A Kremlin-linked network of slush funds has moved money to the Syrian regime, including frontmen for its chemical weapons programme, and to Isis for oil purchases, according to an investigation by BuzzFeed News.
Moscow-based figures, "including associates of the Russian President Vladimir Putin, mafia figures, and Kremlin officials", used accounts at Tanzania-based bank FBME (formerly Federal Bank of the Middle East), which largely operates out of Cyprus, reported BuzzFeed citing leaked documents.
"Issa al-Zeydi, a Russian-Syrian national now outed as a frontman for Syria's chemical weapons regime, moved hundreds of millions of dollars through the Kremlin-linked slush fund network," BuzzFeed alleged.
In October 2014, the US Treasury Department sanctioned Zeydi as frontman for the Scientific Studies and Research Center – the firm that manages Syrian president Bashar al-Assad's chemical weapons programme.
The UN says chemical weapons were used in an attack against the town of Khan Sheikhoun in April 2017, allegedly carried out by the Assad regime.
One offshore company in the slush fund network transferred more than $33m (£24.6m) to Russia's Ministry of Finance to settle a debt with Assad's regime in 2010, according to BuzzFeed.
A spokesperson for FBME told IBTimes UK that the transfer took place between Syria and Russia in 2010, before US sanctions against Syria.
"Not a single transaction from FBME is linked to anything to do with Assad or any chemical weapons. These rumours emanate from faked reports provided by the Central Bank of Cyprus and other parties with whom we are in litigation," said FBME.
"No Russian nationals were identified by FinCEN in any of their FBME notices and the July 2014 FinCEN Notice of Finding against FBME does not mention the word Russia," said FBME.
On 17 July 2014, the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) ruled it "had found FBME to be of primary money laundering concern under Section 311 of the USA PATRIOT Act."
FinCEN ruled that: "(i) FBME is used by its customers to facilitate money laundering, terrorist financing, transnational organized crime, fraud, sanctions evasion, and other illicit activity internationally and through the U.S. financial system; (ii) FBME has systemic failures in its anti-money laundering controls that attract high-risk shell companies, that is, companies formed for the sole purpose of holding property or funds and that do not engage in any legitimate business activity; and (iii) FBME performs a significant volume of transactions and activities that have little or no transparency and often no apparent legitimate business purpose."
FinCEN ruled that US financial institution were to be blocked from dealing with FBME.
Following the ruling, the Central Bank of Cyprus placed FBME under administration and subsequently resolution. The founders of FBME, Lebanese brothers Ayoub Farid Saab and Fadi Michel Saab, are pursuing a case at the International Chamber of Commerce in Paris for up to €1.5bn in compensation from the Republic of Cyprus for the alleged failure to protect their investment, citing the provisions of a bilateral agreement with Lebanon, according to Cyprus Bussiness Mail.
In May 2017, Tanzania's central bank revoked the business licence of FBME and placed it under liquidation, according to Reuters. FBME Bank Ltd is registered in the East African nation.
According to Bloomberg, FBME is currently under US federal investigation for aiding fraudulent credit card activities by online porn and gambling companies, and under another federal investigation on alleged laundering of money from Russian fraud which wound up invested in New York real estate.
FBME told Bloomberg: "We were not aware of any criminality in our card services division, and this would not have been tolerated."
Buying oil from Isis
The BuzzFeed report linked Zeydi and his company Balec Ventures to 2013 and 2014 contracts worth €9.5m with Hesco Engineering, which would be sanctioned by the US in 2015 for trading oil with Isis on behalf of the Syrian regime.
The US Office of Foreign Assets Control said on 25 November 2015: "OFAC designated George Haswani today for materially assisting and acting for or on behalf of the Government of Syria, and HESCO Engineering and Construction Company (HESCO) for being owned or controlled by Haswani.
"Haswani is a Syrian businessman who serves as a middleman for oil purchases by the Syrian regime from ISIL. HESCO is a Syrian engineering and construction company that operates energy production facilities in Syria, reportedly in areas controlled by ISIL. The European Union (EU) added Haswani to its sanctions list in March 2015."
FBME told IBTimes UK: "Ernst & Young (EY) identified USD transactions from May 2013 through August 2013 between Balec and Hesco Engineering and Construction Co. EY raised no concerns about FBME's due diligence files or its maintenance of accounts for Haswani or Hesco. And it did not find, and no regulator has ever suggested, that the account at FBME was used for any improper purpose.
"This trade took place two years before the UBO of HESCO was placed under sanction. No FBME account, including this one, was permitted to operate if the UBO was subject to sanctions and, in line with standard FBME procedure, as soon as details of the sanctions were published by OFAC all HESCO accounts were frozen and details reported to regulators," said FBME.
FBME also held accounts for associates of Putin, including Vladimir Smirnov who has been tied to the reputed Tambov mafia ring in St Petersburg. FBME confirmed to IBTimes UK that Smirnov was a client that had once been classified as a "a high risk politically exposed person" but was in 2013 downgraded to a 'normal risk' as "he had not been a senior executive of a state-owned enterprise in the past 6 years".
BuzzFeed also claimed to have files that showed a large amount of the funding came from laundered money that Russian officials stole from US-led hedge fund Hermitage Capital Management, which is owned by financier Bill Browder.
Russian lawyer Sergei Magnitsky uncovered the $230m tax fraud. He was arrested and tortured to death in a Russian prison in 2009.
Following his death, Browder launched an international campaign to bring the perpetrators to justice and successfully lobbied governments worldwide to pass the Magnitsky Act, which sanctions Russian human rights abusers.
More than $22m of the laundered money from Hermitage ended up in the FBME accounts controlled by the suspected crime boss Dmitry Klyuev, according to BuzzFeed. FBME told IBTimes UK: "Klyuev never maintained an account with FBME."
Browder described the revelation as "devastating" on Twitter. The financier has previously described Cyprus as "the money-laundering country of choice for criminals from Russia... because the Cypriot authorities turn a very active blind eye to the money-laundering".
The Russian embassy in Washington did not respond to the allegations.