U.S. Government Seizes $150 Million in Connection with Hizballah-Related Money Laundering Scheme

The United States has seized $150 million in connection with a civil money laundering and forfeiture complaint filed in December 2011 alleging a massive, international scheme in which entities linked to Hizballah, including the now-defunct Lebanese Canadian Bank (LCB), used the U.S. financial system to launder narcotics trafficking and other criminal proceeds through West Africa and back into Lebanon, announced Preet Bharara, U.S. Attorney for the Southern District of New York, and Michele M. Leonhart, the Administrator of the U.S. Drug Enforcement Administration (DEA).

In September 2011, Société Générale de Banque au Liban (SGBL) agreed to purchase most of the assets of LCB. At least $150 million in purchase price funds related to that sale are being held in escrow in Lebanon at the Banque Libano Française SAL (BLF). The seized funds are substitutes for the money in the LCB escrow account at BLF and came from an account at a U.S. bank that is used by BLF to conduct U.S. currency transactions (the “correspondent account”). The funds were seized pursuant to seizure warrants issued on Aug. 15, 2012. There are no allegations of wrongdoing against BLF, SGBL, or the U.S. bank that maintains the correspondent account for BLF in the United States.

U.S. Attorney Bharara said, “Money is the lifeblood of terrorist and narcotics organizations, and while banks which launder money for terrorists and narco-traffickers may be located abroad, today’s announcement demonstrates that those banks and their assets are not beyond our reach. We will use every resource at our disposal to separate terrorists and narco-traffickers, and the banks that work with them, from their illicit funds, even those hidden in foreign accounts.”

DEA Administrator Leonhart said, “As we alleged last year, the Lebanese Canadian Bank played a key role in facilitating money laundering for Hizballah-controlled organizations across the globe. Our relentless pursuit of global criminal networks showed that the U.S. banking system was exploited to launder drug trafficking funds through West Africa and into Lebanon. DEA and our partners are attacking these groups and their financial infrastructure while establishing clear links between drug trafficking proceeds and terrorist funding.”

According to the complaint, the affidavit in support of the seizure warrants and other documents filed in the case:

From approximately January 2007 to early 2011, at least $329 million was transferred by wire from LCB and other financial institutions to the United States for the purchase of used cars that were then shipped to West Africa. Cash from the sale of the cars, along with the proceeds of narcotics trafficking, were funneled to Lebanon through Hizballah-controlled money laundering channels. LCB played a key role in these money laundering channels and conducted business with a number of Hizballah-related entities. Hizballah is a U.S. Department of State designated Foreign Terrorist Organization, a Specially Designated Terrorist, and a Specially Designated Global Terrorist.

On Feb. 10, 2011, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a finding and proposed rule under provisions of the USA Patriot Act that LCB is a financial institution of primary money laundering concern, based on among other things FinCEN’s determination that there was reason to believe that LCB had been routinely used by drug traffickers and money launderers operating in various countries in Central and South America, Europe, Africa, and the Middle East. FinCEN also determined that there was reason to believe that LCB managers were complicit in the network’s money laundering activities.

After the FinCEN action, another Lebanese financial institution, SGBL, acquired the assets and liabilities of LCB for $580 million, $150 million of which is being held in an escrow account at BLF (the “LCB escrow funds”). Because the LCB escrow funds are traceable to the assets of LCB, they are also subject to forfeiture; but since they are in an account in Lebanon, the United States is unable to seize the LCB escrow funds directly. However, under U.S. law, the United States can seize funds located in a bank’s correspondent accounts in the United States if there is probable cause to believe that funds subject to forfeiture are on deposit with that bank overseas. Based on this provision and others, the seizure warrants were executed. A total of $150 million was seized from BLF’s correspondent account. These funds will be transferred to a seized asset account maintained by the U.S. Marshals Service pending resolution of the forfeiture action.

U.S. Attorney Bharara thanked the DEA for its leadership and praised the New York Organized Crime Drug Enforcement Strike Force for its outstanding work on this investigation, which he noted is ongoing. The strike force is comprised of agents and officers of the DEA, the New York City Police Department, Immigration and Customs Enforcement’s Homeland Security Investigations, the New York State Police, the IRS Criminal Investigation Division, the U.S. Marshals Service, Alcohol, Tobacco, Firearms and Explosives, the FBI, and the U.S. Attorney’s Office for the Southern District of New York. The strike force is partially funded by the New York/New Jersey High Intensity Drug Trafficking Area, which is a federally funded crime fighting initiative. U.S. Attorney Bharara also thanked the U.S. Department of State, the U.S. Department of the Treasury, the FBI, and the New Jersey State Police for their assistance.

This matter is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Asset Forfeiture Unit. Assistant U.S. Attorneys Sharon Cohen Levin, Michael Lockard, Jason Cowley, and Alexander Wilson are in charge of the case.