The U.S. Treasury Department said in a press release on 24 August that two private banks, Infobank of Belarus and First Merchant Bank of the unrecognized Turkish Republic of Northern Cyprus, have been involved in money laundering. According to the U.S. administration, Infobank laundered funds from fraudulent transactions involving Iraq. "Infobank laundered funds for the former Iraqi regime of Saddam Hussein that were derived from schemes to circumvent the United Nations Oil-for-Food (UN OFF) program, including illegal surcharges and inflated contracts," the press release reads. "Proceeds from the illegal surcharges and inflated contracts either were returned to the Iraqi government -- in violation of UN OFF program conditions -- or were used to purchase weapons or finance military training through Infobank and its subsidiary."
"We continue to use our authority under Section 311 of the USA Patriot Act to protect the U.S. financial system from corrupt financial institutions such as these," Stuart Levey, the U.S. Treasury Department's undersecretary for enforcement and head of the Office of Terrorism and Financial Intelligence, commented on the two banks, which were designated under the Patriot Act as financial institutions of "primary money-laundering concern." "Today's designation alerts the global financial community of the threat posed by these entities. It also serves notice to others that there will be significant consequences for institutions that launder tainted money or engage in similar corruption: We will cut you off from the U.S. financial system."
The Treasury Department is authorized to require U.S. financial institutions to take "special measures" against the two designated banks in the event they fail to provide evidence disproving the money-laundering allegations. These measures range from "enhanced record keeping" or "reporting obligations" to the termination of the designated banks' correspondent accounts in the United States.
Infobank on 25 August denied the U.S. charges that it laundered funds for the former regime of deposed Iraqi President Saddam Hussein. "Infobank has in all of its activities strictly followed the spirit and letter of international agreements relating to the fight against the legalization of illegal financial transactions," the bank said in a statement. "We believe that this [allegation] by the U.S. administration was made hastily and we hope that this upsetting incident will be sorted out." Moreover, Belarusian Foreign Ministry spokesman Andrey Savinykh said the same day that the Belarusian authorities had looked into earlier U.S. concerns about Infobank's alleged money laundering but "found no violations."
The U.S. Treasury Department's designation of Infobank as a "primary money-laundering concern" under the Patriot Act follows a report by its Financial Crimes Enforcement Network (FinCEN) (http://www.regulations.gov./freddocs/04-19266.htm).
FinCEN found that Infobank, which was established in Minsk in 1994, is Belarus's 10th-largest bank. (Belarusian media reported that Infobank accounts for some 1 percent of the assets of the entire banking sector in Belarus). Infobank maintains four domestic branches; two additional branches in Russia were closed by Russia's Central Bank in 2001. Infobank is a commercial bank licensed by the Belarusian National Bank to engage in foreign trade, including foreign-exchange transactions. As of 2003, its license was expanded to enable Infobank to carry out banking operations in gems and precious metals.
Shareholders of Infobank include many private Belarusian companies as well as the government, which is a principal shareholder of the bank's capital. In 2001 Infobank sold a 35 percent stake to the Libyan Arab Foreign Bank, which is fully owned by the Central Bank of Libya. FinCEN said Infobank maintains correspondent accounts with several European banks and at least one bank in New York City.
In addition to banking operations, Infobank is involved in a number of business ventures through a network of affiliated entities, joint ventures, and its subsidiary -- Belmetalenergo. These ventures include Bel-Cel, a cellular telecommunications corporation; Systems Business Management, a joint venture that specializes in project finance in the Middle East and Eastern Europe; and MAZ-MAN, a tractor-manufacturing company. FinCEN stated that Infobank and its subsidiary, Belmetalenergo, have procured and financed weapons and military equipment for several countries considered by the Unites States to be "state sponsors of terrorism." FinCEN added that until the collapse of the Hussein regime, Belmetalenergo brokered various contracts with the former Iraqi government for the provision of military equipment and training for Iraqi armed forces in violations of relevant UN resolutions.
Furthermore, FinCEN asserted that Infobank continues to maintain funds in accounts established for the Central Bank of Iraq, thus violating UN Security Council Resolution 1438 (UNSCR 1483), which requires UN member states to transfer funds and other financial assets of the previous Iraqi government to the Development Fund of Iraq. According to FinCEN, until now, the Belarusian government has not taken steps to transfer Infobank funds in compliance with UNSCR 1483.
Quoting information from a "variety of sources," FinCEN stated that in 2001 Belmetalenergo entered into contracts to purchase oil from the Iraqi State Oil Marketing Organization (SOMO) -- which was overseen by the UN -- and secretly agreed with SOMO to pay illegal surcharges and deposit them into Infobank accounts for the benefit of the then-Iraqi government. Belmetalenergo also entered into contracts for the provision of humanitarian aids to Iraq, in which the value of the goods that were actually provided was inflated. FinCEN claims that the funds derived from the illegal surcharges and the inflated oil-for-food contracts were laundered through several other banks and shell companies. Finally, proceeds from these illegal operations were either returned to the Iraqi government or used to purchase weapons or finance military training through Infobank and Belmetalenergo, according to FinCEN.
The charges of the U.S. Treasury Department are in line with reports in some Russian, Polish, and independent Belarusian print media that have suggested links between Infobank and murky Belarusian-Iraqi trade deals. "Nezavisimaya gazeta" revealed shortly before the U.S.-led intervention in Iraq in 2003 that an obscure organization called the Iraqi-Belarus Friendship Society chartered flights from Belarus to Iraq with secret cargoes. It turned out that the society was registered at the same address as Infobank and Infobank Chairman Viktar Shastou served as head of this organization.
The Polish weekly "Wprost" in 2002 suggested links between Infobank and the trade of illegal weapons. According to "Wprost," the most important intermediaries in money-laundering operations involving Infobank were Belmetalenergo and Capital and Business Management, a company registered in Vienna. The illegally earned money from Capital and Business Management, the paper wrote, was reportedly transferred to the accounts of several dozen offshore companies in the Cayman Islands, the Isle of Man, and Jersey and subsequently transferred to foreign representations of Belarusian firms.
Finally, Ron Synovitz, an RFE/RL correspondent in Iraq, discovered in Baghdad in April 2003 a faxed letter from a tank-repair plant in Barysau. The letter was addressed to someone named Uladzislau Rachkevich. The letter suggested that the Barysau plant offered Iraq training, along with advice on additional mine-sweeping equipment on tanks and camouflaging combat vehicles. Rachkevich turned out to be the head of Systems Business Management, of which Infobank was a co-founder. Today, Rachkevich is general director of Bel-Cel, in which Infobank holds a stake.