August 12th, 2022


'Panama Papers' could help go after Assad's wealth

Eli Lake & Josh Rogin

By Eli Lake & Josh Rogin Bloomberg View

Published April 8, 2016

Syria's democratic opposition is combing through this week's release of the "Panama Papers" to revitalize efforts to identify and freeze billions of dollars amassed by the family and friends of their country's dictator, Bashar al-Assad.

The papers, leaked from the Panamanian law firm Mossack Fonseca, have uncovered a web of shell companies and offshore accounts hiding wealth tied to prominent officials around the world. Among them are new disclosures about Rami and Hafez Makhlouf, the cousins of Assad who are estimated to have once controlled more than half of Syria's economy. The papers also document millions of dollars' worth of real-estate holdings belonging to Suleiman Marouf, an Assad ally based in London.

The Coalition for a Democratic Syria, a U.S.-based group that supports members of the opposition who are not jihadis, told us this week the new information could be a map to uncovering Assad's ill-gotten wealth.

"For decades, the Assad family has stolen billions from the Syrian people and used it to fuel their indiscriminate slaughter, but we can now point to an exact path for these funds," said Yahya Basha, the coalition's chairman. "We call on all bodies of the U.S. government to work to stop this despicable practice."

A U.S. Treasury spokeswoman, Betsy Bourassa, declined to comment specifically on the new information about the Makhlouf brothers or Marouf. But she said, "It is important to note that the U.S. government intently focuses on investigating possible illicit activity, including violations of U.S. tax laws or sanctions, using all sources of information, both public and non-public."

The Panama Papers come to light at a moment when the U.S. government has reduced the public pressure on Assad. Until recently, the Obama administration had called on Assad to step down from power. President Obama himself argued that after the Syrian leader turned his military on the civilian population in 2011, he lost legitimacy.

Now the U.S. has changed its tone. In the latest round of diplomatic negotiations, Secretary of State John Kerry and other U.S. officials have said they would accept a peace deal that allowed Assad to stay in power for a period of transition while the country prepares for elections.

The trove of documents from Panama gives Assad's opposition a new form of leverage against his regime: money. "The initial challenge in doing asset recovery is identifying assets and being able to prove those assets are stolen assets, to prove the nominal owner is not the rightful owner," said David Tafuri, a lawyer who has worked with Libya's transitional government and Syria's democratic opposition on asset recovery. "To the extent these documents demonstrate this, it provides the clues the opposition needs to track down the assets and take legal action to recover them."

Tafuri was part of the effort in 2011 to hand over the frozen assets of the Qaddafi regime to the Libyan opposition during the nation's civil war. The U.S. government resisted handing over funds until the Libyan opposition became the officially recognized government. In the end the new Libyan government got only a small fraction of the regime's estimated wealth.

In 2012, Syria's opposition tried to begin the hunt for Assad's assets on its own, but the effort was never fully financed. Tafuri told us that U.S. government officials at the time had indicated they would be willing to help out with the asset recovery effort once a full campaign was under way. President Obama in December 2012 said that the Syrian National Coalition was the "legitimate representative" of the Syrian people, but it's unclear whether the U.S. government will help the Syrian opposition go after the funds now.

Bourassa on Wednesday declined to comment on whether the Treasury was willing to assist such an effort today.

Rami Makhlouf, who was in charge of several Syrian state-owned enterprises before the crisis began, has been sanctioned by the U.S. government since 2008 for benefiting and aiding the public corruption of the Syrian regime. He controlled access to Syria's telecommunications, commercial, oil, gas and banking sectors, according to the Treasury Department.

Hafez, Rami's brother, was the head of Syria's General Intelligence Directorate and has been sanctioned by the U.S. since 2007 as part of an effort to punish Syrian leaders for undermining the sovereignty of neighboring Lebanon.

In May 2011, a few months into the Syrian government's crackdown on public protests, the EU sanctioned both brothers. Those sanctions extended to the British Virgin Islands, where the shell companies controlled by the Makhloufs were incorporated. The financial investigation agency of the British Virgin Islands at that time was already months into an investigation of Drex Technologies SA, the shell company Makhlouf used to control Syriatel, Syria's biggest telecommunications firm.

The papers have disclosed new information about three shell companies used by the Makhlouf brothers -- Pangates International, Maxima Middle East Trading and Morgan Additives Manufacturing. Despite multiple warnings, Mossack Fonseca officials remained on the boards of the Makhloufs' companies until September 2011. Mossack Fonseca, according to Le Monde, continued to advise Pangates International well into 2012.

The documents also show that HSBC helped the brothers maintain their Swiss bank accounts even after the two came under scrutiny from the EU in 2011 for their role in the military campaign against Syrian citizens. HSBC also repeatedly advised Mossack Fonseca to continue doing business with the Makhloufs. HSBC however froze the Swiss bank accounts affiliated with the Makhloufs in September 2011.

Former Treasury Department official Matthew Levitt said that in addition to private efforts to freeze the Syrian regime's offshore wealth, the revelations in the Panama Papers could lead to new investigations of all of the actors connected to the regime's corrupt business practices, including HSBC.

Mossack Fonseca might be vulnerable to sanctions against entities that are considered "super facilitators" of corrupt practices.

"It has ramifications for sanctions evasion. There are all kinds of cases that can come out of this," he said. "These offshore banking communities are going to get a lot more scrutiny."

More broadly, those doing business with the Syrian regime and its cohorts will now face increased risk, making any interactions with Assad's cronies less attractive as money-making opportunities, said Levitt.

For the Syrian opposition, getting Assad's money is not the most important issue. The larger goal is to pick away at the legitimacy of the Syrian regime and the banks and lawyers who enable it.

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Eli Lake is a Bloomberg View columnist who writes about politics and foreign affairs. He was previously the senior national security correspondent for the Daily Beast. Lake also covered national security and intelligence for the Washington Times, the New York Sun and UPI, and was a contributing editor at the New Republic.

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