When BNP Paribas agreed Monday to plead guilty to skirting U.S. sanctions and pay an $8.9 billion penalty, the French bank became the second global bank fined this year for violating U.S. laws. Earlier this year, Credit Suisse paid a $2.6 billion penalty for helping Americans avoid taxes. The Swiss bank also has history of helping Iran avoid sanctions, and, according to court documents, there are similarities between the tactics of Credit Suisse and BNP. In a 2009 case, Credit Suisse admitted that it systematically helped Iranians and others avoid U.S. embargoes for decades, potentially putting American troops at risk. In this excerpt adapted from the new investigative narrative, Operation Shakespeare: The True Story of an Elite International Sting (Simon & Schuster), author John Shiffman recounts how Credit Suisse and other banks helped Iran deceive American law enforcement, and why it matters.
Before he struck out on his own, the arms broker Amir Ardebili worked for a large, state-controlled company called Shiraz Electronics Industries. SEI supplied foreign electronic and military equipment to the Iranian army, navy, and air force. A primary goal was to help Tehran prepare for anticipated battles against the United States and Israel, and to supply insurgents fighting American troops in Iraq and Afghanistan. SEI also maintained a lab dedicated to reengineering samples of the most modern and sensitive foreign military equipment. These labs created knockoff Iranian versions of American weapons systems, including surface-to-air missiles. What SEI could not adequately replicate—night vision goggles and military-grade radar, for example—it bought in bulk. To circumvent the international embargo crippling the Iranian economic and military infrastructure, and to shield any hint of government involvement, SEI hired freelance brokers like Ardebili to operate as secret middlemen. These brokers used the Internet to find Western companies willing to fulfill the requests, ordering anything from refrigerator pumps to radioisotopes to stealth technology. American components were the most desired but also the most difficult to acquire because they could not be shipped directly from the United States. A successful broker needed to work discreetly, employing transshipment points—places like Dubai, Singapore, or former Soviet republics, countries where the items could be legally shipped from the United States, and then quickly reloaded for final transit to Iran. The brokers also had to devise ways to pay their American suppliers, often the most vexing hurdle. Because brokers like Ardebili could not legally wire funds directly from an Iranian bank to a U.S. one, they set up special accounts with banks in Zurich, Dubai, and Frankfurt to launder money to America.
The big global banks, especially Credit Suisse, did what they could help to Iranian customers. From the mid-1990s until approximately 2008, six such international financial institutions systematically falsified or concealed wire transactions, according to U.S. court records. To slip payments past computerized U.S. money laundering filters, the banks routinely stripped any information linking wire transfers to Iran. This included deleting any Iranian- sounding surname, address, bank code, phone number, and email domain. When U.S. investigators finally discovered widespread deception by the six banks, they levied huge penalties. Lloyds TSB was hit for $350 million, Barclays Bank PLC for $298 million, and Standard Chartered Bank for $227 million. ING Bank NV forfeited $619 million, and ABN Amro Bank NV (now the Royal Bank of Scotland) forfeited $500 million. Credit Suisse, the bank Amir Ardebili used two dozen times to funnel payments to American manufacturers, was forced to forfeit $536 million.
Credit Suisse’s circumvention of U.S. banking restrictions can be traced to at least 1986, when Reagan first imposed restrictions on financial transactions with Libya. That year, Credit Suisse issued a directive to employees to conceal references to Libya in certain wire transfers: “Payment orders of Libyan banks or government organizations to third party accounts in the United State or with U.S. banks abroad are to be executed without stating the name of the ordering party.” Over the years, the bank honed its evasion methods, motivated in part by the need for speed. Delayed, rejected, or seized payments ate into profits.
In 1994, Credit Suisse instructed employees to begin substituting the term “By order of A client” for actual Iranian client names. In 1995, Credit Suisse employees were told to omit bank identification codes from future Iranian transactions, and to use something called “cover payment messages” to mask the true originator. Credit Suisse distributed a pamphlet to Iranian clients entitled “How to Transfer USD Payments,” which explained how best to avoid the automated U.S. banking filters. As part of another marketing endeavor to Middle East clients, Credit Suisse pledged to manually inspect every wire transfer to or from Iran, and to wipe away any incriminating data.
One bank document provided to potential Iranian customers boasted, “It is absolutely impossible that one of your payment instructions will be effected without having it checked in advance by our specially designated payment team at Credit Suisse in Zurich and all team members are most professional and aware of the special attention such payments of yours do require. The promises paid off. In 2003, when the British bank Lloyds decided to terminate all U.S. dollar transactions with Iranian customers, almost every Iranian customer at Lloyds moved to the more accommodating Credit Suisse, according to American prosecutors. From 2002 to 2005, the number of Iranians banking with Credit Suisse jumped from 49,000 to nearly 200,000. The Iranian arms broker Amir Ardebili and his Tehran middlemen were among these new customers.
In neither 2009 nor 2014 was any individual at Credit Suisse charged with a crime. In each case, investors also shrugged. The stock price remained steady, and rose slightly rising following this year’s record-breaking fine. Credit Suisse CEO Brady Dougan seemed to sum up the situation in a recent conference call, “We continue to be hopeful and encouraged that there will be very little impact.”
From Operation Shakespeare by John Shiffman. Copyright © 2014 by John Shiffman. Reprinted by permission of Simon & Schuster, Inc.