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Iran Shipping Firm Faces Charges in Money-Moving Scheme

Islamic Republic of Iran Shipping Lines was charged with almost a dozen affiliated firms in a scheme to move more than $60 million through at least seven U.S. banks in violation of government sanctions.

The banks included JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Bank of America Corp. (BAC), according to Adam Kaufmann, chief of investigations for Manhattan District Attorney Cyrus R. Vance Jr. The banks aren’t accused of any wrongdoing.

Since 2008, defendants “began using alias names and shell companies to gain access to the U.S. financial system” and “engaged in illicit commercial transactions through correspondent bank accounts domiciled in New York,” according to a 317-count indictment filed in New York state court.

The charges include falsifying business records in the first degree and conspiracy, according to the grand jury indictment.

The U.S. Department of Treasury’s Office of Foreign Assets Control sanctioned the state-sponsored shipping company, IRISL, in September 2008 for its logistical services to Iran’s Ministry of Defense and Armed Forces Logistics, the arm of Iran’s military overseeing its ballistic missile program.

Front Companies

Since then, IRISL has relied on a global network of front companies and other behavior designed to evade scrutiny, Treasury said in a statement. The department said it was applying more sanctions and coordinating action with the Manhattan District Attorney.

A call seeking comment from the Iranian office at the United Nations wasn’t immediately returned.

Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, declined to immediately comment. Jon Diat, a spokesman for New York-based Citigroup, and Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, declined to comment.

“Our office is shining a spotlight on the fraudulent activities of IRISL, which has been sanctioned by the U.S., the European Union and the U.N. for its role in the proliferation of weapons of mass destruction,” Vance said in a statement. “IRISL and its sanctioned affiliates used a web of aliases or corporate alter egos across the globe to exploit the services of financial institutions located in Manhattan.”

‘More Desperate’

The Treasury Department today said it will apply sanctions to 10 shipping companies affiliated with IRISL and three individuals in response to Iran’s alleged evasion of sanctions and its ongoing creation of front companies to protect IRISL, according to a statement.

“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,” Adam Szubin, director of the U.S. Treasury’s Office of Foreign Asset Control, said in the statement. “The persistent attempts by IRISL to deceive the world, including through the front companies identified today, attest to the weakness of IRISL as it tries to maintain a semblance of legitimacy while supporting Iran’s proliferation activities.”

Including today’s action, Treasury has applied sanctions to 121 companies and individuals affiliated with IRISL.

China, U.K.

Treasury’s latest actions target the IRISL’s activities in the United Arab Emirates, Singapore, China and the U.K. The companies include Singapore-based Sinose Maritime, UK-based Fairway Shipping and Great Ocean Shipping Services in Adjman, United Arab Emirates.

Officials at Sinose Maritime, Fairway Shipping and Great Ocean Shipping couldn’t immediately be reached for comment after regular business hours in their home countries.

Asked whether the foreign companies or five individuals indicted would ever face judgment in New York, Vance said “possibly.”

“If sanctions are to mean anything, they must be enforced,” Vance said at a press conference. New York prosecutors have a responsibility to ensure that “information provided to our New York state banking system is accurate and that it comports with law,” he said.

Kaufmann added that the banks named in the indictment included the largest U.S. dollar clearing institutions in Manhattan, which weren’t complicit in the IRISL’s scheme.

“The banks were deceived into processing these wire payments,” Kaufmann said.

Credit Suisse

The international shipping industry conducts business primarily in U.S. dollars, necessitating access to the U.S. financial system, prosecutors said.

As part of an earlier investigation by Vance’s office, Credit Suisse AG, Lloyds Banking Group Plc and other banks came under scrutiny for processing payments that allowed Iran and other sanctioned nations to gain access to U.S. markets.

London-based Lloyds paid more than $350 million in 2009 to settle the state and U.S. investigation. It admitted to altering wire transfer information to hide the identity of its clients and allowing billions of dollars to pass through U.S. banks in violation of the sanctions, according to a settlement with the Manhattan District Attorney and the Justice Department.

Credit Suisse in 2009 agreed to pay $536 million to U.S. authorities for making more than $1.6 billion in illegal transactions involving Iran, Sudan, Burma, Cuba and Libya from the mid-1990s through 2006, according to court documents.

Barclays Plc, based in London, last year entered into a deferred-prosecution agreement over how it handled money from countries subject to U.S. economic sanctions and paid $298 million in fines and forfeiture, according to Vance’s office.

The case is People of the State of New York v. Islamic Republic of Iran Shipping Lines, 11-02924, Supreme Court of the State of New York (Manhattan).

To contact the reporters on this story: Karen Freifeld in New York State Supreme Court in Manhattan at kfreifeld@bloomberg.net; Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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