U.S. Court Exposes Turkey’s Role in Iran’s and Venezuela’s Sanctions Evasion Schemes – Again

A Manhattan federal jury on Monday convicted Ali Sadr Hasheminejad, the Iranian owner of the now-defunct Pilatus Bank of Malta, of evading U.S. sanctions against Iran by conspiring to transfer payments from a Venezuelan construction project to Iran. Hasheminejad’s use of an Istanbul-based front company to conceal the Islamic Republic’s connection to the funds is further evidence of how Iranian and Venezuelan sanctions busters have taken advantage of the permissive environment provided by the Turkish government.

Hasheminejad’s conspiracy, which entailed moving more than $115 million through the U.S. financial system, goes back to a 2005 memorandum of understanding between Tehran and Caracas to build housing units in Venezuela.

In December 2006, Stratus, a Tehran-based conglomerate owned by the Sadr family, established a subsidiary, Iranian International Housing Corporation, which in July 2007 struck an agreement with Venezuelan state-owned energy company PDVSA to build 7,000 housing units in exchange for $475 million. The project coincided with Tehran’s pursuit of increased political and economic cooperation with Caracas, as Venezuelan President Hugo Chavez and his Iranian counterpart, Mahmoud Ahmadinejad, pledged to build an “axis of unity.”

The Manhattan District Attorney’s Office launched an investigation in 2013 into Hasheminejad’s illicit scheme, leading to his arrest at Virginia’s Dulles Airport on March 19, 2018. The next day, the U.S. Attorney’s Office for the Southern District of New York issued a six-count indictment charging Hasheminejad with conspiracy to violate U.S. sanctions against Iran from 2006 to May 2014 through a network of front companies and foreign bank accounts.

One of the key front companies Hasheminejad used to evade U.S. sanctions against Iran was Stratus International Contracting, which Ali Sadr Hasheminejad and two members of his family established in Istanbul in October 2010, naming it after their Tehran conglomerate. All three members of the Hasheminejad family appear on the Istanbul trade registry as nationals of Saint Kitts and Nevis, where Ali Sadr Hasheminejad acquired citizenship in 2008 through a citizenship-by-investment program.

Hasheminejad, the Malta-based news outlet The Shift reported, “made use of four St Kitts & Nevis passports and used five different names, as well as two different dates of birth, when conducting international business, according to US financial crime consultant Kenneth Rijock.”

Hasheminejad’s Pilatus Bank first came into the spotlight after Maltese investigative journalist Daphne Caruana Galizia, as The Shift reported, accused him of “a number of crimes including money laundering, kickbacks to Maltese politicians, and large transfers to members of the Azeri ruling elite.” At the time of her assassination by a car bomb in October 2017, Caruana Galizia was being sued by Hasheminejad and Pilatus Bank in a U.S. court for malice, defamation, and damaging the bank’s “reputation and actual and prospective economic relationships.”

The scrutiny that ensued after Caruana Galizia’s assassination prompted Maltese and international authorities to further investigate Pilatus Bank. Malta’s banking regulator seized control of the bank, which reported €308 million in assets in 2016, and froze all transactions for customers in March 2018. The European Central Bank revoked Pilatus Bank’s license in October 2018.

Hasheminejad’s businesses, however, have not received similar scrutiny in Turkey, where the Istanbul-based Stratus International Contracting took advantage of the country’s permissive environment for sanctions evaders, a transgression Turkish President Recep Tayyip Erdogan has repeatedly encouraged. Turkey’s Islamist leader has regularly colluded with Iran, Russia, and Venezuela to thwart U.S. sanctions, including by personally facilitating Tehran’s multi-billion gas-for-gold scheme, the biggest recorded case of sanctions evasion in recent history.

Washington needs to continue to prosecute and sanction Turkey-based individuals and entities exploiting Turkey’s permissive environment. Erdogan will see inaction as a license to continue helping rogue regimes and their ringleaders evade U.S. sanctions.

Aykan Erdemir is a former member of the Turkish parliament and senior director of the Turkey Program at the Foundation for Defense of Democracies (FDD), where Philip Kowalski is a research associate. They both contribute to FDD’s Center on Economic and Financial Power (CEFP). For more analysis from Aykan, Philip, and CEFP, please subscribe HERE. Follow Aykan and Philip on Twitter @aykan_erdemir and @philip_kowalski. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.