21 April 2024 | 12:10 AM

FinCEN Files: Planes, boats and tax havens

Key Takeaways

On April 24 2015, the New York branch of Barclays bank filed a report to the US Treasury describing suspicious transactions in the accounts of one of its clients. The accounts in question, in Dubai and Cyprus, were held in the name of Paramount Logistics Corp (PLC), part of the private defence and aerospace group Paramount, controlled by controversial South African-born arms trader Ivor Ichikowitz.

It would be the first in a string of reports Barclays produced on its client around questionable wire transfers.

The Barclays reports are a fraction of a much larger trove of secret financial records obtained by BuzzFeed News and shared with the International Consortium of Investigative Journalists (ICIJ), a nonprofit news outlet and global network of investigative reporters of which amaBhungane is a partner.

The leaked documents, known as the FinCEN Files, include more than 2 100 suspicious activity reports (SARs), produced by banks and other financial entities and submitted to the US Treasury’s Financial Crimes Enforcement Network (FinCEN) under anti-money-laundering provisions.

SARs form part of global banking compliance requirements; they are routine measures to help detect potentially illicit financial transactions. The information they contain is not necessarily evidence of wrongdoing and must be treated with caution. In essence, SARs amount to untested allegations, akin to confidential informant tipoffs, albeit based on banks’ privileged access to their clients’ transactions.

According to explanatory narratives attached to its SARs, which set out the motivation for Barclays’ apparent suspicions, the bank filed the April 2015 report “due to USD wire transfers involving Paramount … and its chief executive officer and beneficial owner, Ivor Ichikowitz”.

The narratives say these transfers “appeared to be suspicious” due to concerns that “Ichikowitz may have been involved in a potential bribery and foreign corruption scheme involving South Africa’s president, Jacob Zuma”; because Zuma was “identified in numerous negative news articles [as] previously being indicted on money laundering and corruption charges”; and because South Africa was “a high-risk geography for bribery and corruption”.

Details of the 2015 transactions that prompted Barclays’ initial report are not known, as they were not included in the leaked FinCEN material. But in September 2016, the bank widened its monitoring to include all of Ichikowitz’s outgoing wire transfers citing “concerns about his source of wealth”, and undertook a review of all past wire activity for Paramount.

Ichikowitz’s association with Zuma and the ANC was nothing new. News reports had previously revealed Zuma had flown on Ichikowitz’s private jet free of charge, including to Lebanon and Kazakhstan for ANC “fundraising and business meetings”.

Zuma and several senior ministers flew the same luxury jet to New York for the 69th UN General Assembly in 2014 at a cost to the taxpayer of R3-million to R6-million, by one expert’s estimate.

It was also known that Ichikowitz had partnered with “Oilgate kingpin” Sandi Majali, who ran an alleged ANC front company involved in the oil-for-food programme with Iraq.

Ichikowitz told reporters at the time that there was nothing improper in his support for the ANC: “This was never conditional. Majali was part of the fundraising structures for the ANC and I was helping out. I never hid it.”

In a response to detailed questions, UK lawyers representing Ichikowitz told amaBhungane he was not prepared to comment on “any allegation relating to confidential information that has been unlawfully obtained by the ICIJ…

“He notes only that the Paramount Group of companies act in accordance with the laws of their residence and international law, and so too does our client.”

In response to questions from the ICIJ, Barclays said in a two-page letter that it could not legally comment on particular SARs, their contents, or the individuals and businesses named in them.

The ICIJ documents show the bank continued filing reports on Paramount and Ichikowitz, over time broadening its reporting to include new individuals and entities in the web of Paramount-linked transfers.

Barclays also commissioned a “politically exposed person” review that included an April 2017 “enhanced due diligence level III” (EDD3) report by London-based private intelligence firm Orbis Business Intelligence.

Orbis’s co-founder, former MI6 operative Christopher Steele, authored the famous dossier containing explosive allegations of co-operation between Donald Trump’s campaign and the Russian government during the 2016 US presidential elections.

An EDD3 probes the background of an individual or company, typically through an in-country “boots on the ground” investigation rather than just desktop research.

The SAR narrative contains a claim by Orbis that it interviewed a source who “acknowledged that Ichikowitz benefits from his donations to the ANC by being awarded major contracts”.

“The EDD3 confirmed that Zuma and Ichikowitz have a close relationship and the report states that Zuma … [has] been flying on Ichikowitz’s aircraft. The report alleged that this relationship is due to the role that Zuma holds (eg, the president of South Africa), rather than due to a friendship.”

The SAR does not cite any evidence for these claims, but notes news reports that Ichikowitz had previously provided Zuma with an aircraft, free of charge, for ANC meetings in Lebanon and Kazakhstan.

Questions sent to Zuma, via his lawyer Eric Mabuza, and to ANC spokesperson Pule Mabe went unanswered, despite attempts to follow up.

Bell Pottinger

The Orbis report written for Barclays seems to draw particular attention to Paramount contracts in Malawi — something amaBhungane previously reported on.

Under then president Joyce Banda, Paramount secured a $145-million (almost R2.5-billion now) contract to supply patrol boats destined to operate on Lake Malawi, as well as other military equipment.

After a change of government, the deal was cancelled amid allegations that it flouted procurement processes and was prohibitively expensive.

According to the SARs, the Orbis report “strengthened” suspicions of corruption by revealing new links to the now infamous public relations firm Bell Pottinger, “which was allegedly introduced to Banda by Ichikowitz in order to assist Joyce Banda to improve her public profile”.

The Telegraph previously reported that Ichikowitz’s family foundation had paid the PR firm to help airbrush Banda’s image. It quoted his brother Eric as saying: “The family foundation believes that President Banda is a force for good in Malawi and that she is striving to improve the lives of all Malawians.”

He added that there was “absolutely no connection between contracts undertaken by [the] Paramount Group and its companies and any charitable work undertaken by the Ichikowitz Family Foundation”.

The SARs, however, appear to contradict that claim, reporting payments to Bell Pottinger around that time coming from the company, not the foundation.

“A review of Paramount’s accounts at the time identified regular non-USD wire payments from Paramount to [Bell Pottinger] in or around and between January 2012 and December 2013, totalling approximately twenty-nine (29) payments aggregating to 500 000 Euro (approximately $585 245.00).”

But the SARs are inconclusive, noting that while invoice numbers were cited on the payments, “without reverting to the client, it was deemed impossible to opine on whether these related to the group’s own activities with [Bell Pottinger] or funding for Joyce Banda per these allegations.”

Opaque offshore world

The FinCEN Files are a window into the architecture of complex financial arrangements and murky tax havens churning with money from questionable sources — a system that allows global elites to conceal wealth and wash dirty money.

Similar architecture was evident when amaBhungane began investigating Ichikowitz’s web of offshore companies and sprawling business interests, which in addition to arms includes mining, toys and teddy bears, and consumer electronics through his family’s interest in the Core Group — the sole distributor of Apple products in South Africa.

Cyprus company PLC sits at the heart of Ichikowitz’s international business empire.

The company features in a separate and ongoing amaBhungane investigation into the collapse of Paramount’s South African armoured vehicle business. (See a new story on that topic next week Thursday at amaBhungane.org.)

At issue in that case are claims, stoutly denied by Paramount, that profits were hoarded offshore to the detriment of the South African operating company.

PLC is a hub through which many of Ichikowitz’s international transactions flow and, as our other reporting shows, it is the contracting party on many of the group’s defence deals.

It also features prominently in the FinCEN Files.

According to documents from the trove, Barclays bank had by January 2017 noted that “one thousand four hundred eighty-four (1 484) wires aggregating to $293 394,991.98 will be reported for Paramount”.

Subsequent reporting pushed up that figure.

All told, Barclays facilitated $500-million (about R8.5-billion now) in transactions across the globe for Ichikowitz and his companies up to late 2017, after which records are not available.

Barclays appears to have been alarmed for a number of reasons, including “the possible layering and commingling of funds between Ichikowitz’s investment vehicles … and his other entities for which the purpose was unknown”.

In financial parlance, “layering” refers to a series of transactions designed to conceal the source of money.

The bank homed in on frequent payments made from PLC to Socintra, a company registered in the opaque tax haven of the British Virgin Islands and co-owned, according to the SARs, by Ichikowitz and one of his brothers.

More than $8-million was transferred from PLC to Socintra, which the bank identified as “a provider of finance and working capital to businesses located in South Africa”.

The SAR narrative goes on to explain: “As Ichikowitz owns Socintra, and Socintra frequently pays for Ichikowitz corporate expenses, there are concerns regarding the ultimate source of funds.”

Socintra is also the owner of another Paramount company that bought assets out of the collapsed Paramount subsidiary in South Africa.

A list of transactions accompanying the SARs shows that Socintra made at least two payments totalling about $260 746 to The World of ResidenSea II Ltd, part of the World group of companies that claims to own “the largest private residential ship on the planet”.

Former Paramount employees have told amaBhungane that Ichikowitz enjoys permanent residence on the vessel — a “floating tax haven” that wanders the globe, offering ultra-luxury to those with the means.

One of the entities that raised eyebrows at Barclays was Mamio Holdings — an “unidentifiable counterparty” located in another tax haven, the Cayman Islands, with a Swiss bank account.

Payments between Socintra and Mamio were cause for suspicion because “no material information was found in the wire payments details as to the purpose of these wires”.

The SAR reports that “the activity appears to be circular in nature” — a possible sign of financial malfeasance.

Paramount’s “same-name” transfers between similarly named entities in different parts of the group, using round dollar amounts and vague payment details, aroused further suspicion.

Though the SARs point to suspicious activities that bear the traits common to money laundering and other illicit financial activity, they are not evidence themselves of criminality.

Barclays, in its letter to the ICIJ, stressed that they instead “simply reflect a snapshot taken at a particular point in time of the information then available”.

Ichikowitz and Menell

In the SARs, the bank also flagged a company called Kemet Global Ltd, which it says “Ichikowitz had masked his ownership of”.

“Though he is not an owner officially by structure, Barclays Corporate believes that Kemet is related to his businesses, which explains why there are transfers relating to his mine deal; therefore, Kemet will be listed as a SAR suspect in this case.”

Barclays eventually terminated its relationship with Kemet because it was not within its “risk appetite”.

South African mining magnate Brian Menell is currently Kemet’s sole director. He has told the ICIJ that the company “was originally conceived as a joint investment vehicle between Mr Ichikowitz and me. The shareholding was split between our respective investment vehicles.”

However, he said, “the purpose for which Kemet Global Ltd was originally conceived did not materialise”, and Kemet “became a business service provider, which I run and [of which I] am the sole owner”.

“I did not at any point give any incorrect information to Barclays bank regarding the ownership of Kemet Global Limited,” said Menell, adding: “I am entirely confident that the compliance processes that we have within Kemet insure [sic] that all of the activities and transactions of the company are fully transparent, in accordance with correct governance, and in all cases are of a nature that would not raise any concerns on the part of any properly informed regulator or financial institution.

“No reasons were ever given to me for Barclays’ discontinuation of its banking relationship with Kemet, and I was never given the opportunity to answer any questions to allay its concerns.”

He pointed to “the lack of recourse against financial institutions which take arbitrary action [on] the basis of incompetent and ill-informed compliance”.

Though the bank dropped Kemet, no such action appears to have been taken against other Ichikowitz companies flagged in its SARs, at least up to late 2017, the period for which records are available.

In response to the ICIJ, Barclays said: “If we conclude we have financial crime concerns, we take appropriate action and have done so in numerous cases over the years. As you will appreciate, terminating client relationships is not something we take lightly.

“Given the filing of a SAR is not [in] itself evidence of any actual wrongdoing, we would only terminate a client relationship after careful and objective investigation and analysis of the evidence, balancing potential financial crime suspicions with the risk of ‘de-banking’ an innocent customer and our obligation to treat customers fairly.”

Barclays said SARs were “a common and required practice”, and that it files thousands of them and similar reports each year globally.

Through his London-based lawyers, Ichikowitz has threatened legal action against amaBhungane in terms of UK data protection and defamation law.

The lawyers did not address our questions, but instead posed a number of questions to us, mostly about how the data was obtained.

They said of Ichikowitz: “Neither he nor any of the companies under the Paramount Group have been subject to an investigation by any relevant authority whether in South Africa (where Paramount has a small presence in the context of its global operations) or elsewhere… Any statement to the contrary is without evidence … and liable to be defamatory.”


Warren Thompson and Micah Reddy

Your identity is safe with us. Email or Call us


Related Stories