In First Use of Section 311 Against a Non-Bank Financial Institution, Treasury
Acts to Protect the U.S. Financial System from Foreign Exchange Houses Tied to
Global Narcotics and Money Laundering Networks and Hizballah
WASHINGTON – The
U.S. Department of the Treasury today named two Lebanese exchange houses, Kassem
Rmeiti & Co. For Exchange (Rmeiti Exchange) and Halawi Exchange Co. (Halawi
Exchange), as foreign financial institutions of primary money laundering
concern under Section 311 of the USA PATRIOT Act (Section 311) – the first time
the Department has used Section 311 against a non-bank financial institution. Today’s action reflects the Treasury
Department’s continuing commitment to target illicit financial networks that
launder millions of dollars in funds for narcotics traffickers and that, in the
process, provide substantial financial benefits to the terrorist organization Hizballah. This action will protect the U.S. financial
system from these activities and expose entities supporting the network of
designated drug kingpin Ayman Joumaa.
“Following Treasury’s action against the Lebanese Canadian
Bank, the Joumaa narcotics network turned to Rmeiti Exchange and Halawi
Exchange to handle its money laundering needs,” said Under Secretary for
Terrorism and Financial Intelligence David S. Cohen. “As our actions against the Lebanese Canadian
Bank, Joumaa and the two exchange houses today make clear, the Treasury
Department, working with our partners across the Federal government, will
aggressively expose and disrupt sophisticated multi-national money laundering
organizations that handle drug proceeds for criminal enterprises including the
terrorist group Hizballah.”
The Treasury Department’s 311 action against Lebanese
Canadian Bank in February 2011, as well as designations in January 2011 of
Ayman Joumaa and two exchange houses, Hassan Ayash Exchange and Ellissa
Exchange, exposed the Joumaa network’s money laundering scheme and forced these
financial institutions out of the U.S. and international financial systems.
Rmeiti Exchange and Halawi Exchange subsequently picked up the
network’s money laundering work, including the trade-based money laundering schemes
involving used car dealerships in the United States and consumer goods from
Asia. Rmeiti Exchange and Halawi Exchange
used their foreign money transmitter businesses to process millions of dollars
on behalf of narcotics traffickers and money launderers, and attempted to
obfuscate the source of illicit funds by comingling or splitting transactions
across a variety of businesses, financial institutions, and continents,
including in the United States.
In conjunction with today’s findings that Rmeiti Exchange
and Halawi Exchange are foreign financial institutions of primary money
laundering concerns, Treasury’s Financial Crimes Enforcement Network (FinCEN)
also issued an order, effective immediately and with a 120-day duration, that
requires U.S. financial institutions to report information on any new or
attempted transactions by Rmeiti Exchange and Halawi Exchange. Treasury also today issued a notice of
proposed rulemaking that, if adopted as a final rule, would continue the reporting
requirement imposed by the order and prohibit any U.S. financial institution
from opening or maintaining a correspondent or payable-through account that is
used to process a transaction that involves Rmeiti Exchange and Halawi Exchange,
effectively cutting off these exchanges from the U.S. financial system.
The Treasury Department will continue to work with the
Lebanese Central Bank and other relevant Lebanese authorities to address
concerns highlighted by today’s action.
These actions would not have been possible without
considerable support from the Drug Enforcement Administration, Customs and
Border Protection, the Federal Bureau of Investigation, and the New Jersey State
Kassem Rmeiti and
Co. For Exchange
Rmeiti Exchange, its ownership, management, and associates
facilitate extensive transactions for money launderers and drug
traffickers. Between 2008 and March 2011,
Rmeiti Exchange and its owner provided at least $25 million in payments to
U.S.-based car dealers and exporters associated with the Joumaa narcotics and
money laundering network. Some of these
car dealers and exporters have been named in a civil money laundering and
forfeiture action against the Lebanese Canadian Bank, drug kingpins Ayman
Joumaa and Ali Mohamed Kharroubi, and Elissa Exchange and Hassan Ayash Exchange,
brought by the U.S. Attorney’s Office for the Southern District of New York.
Rmeiti Exchange and its management have also conducted
financial activities for other money laundering and drug trafficking
organizations operating in both Europe and Africa. Between March 2011 and October 2012, Rmeiti
Exchange facilitated the movement of at least $1.7 million for Beninoise and
Lebanese money launderers and drug traffickers.
This included Rmeiti Exchange and Kassem Rmeiti taking on large cash
deposits, collecting bulk cash currency, issuing cashier’s checks, and facilitating
cross-border wire transfers on behalf of known and suspected money launderers,
drug traffickers, and Hizballah affiliates.
As of December 2011, we believe that Hizballah had replaced
U.S.-designated Elissa Exchange owner Ali Kharroubi with Haitham Rmeiti – the
manager/owner of STE Rmeiti – as a key facilitator for wiring money and transferring
Hizballah funds. Rmeiti Exchange,
through its owner, Kassem Rmeiti, owns STE Rmeiti. Treasury believes that this activity
demonstrates Hizballah’s efforts to adapt after U.S. Government disruptive
actions, and illustrates the need for continued action against its financial
Co. (“Halawi Exchange”)
Halawi Exchange represents a substantial threat to the U.S.
and international financial systems, given its extensive illicit financial
activity on behalf of a variety of international narcotics trafficking and
money laundering networks. Halawi Exchange
often employs deceptive practices to disguise this illicit financial activity
to mislead U.S. and international banking institutions.
Halawi Exchange facilitates transactions for a network of
individuals and companies which launder money through the purchase and sale of
used cars in the United States for export to West Africa. In support of this network, management,
ownership, and key employees of Halawi Exchange coordinate transactions –
processed within and outside of Halawi Exchange – on behalf of Benin-based
money launderers and their associates.
For example, in early 2012, Halawi Exchange, including its management,
ownership, and key employees were involved in arranging multiple wire transfers
totaling over $4 million on behalf of one such money laundering network. As of mid-2012, central figures in this
scheme planned to move $224 million worth of vehicle shipping contracts through
this same network via a Halawi-owned Benin-based car lot, which receives
vehicle shipments from the United States.
As of late 2012, Benin-based money launderers continued to
use Halawi Exchange to wire transfer money to U.S. car suppliers in support of
their money laundering operations. The
proceeds of car sales were hand-transported in the form of bulk cash U.S.
dollars from Cotonou, Benin to Beirut, Lebanon via air travel and deposited
directly into one of the Halawi Exchange offices, which allowed bulk cash
deposits to be made without requiring documentation of where the money
originated. Halawi Exchange, through its
network of established international exchange houses, initiated wire transfers from
its bank accounts to the United States without using the Lebanese banking
system in order to avoid scrutiny associated with Treasury’s designations of
Hassan Ayash Exchange, Elissa Exchange, and its Lebanese Canadian Bank Section
311 Action. Money was then wire
transferred via Halawi’s banking relationships indirectly to the United States
through countries that included China, Singapore, and the UAE, which were
perceived to receive less scrutiny by the U.S. Government.
Additionally, Halawi Exchange is known to have laundered
profits from drug trafficking and cocaine-related money laundering networks for
a leading Hizballah official and narcotics trafficker. Halawi Exchange has also been routinely used
by other Hizballah associates as a means to transfer illicit funds.
To view a Fact Sheet
on Section 311 of the USA PATRIOT Act, visit this link.
To view a chart
related to this action, visit this link
To view the complete
Findings against Kassem Rmeiti & Co For Exchange and Halawi Exchange Co.,
visit this link
To view the Notice of
Proposed Rulemakings, visit this link
To view the Orders
imposing Section 311 Special Measure One, visit this link