[EXPLAINER] Why has Malta’s Pilatus Bank chairman Ali Sadr been arrested in the United States?

Who has been arrested?

Ali Sadr Hasheminejad, 38-year-old chairman of Malta-licensed private bank Pilatus and scion of the Hashemi family, whose Stratus Group is involved in construction.

The arrest is the result of an investigation launched by Geoffrey S. Berman, United States Attorney for the Southern District of New York, in 2013 into Hasheminejad and an illicit scheme to funnel millions from Venezuela to Iranian-controlled entities. In Berman’s words, “the defendant’s conduct strikes at the very heart of what U.S. economic sanctions are designed to prohibit.”

Why is he important?

Pilatus Bank was thrust into the spotlight over allegations by the assassinated journalist Daphne Caruana Galizia, that it held a bank account for the Maltese Prime Minister’s wife or processed a $1 million transfer from the Azerbaijani ruling dynasty to her. The claims were strongly denied, with the prime minister requesting a magisterial inquiry into the allegation and Pilatus complying with the investigation. As it happens, the alleged whistleblower in the case turner herself to Greek police this week: she is wanted in Cyprus for alleged fraud and in Malta to testify in a fraud case filed against her by Pilatus Bank.

Hasheminejad’s father is Mohammad Sadr Hashemi, chairman of Stratus Group Holding, one of the richest men in Iran.

Pilatus Bank employees on their way to work the day after the allegations were made that the bank processed a $1 million transfer to Michelle Muscat

What is the illicit scheme Hasheminejad was arrested on?

In 2005 the governments of Iran and Venezuela entered into an agreement for an infrastructure project that involved the construction of thousands of housing units in Venezuela. The project was led by Stratus Group, an Iranian conglomerate controlled by Hasheminejad’s family. In December 2006, Stratus Group’s subsidiary Iranian International Housing Corporation entered into a contract with a subsidiary of a Venezuelan state-owned energy company to build 7,000 housing units for approximately $475,734,000. Stratus Group created the Venezuela Project Executive Committee to oversee the execution of the project.  Hasheminejad was a member of the committee and responsible for managing the project’s finances.

Former Iranian president Mahmoud Ahmadinejad (left) with the late Venezuelan president Hugo Chavez

What is Hasheminejad being accused of?

Hasheminejad is believed to have taken steps to evade U.S. economic sanctions and defraud U.S. banks by concealing the role of Iran in U.S. dollar payments sent through the U.S. banking system.  For example, in 2010, using his St Kitts and Nevis passports, he incorporated two entities outside Iran to receive U.S. dollar payments on behalf of IIHC.  The first entity, Clarity Trade and Finance was incorporated in Switzerland, and the second ‘Straturk’ was incorporated in Turkey.

He then opened U.S. dollar bank accounts for the two companies at a financial institution located in Switzerland to carry out financial transactions and conceal the Iranian nexus to the payments, in violation of U.S. economic sanctions. Specifically, between April 2011 and November 2013, the Venezuela Project Executive Committee made approximately 15 payments to IIHC through Stratus Turkey or Clarity, totalling $115,000,000.

What is exactly wrong here?

Using his passport and companies outside Iran, Hasheminejad tried to evade sanctions by routing the payments through banks in the United States 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 had been incorporated by Hasheminejad and others in 2009.  In addition, on February 1, 2012, Clarity wired more than $2,000,000 of proceeds from the project directly into the United States.  Those proceeds were then used to purchase real property in California.

Is Pilatus Bank involved?

We don’t know yet. You have to appreciate the centrality of Switzerland and the Swiss banking system in the entire saga: Pilatus is one of the country’s highest mountains, and the bank’s ownership is held by the holding company Alpine Limited.

Geoffrey S. Berman is an American lawyer currently serving as the Interim United States Attorney for the Southern District of New York

READ MORE: David Casa wants British authorities to act fast on Pilatus’s London branch

How serious are the charges Hasheminejad faces?

He faces 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 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.

If found guilty, he will not face the combined total of 125 years in prison, but the highest number of years applicable from any one charge he is found guilty of.