How did DAN GERTLER, the diamond dealer from Kabila, find his tax haven at Afriland Congo bypassing American sanctions? (the world, bloomberg, global witness)

dan gerteler and afriland

A year ago, in June, a group of bankers entered a US Treasury office in Washington to perhaps fulfill one of the most important missions of their careers: to save a country from financial collapse. Among them, Willy Mulamba, the highest executive of Citigroup Inc. in the Democratic Republic of Congo, a country rich in mineral resources but extremely poor in Central Africa.

Mulamba, a 51-year-old Congolese banker who returned to the Congo after years abroad, was part of a small, desperate team to dissuade U.S. Treasury officials from cutting the Congo out of the U.S. banking system, despite scandals of corruption swirling around President Joseph Kabila, who recently left office, had infected several local banks. Global companies, including ING Groep NV and Commerzbank AG, had stopped processing most Congo dollar transactions for fear of violating United States anti-money laundering rules or sanctions imposed on generals, government officials and, in particular, December 2017, to one of Kabila’s most important financiers. : Dan Gertler. The Israeli billionaire had amassed a fortune “through hundreds of millions of dollars in opaque and corrupt mining and oil operations,” said the US Department of the Treasury.

AFRILAND FIRST BANK, A TAX PARADISE IN THE HEART OF KINSHASA

Back in Kinshasa, the capital of the Congo, the bankers felt reassured. They held a press conference asserting their intention to tighten controls, and Mulamba issued a clear warning. “I ask our banks and our monetary and political authorities to focus on the issues of combating money laundering and the financing of terrorism,” he said. “We are a strategic sector and we must be protected.” For anyone who knew Congolese finance, what he said was obvious: stop holding suspicious money, because one misstep could ruin us all.

What the bankers did not know was that a kilometer and a half from the main boulevard of Kinshasa from where the press conference took place, in a two-story building with reflective windows, a bank had made holding money suspects its business model, according to documents provided in Paris based on the anti-corruption group Platform to Protect Whistleblowers in Africa, known by its French acronym Pplaaf, and shared with Bloomberg News.

The bank was the Congolese subsidiary of the Cameroonian group Afriland First Bank. Citigroup did not process dollar transactions for the unit, but it did serve the parent company – one of two so-called correspondent banks doing so, according to Afriiland’s website.
In January 2018, a few weeks after the United States imposed sanctions on Gertler, a family friend named Shlomo Abihassira entered Afriland’s headquarters in Kinshasa and opened an account for a newly registered company with the unpronounceable name RDHAGD Sarlu, according to bank documents. Over the next five months, Abihassira, who lives in Israel, made 17 deposits for a total of $ 19 million. In August, he transferred the funds all at once to another Afriland account registered with a company called Dorta Invest SAU, according to bank records. Dorta Invest, created by French businessman Elie-Yohann Berros, has sent most of the funds abroad to recipients, most of whom are not identified in the documents.

Just over a year after Abihassira opened the account, whistleblowers shared with Pplaaf a cache of Afriiland documents describing the flow of money. With the help of London-based anti-corruption NGO Global Witness, the researchers spent more than a year understanding the deals. They went through publicly available business registers, corporate statements and social media.

They discovered a network of companies that emerged in the Congo after the sanctions came into effect. Although Abihassira and Berros say they have no financial ties to Gertler, their associations with others related to the Israeli businessman raise questions about whether they actually helped him continue to do business after restrictions are put in place.
Whatever conclusions ultimately are drawn about Gertler’s relations with Afriland, the undisclosed informal links offer a glimpse of what could be described as the last mile problem for financial sanctions regimes.

Regulatory authorities in Washington may impose significant know your customer obligations on banks such as Citigroup. But on the fringes of the banking sector, in corners of the world where corruption prevails, rules based on legal concepts such as beneficial ownership or majority control may seem ineffective in the face of personal loyalties, unwritten obligations and documents. impenetrable business. Ultimately, it is a system that relies on whistleblowers to reveal the truth.

“This is how, despite the sanctions, Gertler seems to have continued to reap the vast financial benefits of his commercial activity in the DRC – a country where more than 72% of the population lives on less than $ 1.90 per day”, wrote Pplaaf and Global Witness. in a report released Thursday. The report says organizations cannot prove that the network was used to evade US sanctions and that it does not allege any criminal behavior.
Gertler declined to comment on this story or the report. But in a series of letters to Bloomberg News and the two groups, his lawyers for Carter-Ruck in London said that the Afriland documents did not show that Gertler was involved in the avoidance of sanctions. The lawyers said he had no business relationship with Abihassira or Berros. They also said that the bank documents had been stolen, that some of the documents had been forged and that an internal audit had revealed that one of the whistleblowers had stolen money from accounts of independent clients. Neither Afriland nor Gertler’s lawyers have provided evidence for this latest request or evidence that documents had been fabricated.

Bloomberg, Le Monde in Paris and TheMarker, a trade publication in Israel, had access to the documents, conclusions and other information before the report was published. Over the course of several months, Bloomberg independently obtained additional documents and interviewed people on three continents involved in banking operations in the Congo and the United States and knowing the application of the sanctions to confirm and complete the conclusions.

The report describes how Gertler appears to have been connected to a complex structure to move money abroad, with more than a dozen front companies, subsidiaries, local and foreign intermediaries and an octogenarian living in Moscow. Although bank documents open a window to the network, they do not show why the transactions were made or where, in many cases, the money ended up. But they offer clues. Afiland was at the center of the network. At the end of 2018, deposits from businesses and individuals linked in one way or another to Gertler represented more than a third of the total of the Kinshasa unit, which had almost quintupled to $ 279 million compared to the year previous, according to an audit of PwC examined by Bloomberg. Whether Afriland knows it is dealing with Gertler dollars or that its compliance procedures are not deep enough, the bank and its employees face possible sanctions and fines if they break US law.

Afriland RDC and its parent company in Cameroon did not respond to many requests for comment. The Congo unit told Global Witness and Pplaaf that it had not violated any regulations or helped any of its customers to bypass US sanctions.

ABIHASSIRA, GERTLER’S PROXY AT AFRILAND?

Abihassira, whose father is the rabbi of Gertler in Israel, said in an email that he opened the account with Afriland to invest in real estate in Kinshasa and that the name of the company represented Royal Development Housing and General Design. Abihassira, who had little experience in the Congo, confirmed the deposits and transfers to Dorta Invest. He said he was returning money he had borrowed from Berros after he gave up on his real estate dreams.

Patrick Klugman, a lawyer in Paris who represents Berros, matched the account by Abihassira. He said his client was a businessman whose investments in Congo had nothing to do with Gertler. This lack of connection does not help explain why, just a week after the sanctions were imposed, Berros created a company with the same name – Fleurette Mumi Holdings – as the one previously used by Gertler. Or why Abihassira hired a lawyer who worked for Gertler to register his business. Or why Berros and Abihassira opened accounts in the same small Congolese bank that Gertler, his companies and several associates used.

Abihassira said the moment was fortuitous and that he did not know that the Congolese lawyer he had hired had worked for Gertler. Lawyer Simon Niaku said in an email that he had not helped Gertler or any of his companies since the sanctions had been imposed and had never met him, although his signature th -mail bore the name and logo of Jarvis Congo, one of Gertler’s sanctioned entities. . In less than an hour, Niaku sent a second email asking Bloomberg to ignore anything that didn’t concern him in the previous message. He did not respond to a follow-up email asking him to connect to Jarvis.

Berros told Global Witness and Pplaaf that he copied Gertler’s company name because he saw it as an entrepreneurial model.
No other businessman has exercised Gertler’s influence in the Congo in the past two decades. A descendant of Israeli diamond dealers, he mastered the family business when he was a child. At the age of 23, Gertler landed in the Congo, entering the ruins of Mobutu Sese Seko’s 32-year reign. A rabbi from Kinshasa introduced him to Joseph Kabila, then 26, who became army chief after his father, the rebel leader, overthrew Mobutu. The young Kabila took over the presidency four years later.

In more than 20 years of friendship, Gertler lobbied the White House on behalf of Kabila, conducted secret peace talks and became the Congo’s honorary consul in Israel. At first, Gertler dealt with precious stones, at one point having a monopoly on diamond exports from the Congo. But the real riches of the country are its copper and cobalt deposits. Gertler began to facilitate access for mining companies such as Glencore Plc and Eurasian Natural Resources Corp. Instead of selling precious stones, Gertler was now dealing with huge mines and oil fields.
The United States Department of Justice has opened investigations into Glencore and the New York hedge fund Och-Ziff Capital Management LLC. The Serious Fraud Office in the UK has launched separate probes on Glencore and ENRC. Among other things, investigators looked at the deals involving Gertler.

Gertler’s offshore leasing companies and its networks

In a 2016 agreement with the Department of Justice and the Securities and Exchange Commission, Och-Ziff, later renamed Sculptor Capital Management Inc., admitted his role in a corruption plot in Africa. An unidentified Israeli businessman, allegedly Gertler in a related civil case, has paid more than $ 100 million to Congolese authorities for more than a decade to gain access to mineral rights. Gertler was not charged with any crime in this or any other case, and he denied it. Glencore said it was cooperating with the investigations, and ENRC said it had done nothing wrong.
Meanwhile, Kabila’s hold on power was easing. He won elections in 2006 and 2011, but the constitution prohibited him from running for a third term. He delayed the vote, and when his security forces tortured and killed protesters, the United States imposed sanctions on some of his generals to force him to hold elections and stop human rights abuses. When it didn’t work, it was after Gertler, who “acted for or on behalf of Kabila”, created offshore leasing companies, the Treasury said when the government announced action in December 2017.

The sanctions prohibited Gertler, any company in which he had a controlling interest, and 19 designated entities related to him from doing business with American banks or actually trading in dollars. All assets under US jurisdiction could also be frozen. In June 2018, the Treasury added 14 other entities to the list because of their alleged links to Gertler.
Shortly before the December 2017 announcement, Gertler reinstated and relocated several of its companies to the Congo from offshore jurisdictions. Fleurette Mumi Holdings Ltd., a company registered in the British Virgin Islands that collects royalties from the two copper and cobalt mines at Glencore, has been transferred to Congo and renamed Ventora Development Sasu, according to company records. The entity that had exploration rights for an oil block on the eastern border of the Congo has also been relocated and renamed. And Gertler has created a new holding company in Congo called Gerco SAS, whose owners are his wife and nine members of his family, according to the documents.

Some banks in Congo, including Citigroup, had long refused to take Gertler as a customer, according to people familiar with the industry. But Afriland has opened accounts for his new companies, as well as for Gertler, according to bank documents. The same was true for Pieter Deboutte, Gertler’s long-time chief of operations in the Congo, also punished. Deboutte said the funds in his account were intended for private use. In total, Pplaaf has received records for 20 accounts which can be traced back to Gertler or to people related to him via administrators, lawyers, addresses or joint participations. Some, including those of Gertler and Ventora, are in euros or Congolese francs. Others are in dollars.

Banks that transact with the United States financial system, whether based in the United States or abroad, are generally prohibited from processing payments involving sanctioned entities and individuals. Transactions in euros or other currencies can also go against the Treasury Department if they involve an American person or if they are deemed to have the purpose of evading sanctions. In addition, the United States calls for caution when considering transactions with entities that a sanctioned person “may control by means other than a controlling interest.”

The registers of the 20 bank accounts of the Gertler network

Since money often flowed between businesses or individuals and sometimes seemed to ebb, it is impossible to calculate a total without double counting certain funds. But Berros’ Dorta Invest was probably the biggest beneficiary, recording $ 49 million in deposits in five months.

A week after the sanctions were imposed, Berros registered in Hong Kong a company called Fleurette Mumi Holdings, which has the same name as one of Gertler’s BVI entities. Berros told Global Witness and Pplaaf that he had started planning the business before Gertler was sanctioned, but never got permission to use the name. His lawyer, Klugman, said that Berros had abandoned the project when he heard of the sanctions.
Berros’ sudden success in securing Congo’s rights also raises questions. One month after registering Evelyne Investissement SAU in September 2018, he obtained the rights to develop cobalt and copper permits bordering one of Glencore’s flagship operations. It was the kind of transaction that Gertler would have been proud of: From nowhere, a new entrant in the industry has positioned itself in the premier league of resource transactions.

In December 2019, Glencore said it had agreed to pay state-owned mining company Gecamines up to $ 250 million for land rights adjoining one of the world’s largest copper-cobalt mines. Some of these sites overlap with those acquired by Evelyne. Glencore said in an email that Gécamines had agreed to return the purchased territory free of any claims from third parties such as Evelyne at the close of the transaction and that it had obtained assurances that none of its funds would benefit sanctioned entities. Glencore also said he understands that Evelyne is now part of Eurasian Resources Group, the parent company of Gertler ENRC’s former partner, but Berros’ lawyer Klugman said that “his client remains the owner and that neither Gertler and none of his companies were related to Evelyne ”.ERG declined to comment and Gecamines did not respond to requests for comment.

Ruben Katsobashvili, the Muscovite connection
An 87-year-old Moscow businessman by the name of Ruben Katsobashvili loaned Berros $ 10 million for his mining project, said Klugman. A company registered as Katsobashvili also bought its own copper and cobalt deposits for $ 75 million, according to a copy of the deal and Gecamines’ financial statements. Like Dorta Invest, two Katsobashvili-owned companies were established in the Congo shortly after Gertler was added to the sanctions list. Katsobashvili was also the source of the funds Berros invested in the Abihassira real estate project, said Klugman.

A Wikipedia page created by an employee of one of the Katsobashvili companies describes him as a billionaire commodity trader born in Georgia, the former Soviet Republic. The page says that Katsobashvili was a chess prodigy and the CEO and founder of several energy companies. But neither he nor any of these entities appear in the registers of companies in Georgia or Russia. A company it controls in the UK lost 20,844 pounds ($ 250,000) in 2018, according to the latest accounts. And a Swiss company he owns hasn’t filed any paperwork with authorities since 2016, with the exception of a recent change of director, a public register says. Katsobashvili owns a three-room apartment on the seventh floor of a 24-story residential building in a bourgeois district of Moscow. It was valued at around $ 380,000 in 2017, according to Russian land registers. Russian vehicle records show that from 2016 he owned a Peugeot 407. In 2007, when a Bloomberg News reporter called Katsobashvili in June, he gave the phone to his wife, who said he did not hear very well. She referred Bloomberg to Klugman, who also represents Berros. Klugman said that Katsobashvili had created a gold trading company in the Congo in 2012 that had no connection with Gertler, but Bloomberg could find no trace of it in public company records.
How Gertler, Berros, Katsobashvili and others came to have accounts with Afriland is a story that begins in 2006, when the bank opened an office in Congo.

In 2018, Afriland’s total assets more than tripled over the previous year to $ 351 million, according to the PwC audit

The founder of Afriland, Paul Fokam, presents himself more as an anti-poverty messiah than as a banker, evangelizing to generate wealth through basic businesses. The expansion of the bank has also made him wealthy. Forbes says he has a fortune of $ 900 million, which makes him the second richest man in French-speaking Africa, a region of more than 20 countries.

People familiar with the bank say that until Gertler was sanctioned, they could not remember a transfer of more than $ 500,000 or the subsidiary holding more than $ 2 million in cash there. But in 2018, Afriland’s total assets more than tripled from the previous year to $ 351 million, according to the PwC audit. Banking revenue more than doubled to $ 16 million that year, with transfer and exchange fees accounting for 80% of the total.
In Congo and Cameroon, as in the United States, banks are required to know their customers and report suspicious transactions to regulators. They are supposed to determine who owns an account or who makes a transfer, what is the reason for the transaction and where they got the funds. Afriland’s due diligence leaves much to be desired, according to the documents provided to Pplaaf. For one person who withdrew $ 14 million from the Dorta Invest account, the bank registered only one name.

PwC did not raise questions in its audit regarding Afriland’s customers, even though it cited a loan of € 28.5 million to “a company which is a related party to another company under the control of authorities sanctions ”. The auditor did not suggest that this transaction was related to Gertler and said that it did not affect its overall conclusion. PwC declined to comment, saying it could not discuss customer matters. Fokam did not respond to requests for comment sent to the bank and the institute he directs.
As global lenders began to limit their exposure to Congolese banks as part of a burgeoning US sanctions program, it has become difficult for Afriland’s Congo branch to find a partner to offset its dollars. She therefore had to rely on her Cameroonian parent company to do business in American currency, a practice known as nesting. This entity has two correspondent banks that have enabled Afriiland’s customers in the Congo to access the US financial system. One of them is City Bank Group

Correspondent banks are required to exercise due diligence with respect to the financial institutions they serve – to know their customers in anti-money laundering language. But they are not required to do the same for their clients’ clients, unless they suspect that these clients are dealing in illicit funds. Citigroup said it could not comment on customers but that its network of correspondent banks “fully complies with local and international laws”.

A person familiar with the biggest customers of the Afriland unit in Congo recently scanned the list of companies identified during the PwC audit, identifying them one by one. Almost everyone, said the person, was related to Gertler.

GERTLER’S STATUS IN CONGO HAS NOT CHANGED AFTER THE SANCTIONS

Gertler, who lives in Israel, tried to lift the sanctions. He hired former FBI director Louis Freeh and former Harvard law professor Alan Dershowitz, who represented Donald Trump at his impeachment trial, to help plead the case. Dershowitz acknowledged in an email that he was working to have Gertler removed. Freeh did not respond to requests for comment.

For some time, despite the sanctions, Gertler’s status in the Congo has not changed much. And Kabila, who made it possible to hold elections in December 2018, retains immense influence even if his handpicked successor did not win. The new president, Felix Tshisekedi, formed a coalition with Kabila, whose allies obtained dominant majorities in both chambers of parliament, as well as control of most governorates and provincial assemblies. The main cabinet ministers of Tshisekedi are Kabila loyalists. Despite evidence of fraud obtained through leakage of electronic polling data showing that neither Tshisekedi nor Kabila’s candidate won the election, the results remained valid.

Erich Ferrari, a Washington lawyer representing Kabila, said in a letter marked “cease and desist” that the elections were legitimate, certified by the Congo’s constitutional court and accepted by the United States and the United Nations. He also denied that the legal basis for the sanctions against Gertler had nothing to do with his alleged dealings with Kabila or that those against his government officials were intended to coerce him into holding elections.
Desperate to receive financial support from the International Monetary Fund and other donors, Tshisekedi has taken steps to eradicate corruption. In December, a prosecutor opened an investigation into how Gécamines used a 128 million euro loan that Gertler granted to the mining company before the imposition of sanctions. This kind of control by the Congolese authorities is unprecedented. Although Gertler is not being investigated, government mine officials have questions about the destination of the money, two people familiar with the matter said. In June, Tshisekedi’s chief of staff was found guilty of corruption and sentenced to 20 years in prison, a verdict he appealed.

If the spotlight shines on the Afriland unit in the Congo, it could make matters worse for Gertler. It could also put pressure on Citigroup to end its banking relationships with Afriiland’s parent company, or cause the United States to take further action – the scenario that Willy Mulamba feared when meeting with Treasury officials. ‘last year.
However, recent anti-corruption actions have given him some hope. “The new government recognizes the need to be part of the global financial ecosystem if the country is to attract investment flows and see growth,” said Mulamba. “As such, they work with Citi, the United States government and others to make it happen. “

If this does not happen, a former president, a businessman and a small bank could ruin a country more deeply.

An investigation by Le Monde, Bloomberg, Global Witness / UK and The Marker

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