Indictment of Lebanese Businessman, Tajideen, Points to Bold Methods of Sanctions Enforcement by DoJ and May Trigger Compliance Headaches for Banks

July 14, 2017
By Anna Sayre, Legal Content Writer,

On March 24, 2017, Kassim Tajideen, an international financier and businessman operating a network of businesses in Lebanon and Africa, was charged by the U.S. Department of Justice (DoJ) with evading sanctions by purposefully concealing his association with certain companies, the profits of which were used in part to support the Shiite militant movement Hezbollah. This terrorist group was also designated by the U.S. Department of State as a Foreign Terrorist Organization in 1997. Tajideen, who was extradited from Morocco to the U.S., pleaded not guilty to all 11 counts.

According to a 27-page indictment, Tajideen, in conspiracy with Mr.Imad Hassoun, allegedly restructured his multi-billion-dollar businesses in order to evade U.S. sanctions laws and continue to profit from his businesses. In order to do so, Tajideen masked his involvement by using a complex web of business names and misrepresented his ownership stake during the course of several transactions, including one with food processing giant, Seaboard Corp., known for its Butterball turkey brand.

The conspirators were also charged with conspiracy to commit money laundering as a result of their efforts to “conceal and disguise the nature, the location, the source, the ownership and the control of the proceeds of illegal business transactions.”

In just over seven years, Tajideen succeeded in completing at least 47 fraudulent wire transfers totaling more than $27 million.

An Intricate Corporate Network to Conceal Ownership

Since May 2009, Mr Tajideen has been listed as a Specially Designated Global Terrorist (SDGT) by OFAC. SDGTs are entities and individuals who OFAC finds have committed or pose a significant risk of committing acts of terrorism, or who provide support, services, or assistance to, or otherwise associate with, terrorists and terrorist organizations.

Directly after being ‘blacklisted’ by the Office of Foreign Assets Control(OFAC) in 2009, Tajideen, and his conspirator, Hassoun, utilized different corporate entities over a period of years, such as Epsilon, International Cross Trade Company Limited (ICTC), and Sicam Ltd, to procure and distribute goods throughout the world.

Throughout their conspiracy, Tajideen and Hassoun conducted approximately 15 commercial transactions with U.S. persons using the aforementioned businesses, all the while taking steps to conceal Tajideen’s ownership stake by providing false compliance statements to OFAC and other fraudulent actions.

Tajideen Charges a Departure from the Norm

In the March case, Mr Tajideen, an SDGT,was charged for doing business with U.S. persons without an OFAC license.Namely, by not disclosing his true controlling stake in various companies, Tajideen caused U.S. persons to transact business with those companies, thus allegedly violating U.S. sanctions. Though not technically a controlling stakeholder in these companies, as he owned less than 50% share in each, the DoJ has alleged that Tajideen nevertheless was the “ultimate owner”.

The indictment saysthat,“the business empire utilized different corporate entities over the years, all controlled(bold added)by KASSIM TAJIDEEN…. KASSIM TAJIDEEN was the ultimate owner and chief decision-maker of the business empire, with IMAD HASSOUN acting as confidante and lieutenant. KASSIM TAJIDEEN benefited directly and indirectly from the operation of the business empire.”

It goes on to say that, “the SDGT designation resulted in any property in the United States, or in the possession or control of U.S. persons, in which KASSIM TAJIDEEN had an interest, being blocked, and all U.S. persons were generally prohibited from transacting business with, or for the benefit of, KASSIM TAJIDEEN.”

This is a seeming departure from current OFAC guidance on the subject. According to OFAC’s guidance on its‘50% rule’, control alone does not result in the designated individual’s company being blocked.

OFAC’s 50% Rule

OFAC has issued guidance regarding the circumstances in which any corporate entity –even though it is not listed – will itself become blocked because an SDGT or a Specially Designated National (SDN) has a 50% or more ownership stake in the entity.

The guidance states: “any entity owned in the aggregate, directly or indirectly, 50 percent or more, by one or more blocked persons is itself considered to be a blocked person.”

In this case, however the indictment makes no mention of Tajideen having a 50-percent or more stake in the businesses involved in the allegedly criminal transactions.Instead, the indictment describes Tajideen as the “ultimate owner and chief decision-maker” for such business, while Hassoun acted as a “confidante and lieutenant”.

OFAC indicates in its guidancewith regard to the 50% rule:

“U.S. persons are advised to act with caution when considering a transaction with a non-blocked entity in which one or more blocked persons has a significant ownership interest that is less than 50 percent or which one or more blocked persons may control by means other than a majority ownership interest. Such entities may be the subject of future designation or enforcement action by OFAC.”

Transactions Through Banks

According to the indictment, in order to carry out prohibited transactions after his listing as an SDGT, Tajideen utilized such banks as: Bank of America, BB&T, City National Bank, Emirates NBD Bank, Noor Islamic Bank, Sharjah Islamic Bank, and Mashreq Bank.

The indictment lists multiple transactions that flowed through the U.S. and other financial institutions.For example, “(…) amounts were wire transferred from Epsilon accounts in the UAE into account number ********5232 at Bank of America, and other accounts in the U.S., as payments for goods bought by Epsilon and consigned to Neptune Enterprise in Gambia, Congo Stars in the Democratic Republic of Congo, as well as General Trade Company in the Democratic Republic of Congo.”

A few examples of these transactions are:

Date Received by US Account Holder Amount Originating Bank Account (Epsilon’s account) Country of Origin
May 13, 2014 $342,720.00 Emirates NBD Bank UAE
May 16, 2014 $342,694.80 Emirates NBD Bank UAE
June 11, 2014 $68,544.00 Noor Islamic Bank UAE

Potential Implications for Financial Institution

Though it contained no allegations against any financial institution, the indictment against these Lebanese businessmen may have future compliance and legal implications on several fronts for the banks that processed the payments for goods bought or sold by Mr. Tajideen and Mr. Hassoun’s businesses.

The Bank Secrecy Act (BSA)

In accordance with the BSA, financial institutions are required to have internal controls for money laundering prevention and detection and check whether their clients are suspected money launderers or terrorists and report any suspicious activity to Treasury’s Financial Crimes Enforcement Network (FinCEN) or their own country’s Financial Intelligence Unit.

The indictment against Mr. Tajideen and Hassoun does not state whether there were potential red flags indicating suspicious activity that should have been detected by the financial institutions that processed these transactions. However, this could very well become the subject of a future investigation.

Willful violation charge under the IEEPA

The Department of Justice (DOJ) has the power to investigate and prosecute violations of federal criminal laws, which includes willful violations of sanctions and export controls laws. Under the International Emergency Economic Powers Act (IEEPA), the primary law under which U.S. sanctions programs are issued, it is a crime to willfully violate, or attempt to violate, any regulation issued under the act.

As such, individuals or entities, including financial institutions, may face criminal enforcement action by the DOJ under the IEEPA.

U.S. money laundering prosecution

The Money Laundering Control Act of 1986, codified at Title 18 U.S. Code s.1956, was the first law in the world to make money laundering a crime. It is one of the most powerful anti-money laundering laws in the world. Among other things, section 1956, in general, prohibits anyone knowingly engaging in a financial transaction with illicit proceeds (proceeds of a Specified Unlawful Activity (SUA)) or with the intent to conceal the true source or ownership of the proceeds or in order to avoid the mandatory reporting requirements.

Listed among the more than 220 SUAs that can serve as predicates to a U.S. money laundering prosecution is Section 206 of the IEEPA, which as mentioned above, prescribes penalties for violating the sanctions requirements of the U.S. Treasury Department.

As a SUA, violations under the IEEPA can activate a U.S. money laundering prosecution, when strict conditions are met, against not only Mr. Tajideen and Mr. Hassoun, but also against financial institutions that were involved with processing the criminal funds.

This money laundering violation carries a maximum penalty of 20 years in prison and criminal fines of up to $500,000 for each violation.

An ‘Aggressive Approach’ by the DoJ

The DoJ has been keen to showcase its commitment to the enforcement of sanctions laws and the Tadijeen case has given them an opportunity to do just that.

“This extradition sends a clear message that we are resolved to find and hold accountable those who violate these laws,” said the DoJ’s Acting Assistant Attorney General for National Security, May B. McCord.

The Tajideen case demonstrates the willingness of the DoJ to go above and beyond current guidance and regulations in certain circumstances to hold SGDTs accountable for violations of sanctions laws.  Businesses and financial institutions should therefore take heed and use extreme caution when doing business with entities in which a listed person has a defacto ownership stake, even if those individuals do not technically meet OFAC’s 50-percent rule.

Peter Jeydel, Counsel at Steptoe & Johnson, says “targeting an SDN with criminal charges based on a conspiracy theory is an interesting and aggressive approach, particularly when combined with an effective extradition effort.”

Customer Due Diligence Lessons

As for lessons to be learned from such a case, Mr Jeydel points to practical matters. “This case is all about due diligence.  If an SDN was lurking behind these transactions in a concealed and actively misrepresented manner, as the government has alleged, the most instructive aspect from a compliance perspective would be to know if there were red flags that could have alerted the U.S. persons to the involvement of an SDN.”

Mr. Bruce Zagaris, Partner at Berliner Corcoran & Rowe, suggests that the “strong extraterritorial enforcement of sanctions in this case by the U.S. presages what is likely to continue to occur with respect to North Korean sanctions.” Mr Zagaris says this is true “especially since the U.S. has not succeeded in its use of multilateral institutions to restrain North Korea.”

At any rate, this bold action by the DoJ in taking the time to extradite Tajideen from half way across the world highlights the growing need for compliance professionals to stay diligent and on top of their duties in all circumstances.

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