U.S. Seizes $150m Terrorist-related Fund Laundered Through West Africa

Michele M. Leonhart

THE United States Drug Enforcement Administration (DEA) chief, Michele M. Leonhart, and United States Attorney for the Southern District of New York, Preet Bharara, during the week, announced the seizure of $150 million in connection with a civil money laundering and forfeiture complaint filed in December 2011.
The complaint, according to the DEA, alleged massive, international scheme in which entities linked to Hizballah, including the now defunct Lebanese Canadian Bank (“LCB”), used the U.S. financial system to launder narcotics trafficking and other criminal proceeds through West Africa and back into Lebanon.

A statement obtained via electronic mail by The Guardian disclosed that Société Générale de Banque au Liban (“SGBL”), in September 2011, agreed to purchase most of the assets of LCB, and, at least, $150 million in purchase price funds related to the sale are being held in escrow in Lebanon at the Banque Libano Française SAL (“BLF”).

The seized funds are substitutes for the money in the LCB escrow account at BLF, and came from an account at a U.S. bank that is used by BLF to conduct U.S. currency transactions (the “correspondent account”).

The funds were seized pursuant to seizure warrants issued on August 15, 2012. There are no allegations of wrongdoing against BLF, SGBL, or the U.S. bank that maintains the correspondent account for BLF in the U.S.

“As we alleged last year, the Lebanese Canadian Bank played a key role in facilitating money laundering for Hizballah controlled organisations across the globe,” Administrator Leonhart said. “Our relentless pursuit of global criminal networks showed that the U.S. banking system was exploited to launder drug trafficking funds through West Africa and into Lebanon. DEA and our partners are attacking these groups and their financial infrastructure, while establishing clear links between drug trafficking proceeds and terrorist funding,” U.S. Attorney, Bharara, said.

“We will use every resource at our disposal to separate terrorists and narco-traffickers, and the banks that work with them, from their illicit funds, even those hidden in foreign accounts.”

According to the Complaint, the affidavit in support of the seizure warrants and other documents filed in the case:

From approximately January 2007 to early 2011, at least $329 million was transferred by wire from LCB and other financial institutions to the U.S for the purchase of used cars that were then shipped to West Africa. Cash from the sale of the cars, along with the proceeds of narcotics trafficking, were funneled to Lebanon through Hizballah-controlled money laundering channels.

LCB played a key role in these money laundering channels and conducted business with a number of Hizballah-related entities.

Hizballah is a U.S. Department of State designated Foreign Terrorist Organisation (FTO), a Specially Designated Terrorist and a Specially Designated Global Terrorist.

On February 10, 2011, the U.S. Department of the Treasury, Financial Crimes Enforcement Network (“FinCEN”) issued a finding and proposed rule, pursuant to the USA Patriot Act, that LCB is a financial institution of primary money laundering concern, based on, among other things, FinCEN’s determination that there was reason to believe that LCB had been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa, and the Middle East.

FinCEN also determined that there was reason to believe that LCB managers were complicit in the network’s money laundering activities.

After the FinCEN action, another Lebanese financial institution, SGBL acquired the assets and liabilities of LCB for $580 million, $150 million of which is being held in an escrow account at BLF (the “LCB Escrow Funds”).

Because the LCB Escrow Funds are traceable to the assets of LCB, they are also subject to forfeiture, but since they are in an account in Lebanon, the U.S. is unable to seize the LCB Escrow Funds directly.

However, pursuant to U.S. law, the U.S. can seize funds located in a bank’s correspondent accounts in the U.S. if there is probable cause to believe that funds subject to forfeiture are on deposit with that bank overseas. Based on this provision and others, the seizure warrants were executed. A total of $150 million was seized from BLF’s correspondent account. These funds will be transferred to a seized asset account maintained by the United States Marshals Service pending resolution of the forfeiture action