Monday, August 17, 2015

Exclusive: Assad's sanctions-busting ties to Israeli business tycoon



Exclusive: Assad's uncle is using HSBC and front companies to avoid EU/US sanctions and funnel cash through international tax havens, funding death and destruction back in Syria, al-Araby al-Jadeed reveals.
At the start of the Syrian uprising in 2011, the family of Bashar al-Assad's maternal uncle, Mohammad Makhlouf, were known to control around 50 companies in Syria.

The Makhlouf empire included the country's largest phone company, Syriatel, the largest holding company, Sham Holding, as well as Syria's largest banking, insurance, construction and real estate groups.

But these companies are just a small part of Makhlouf's international domain, as al-Araby al-Jadeed unveils a far more complex network of front companies in offshore tax havens and secret accounts that operate away from the prying eyes of international finance regulators.

The Makhlouf empire

The Makhloufs are prime financiers of Bashar al-Assad's brutal regime.

They are linked to the president by political and family ties and are actively involved in the deadly suppression of the Syrian uprising.

Makhlouf's four sons occupy various positions in the Syrian establishment, the most prominent being Rami Makhlouf, known to Syrians as the "wealthiest man in the country". According to The Financial Times, he is thought to control as much as 60 percent of the country's economy.

A detailed investigation by al-Araby al-Jadeed reveals the web of money that links the Makhloufs and the Assad regime with the global financial powerhouse HSBC, two Fortune 500 companies, and, more significantly, business leaders from the country Assad swears is his worst enemy, Israel

Several members of the Makhlouf family have been on the EU sanctions list since 2008.

The Makhloufs have been fighting to keep hold of their assets and ensure their money keeps flowing back to Syria and to the Assad regime in its costly war against the Syrian opposition and the Islamic State group (IS).

The financial empire

Aspects of the Makhlouf's financial empire were revealed following a giant tax evasion scheme investigation by the International Consortium of Investigative Journalists (ICIJ).

The ICIJ released information about bank accounts in Switzerland under the title Swiss Leaks: Murky Cash Sheltered by Bank Secrecy, most significantly implicating banking giant HSBC and its Swiss subsidiary HSBC Private Bank.

Al-Araby al-Jadeed
 obtained the Makhlouf family's Swiss banking records in collaboration with ICIJ and Arab Reporters for Investigative Journalism (ARIJ).

The documents that cover the period between 1997 and 2007 reveal financial transactions to partners and front companies in offshore tax havens worth $43 million.
    The Makhloufs' empire is a complex network of front companies in offshore tax havens and secret accounts

However, more recent documents concerning secret companies and financial managers expose an unusual relationship between the Makhlouf family and HSBC, which goes far beyond the standard client-bank relationship.

The leaked documents also showed that the family's Swiss accounts were not used to save money, but rather to conduct various secret transactions to other accounts and destinations, aided by Switzerland's opaque banking laws.

It confirmed a 2012 Sunday Times report, which claimed that the two banks continued to do business with the family and manage their accounts despite European and US sanctions.

The Israeli connection

Syria has officially been in a state of war with Israel since the creation of the state in 1948.

However, the leaked documents reveal a relationship between Makhlouf and Israeli business tycoon Freddy Zinger.

Zinger, who resides in the Kiryat Shmona settlement on the borders with Lebanon, served in the Israeli army between 1976 and 1981 in the post of development manager and attained the rank of captain.

Zinger is linked to two Makhlouf-owned companies: Hoxim Lane Management Corp and Cara Corporation, and is director and partner in a number of pharmaceutical companies.

He has access to bank accounts owned by the four Makhlouf brothers.

The Makhlouf brothers are registered as "Beneficial Owners" on a joint accounted registered to Freddy Zinger and his wife, Loria Zinger.

The records also show that Nadine Raccah, an HSBC employee, was listed as the manager of those two companies. Raccah's LinkedIn page, linked to her official HSBC Private Bank email, shows that she was in charge of the bank's Israel portfolio from 2000 until 2012.

Nadine Raccah was contacted for comment but did not respond over a period of five months of this investigation.
The Makhloufs held private accounts with HSBC
Israeli business tycoon Freddy Zinger is linked to the Makhlouf brothers' accounts

'Exclusive agent' 

The HSBC Private Bank-leaked documents also reveal that Mohammad Makhlouf presented himself to the bank as the "exclusive agent" in Syria of Philip Morris, the American tobacco giant, Coca-Cola and Mitsubishi - information previously not known to the public.

When approached for comment, Philip Morris denied any knowledge of Makhlouf being an agent for the company.

The American company stated it had "stopped business activities in Syria since the start of the revolution", but yet, tax-free zones owned by the Makhloufs continue to sell Philip Morris products.

Coca-Cola and Mitsubishi did not respond to al-Araby al-Jadeed's requests for comments.

British Virgin Islands' tax haven

The Makhlouf family also owns five companies registered in the British Virgin Islands - a well-known tax haven.

According to official records obtained from the Registry of Corporate Affairs in the British Virgin Islands, it is one Rosemarie Flax, an offshore financial services administrator, who professionally manages the Makhlouf companies registered there.

The companies have been registered under the names of Mohammad Makhlouf and his four sons: Rami, Hafez, Eyad, and Ihab. They are, however, fronted by proxy executives to keep the real owners anonymous.

Al-Araby al-Jadeed
 contacted Flax in April to ask why she continued to manage these companies despite the international sanctions. She has not responded to date.

Syria's economy of war

Rami Makhlouf has tried to distance himself from the war in Syria, at least in public. Early on, he claimed that much of the revenues from his phone company go to charity; that he refuses to be a "burden" on the country.

But that came out to be another attempt to survive the sanctions.

The Makhloufs appear to be at the heart of Syria's troubles. Not only did Makhlouf's empire contribute significantly to the impoverishment of the Syrian people, but it also served as a prime sponsor of a bloody counter-revolution.

More importantly, the Makhloufs' ties with Israeli business figures are another nail in the coffin of Assad's anti-Israel propaganda - on which much of his nationalist legitimacy relies.  

Since the start of the uprising, more than 240,000 people - including more than 12,000 children - have been killed. Millions more have been displaced both internally and into neighbouring countries.

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