Rozana Participates in the Panama Papers Investigation: How did the Syrian Regime Circumvent the Sanctions?

Rozana Media Foundation participated in an investigation based on the recently leaked Panama documents. The investigation reveals the names of people and companies suspected of financing terrorism and supporting the Syrian regime by supplying it with fuel for the warplanes that were dropping barrel bombs on several areas in Syria.

Rozana was the only Syrian media institution that worked with the ICIJ to complete this investigation, with the help of a group of journalists and citizen journalists who preferred to remain anonymous.

One morning in mid-2014, before the sun reached its highest point in the summer sky, two elderly men in Aleppo, northern Syria, were sitting on plastic chairs, chatting quietly and drinking coffee. In front of his grocery booth, Sabri Wahid Asfour and his friend Abu Yassin were watching their neighbours go to work. Suddenly, barrel bombs fell to the ground, causing major damage to a number of residential buildings; and seconds later, it exploded, splattering thousands of shrapnel, nails, and iron rods in all directions, as these barrels are specially designed to cause maximum damage to humans.

When the cloud of smoke cleared, Asfour reached for his friend Abu Yassin. “I looked at my friend after I managed to see again through the smoke, and I saw his body torn apart,” recalled Asfour, adding “he was taking his last breaths.”

This was one of hundreds of air strikes carried out by the Syrian regime’s aviation during the ongoing conflict in Syria, which has killed thousands of civilians.

The air offensive launched by the regime’s aviation in various regions in the country would not have been possible without the support of a network of companies that dodge international sanctions and provide the Syrian regime with oil and gas to fly warplanes in the sky.

The US has claimed that three of the companies that helped supply the regime with the fuel are clients of the global law firm Mossack Fonseca & Co., which helped companies and maintained overseas subsidiaries in the Seychelles islands (the Indian Ocean), which are considered tax havens.

The Mossack Fonseca law firm maintained close business ties with at least one of these companies, after being blacklisted by the US government due to its support of the Syrian regime’s war machine, in addition to dozens of Fonseca clients who were subject to sanctions by the US office of Foreign Assets Control (OFAC).

The Panama-based Mossack Fonseca, which has offices around the world, had worked with at least 33 people and companies who were on the OFAC blacklist, according to an analyst who worked on internal files prepared by investigative reporters, belonging to the German Süddeutsche Zeitung newspaper and other media partners.

In some cases, Mossack Fonseca disengages from work contracts with individuals and companies before the imposition of sanctions on them, and in others instances; the clients get penalized during their collaboration with the firm.

Partnering media organizations studied more than 11.5 million documents, including email correspondence, customer accounts, and financial records that exposed Mossack Fonseca internal business from 1977 to December 2015.

Reports show that Mossack Fonseca has made money from shell companies for years, which have been used by people suspected of being terrorists or war criminals in the Middle East, and drug traffickers in Mexico, Guatemala, and Eastern Europe, in addition to dealers of (nuclear) weapons of mass destruction in Iran and North Korea, and arms dealers in South Africa.

Jason Sherman, a professor at the School of Government and International Relations at Griffith University (Australia) and co-author of the groundbreaking study on shell companies, said: “It looks almost like a suicide, a company that accepts to deal with all these bad people. Even if it is a cynical idea to you, they will hesitate a lot before dealing with entities that have been sanctioned by the US.”

Mossack Fonseca denies involvement 

A spokesman for Mossack Fonseca told the ICIJ that the law firm relied on intermediaries such as banks and other legal services firms to conduct a background check of clients who seek cooperation with Mossack Fonseca.

Those intermediaries are supposed to provide the firm as soon as possible with background information about the customer, and whether his/her name is on the sanctions list.

The law firm spokesman said: “We have specific procedures to identify those individuals to some extent, and the time needed to disengage from the client varies per jurisdiction, while some authorities require maintaining contact with the client to avoid conflicting elements in the investigations.”

“Mossack Fonseca was not aware that it was being hired by people who had any relations with North Korea, Zimbabwe, Syria, or any other country that had been included in the sanctions list, and if the firm comes to know that it represented a client to serve for illegal interests, then we will take appropriate and reasonable measures according us to deal with the case,” the spokesman added.

Fuel for war 

The Office of Foreign Assets Control (OFAC), which is a financial intelligence and enforcement agency of the US Treasury Department, announced a series of sanctions in 2014 preventing US citizens from doing business with companies and people suspected of supporting the Syrian regime.

One of the companies was Pangates International Corp Ltd, which is a petroleum company headquartered in the United Arab Emirates that has been engaged in business contracts with Mossack Fonseca for more than a decade.

The OFAC blacklisted Pangates International Corp Ltd in July 2014, accusing it of supplying the Syrian regime with more than 1,000 metric tons of aviation fuel Avgas.

“Any Syrian air force battalion would absolutely use the Avgas,” said Nick de Laringa, an editor for Jane’s Defence Weekly Europe.

Pangates is part of AbdulKarim Group, which is a giant Syrian company based in Damascus. The OFAC imposed sanctions on two Mossack Fonseca clients who had close ties with subsidiaries of AbdulKarim Group, namely, Maxima Middle East Trading Co. and Morgan Additives Manufacturing Co.

The OFAC also imposed penalties on two persons related to these companies, namely, Ahmed Barqawi, who is the general manager of the Maxima Middle East Trading, and Wael Abdel Karim, Executive Director Pangates International Corp, as he reportedly “worked on scheduling many of important fuel and petroleum shipments to supply Syrian warplanes.”

According to the OFAC, in June 2014, Pangates International Corp, Maxima Middle East Trading and AbdulKarim Group had worked with a Russian fuel company to obtain the necessary fuel for the refineries controlled by the Syrian regime.

A representative of Morgan Additives Manufacturing Co. told the ICIJ that “adding the company to the blacklist was a mistake in the first place,” noting that “Barqawi had resigned from the position of CEO before his name was put on the blacklist, while Abdel Karim resigned after announcing the sanctions, noting that the company is no longer the property of Wael Abdel Karim.”

The other firms and individuals who were sanctioned for being directly related with deals to supply the Syrian regime with warplanes fuel, never answered the inquiries addressed to them and did not comment on the matter via email or on the phone.

In a previous comment to the media, the Pangates International Corp admitted delivering jet fuel to Syria, but claimed that it was not aware of the destination or purpose of the shipments.

In a statement to Reuters, the company said: “We sell to non-Syrian companies who are not on the UAE or US sanctions list. We do not know who uses the fuel at the end, but as far as we know the fuel is used for humanitarian purposes.”

Classified files clarified the relations between Pangates and Mossack Fonseca, which began in 1999, when the legal services company listed Mossack Fonseca on the island of Niue in the Pacific Ocean, as the latter had exclusive rights to establish companies abroad.

When the authorities in Niue closed overseas registry offices following complaints about possible money laundering operations, Pangates was then moved to Samoa, and then to the Seychelles in 2012. At this point the company was worth $7.5 million.

Nine months after the US imposed sanctions on Pangates, Mossack Fonseca was still trading the company’s securities, stating that it was a Seychelles company with legal status. Afterward, Mossack Fonseca continued to help Pangates close its business in Seychelles and sent the company a $ 1100 invoice to cover its commission for the service, while asking for an online money transfer or via the Fonseca bank account in New York.

Until August 2015, no more than a year after the sanctions were imposed on Pangates International Corp, Mossack Fonseca recognized the sanctions’ list and rushed to obtain ownership details, invoices, or any specific information about Pangates managers in Dubai and Maxima in the Middle East.

In August 2015, Mossack Fonseca finally acknowledged that these companies were on international sanctions lists.

Al-Assad’s maternal cousin 

Leaked documents from the Mossack Fonseca law firm revealed details about working with Rami Makhlouf, who is the maternal cousin of the dictator Bashar Al-Assad.

Early in 2008, the US Treasury Department had identified Makhlouf as being an official of the Syrian regime, who improperly benefited from and contributed to materializing the corrupt practices of regime officials, froze his bank accounts in the USA and prevented companies or persons from dealing with him.

Later that year, it was widely announced that the United States had placed some of Makhlouf’s companies on the sanctions’ list.

All this changed in 2010 when the authorities in the British Virgin Islands requested information about Drex Technologies, which is a company owned by Makhlouf that had merged with Mossack Fonseca years ago.

Staff at Mossack Fonseca looked for information that had been widely circulated for years and quickly found out about Makhlouf’s political connections.

At this point, when the files were revealed, an official at Mossack Fonseca wanted to disengage with Makhlouf right away, but one of the partners resisted, hoping that the company would not lose its business.

Partner, Chris Zollinger, wrote to his colleagues: “There are rumours, but there are no facts, no official investigations, and no indictments.”

Zollinger had briefed his colleagues on conversations between Mossack Fonseca and HSBC Bank (a Britain-based bank through which most of Makhlouf’s financial transactions were made), as the bank confirmed to the legal services department that the HSBC offices in Geneva and London knew about Makhlouf’s situation and were comfortable to collaborate with him.

“If this bank does not have any problem with Rami Makhlouf, then we can accept him too,” said Zollinger. However, he finally agreed to cut ties with Al-Assad’s cousin after a long discussion with his colleagues and after the escalation of official investigations on Makhlouf’s financial empire.

Zollinger recently told Süddeutsche Zeitung that he regrets commenting on the subject via email which was the wrong step to take, adding that Mossack Fonseca does not have any influence over the companies associated with Makhlouf, who did not respond when asked to comment.