A US federal indictment has charged Ali Sadr Hasheminejad with thwarting American sanctions against Iran, laundering money and committing bank fraud. In response, the Maltese Financial Services Authority has removed him as chairman of Pilatus Bank, a private bank with offices in London and Malta, and frozen all the bank's local assets.

The MFSA's directive states that it has directed the bank "not to transact any business whatsoever, irrespective of the client or the counterparty." In doing so it has invoked Article 4B Banking Act (Cap 371). In relieving him of all his duties at the bank it has invoked Article 14(10) and in suspending the exercise of his voting rights as shareholder and restraining him from representing the bank legally, it has invoked Article 4B(1). The head of compliance at the bank is Dr Claude-Anne Sant Fournier.

Sadr was charged with participating in a scheme in which more than US$115 million (€93 million) in payments for a Venezuelan housing complex were illegally funneled through the US financial system for the benefit of Iranian individuals and entities. The FBI’s New York Field Office was involved in the investigation.

Sadr has been arrested on a six-count indictment and has appeared at the US District Court for the Eastern District of Virginia. Ever since 1979, various US presidents, invoking the International Emergency Economic Powers Act (the IEEPA), have said repeatedly that the actions and policies of the government of faraway Iran constitute an unusual and extraordinary threat to the national security, foreign policy and economy of the United States. In accordance with these presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities. This sanctions regime prohibits, among other things, financial transactions involving the US (or American citizens in general) that were intended for the benefit of the Government of Iran or Iranian people and firms.

In August 2004, the Governments of Iran and Venezuela signed a co-operative agreement that covered certain areas of common interest. The following year, they supplemented this agreement by signing a memorandum of understanding (MoU) regarding a project in Venezuela that involved the construction of thousands of housing units.

The project was led by Stratus Group, an Iranian conglomerate controlled by Sadr and his family with international business operations in the construction, banking, and oil industries. In December 2006, Stratus Group incorporated a company in Tehran, which was then known as the Iranian International Housing Corporation (IIHC). IIHC was responsible for construction on the project. Thereafter, IIHC signed a contract with a subsidiary of a Venezuelan state-owned energy company which obliged it to build approximately 7,000 housing units in Venezuela in exchange for approximately US$475.7 million (€385.2 million). Stratus Group created the Venezuela Project Executive Committee to oversee the project. Sadr was a member of the committee and was responsible for managing the project’s finances.

In connection with his job on the project, Sadr allegedly took steps to evade US economic sanctions and to defraud US banks by concealing the role of Iranian parties in US dollar payments that went through the US banking system. For example, in 2010, Sadr and a co-conspirator used St Kitts and Nevis passports and a United Arab Emirates address to incorporate two entities outside Iran that would receive US dollar payments related to the project on behalf of IIHC. The first entity, Clarity Trade and Finance, was incorporated in Switzerland and the second, Stratus International Contracting (aka Stratus Turkey or Straturk), was incorporated in Turkey. Stratus Turkey and Clarity were both owned and controlled by Sadr and his family members in Iran. Sadr then opened US dollar bank accounts for Clarity and Stratus Turkey at a hitherto-unnamed financial institution located in Switzerland.

Thereafter, Sadr and others allegedly conducted a series of international financial transactions using Clarity and Stratus Turkey for the benefit of Iranian parties in a manner that concealed the Iranian nexus to the payments, in breach of US economic sanctions. Between April 2011 and November 2013, the VE Company, at the direction of Sadr and others, made approximately 15 payments to IIHC through Stratus Turkey or Clarity, totalling approximately $115 million (€93.14 million).  

The indictment accuses Sadr and others of ordering payments to be routed through banks in the US to Stratus Turkey’s or Clarity’s bank accounts at the financial institution in Switzerland.  The majority of the funds were then transferred to another offshore entity located in the British Virgin Islands, which (the indictment says) had been incorporated by Sadr and others in 2009. In addition, on 1 February 2012, Clarity allegedly transmitted more than $2 million of proceeds from the Project directly into the United States. Those proceeds were then used to purchase real property in California, according to the US Deparment of Justice.

The indictment charges Sadr with: one count of conspiracy to defraud the United States, which carries a maximum penalty of 5 years in prison; one count of conspiracy to violate the IEEPA, which carries a maximum penalty of 20 years in prison; one count of bank fraud which carries a maximum penalty of 30 years in prison; one count of conspiracy to commit bank fraud which carries a maximum penalty of 30 years in prison; one count of money laundering, which carries a maximum penalty of 20 years in prison; and one count of conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison.