargo), the indictment said.

Vance's office said in a statement that "the international shipping industry conducts business primarily in U.S. currency and therefore the firms involved in international shipping must have access to the U.S. financial system. Because IRISL and its sanctioned affiliates were banned from transacting with or through U.S. financial institutions, any use of their real names would have been detected and blocked by U.S. banks."

The Manhattan D.A.'s office noted that "IRISL has violated UN Security Council Resolutions by chartering vessels to transport IRISL cargo containers of ammunition and weaponry from Iran to countries linked to international terrorism."

The statement cited a case in November 2009 in which "36 Iranian cargo containers transporting hundreds of tons of weaponry, including rockets, missiles, mortars, and small arms, were interdicted en route to Syria via the intended port of Beirut."

"It is alleged that this shipment was intended for Hezbollah. This activity – the provision of arms to terrorist organizations – occurred during the time period charged in this conspiracy," Vance said.

"The point of this indictment is that sanctions exist… and to make sanctions work, they have to be enforced," he said. "The sanctions here are designed to shut IRISL down and to make it harder for IRISL and Iran" to achieve their goals.

Adam Szubin, the head of Treasury's Office of Foreign Assets Control (OFAC), cited the pressure on IRISL to date has having a dramatic impact on Iran's shipping business, including the loss of maritime insurance, the default on loans and the seizure of ships. Szubin pointed out that his office's aggressive actions have put extreme pressure on the shipping firm which is a significant part of the structure providing Iran with the materials needed for development of weapons of mass destruction.

"As the private sector around the world increasingly turns its back on Iran's national shipping line, IRISL's efforts to evade international sanctions and increased scrutiny have grown more and more desperate," Szubin said.

Szubin also announced today the sanctioning of ten additional shipping companies and three individuals. The sanctions prohibit trade and authorize the freezing of assets of companies doing business with companies that harbor terrorists or proliferate weapons of mass destruction.

Still, Vance acknowledged the difficulty officials face in attempting to extradite the newly indicted individuals.

"Will anyone ever face judgment in New York courts? Possibly," he said.