Acting deputy assistant director of the Federal Bureau of Investigation’s (FBI’s)

criminal investigative division, Steven D’Antuono, has issued a statement before the US Senate’s  Banking, Housing, and Urban Affairs Committee on combatting illicit financing through anonymous shell companies.

He criticises the US for having one of the world’s lightest requirements for the disclosure of beneficial owners of companies.

D’Antuono says the FBI continues to conduct a plethora of investigations, spanning criminal and national security investigations that have been impacted by the use of shell or front companies by bad actors.

Example cases

He provided the committee with examples of investigations hindered by obscured beneficial ownership information.

These included the Li Fangwei, also known as the Karl Lee investigation. Several of his Chinese shell and front companies were designated by the treasury department’s Office of Foreign Assets Control (OFAC) as the principal supplier to the government of Iran’s ballistic missile programme.

Shell companies

Lee owned a graphite and metallurgical production factory in Dalian, China and was supplying Iran with various military and metallurgical items.

He used Chinese shell and front companies to surreptitiously exploit the US financial system to supply weapons of mass destruction to Iran.

Hard times

Eventually Lee was indicted on seven counts of sanctions violations, and approximately US$7 million was seized from US-based correspondent bank accounts associated with Lee’s foreign based accounts, but D’Antuono says the FBI had a hard time reaching that point.

“During the Karl Lee investigation, the FBI faced numerous hurdles due to the litany of overseas shell corporations,” the FBI officer told the Senate committee, adding that weak know-your-customer procedures at US banks proved a particular hindrance.

Bank assistance

“Thankfully, one bank did collect this information, which enabled the FBI to start to unravel Lee’s illegal…use of the US financial system,” D’Antuono said.

“This fundamental information proved crucial to the investigation but only existed by chance, not by legal requirement,” he added.

Categories: Trade Based Financial crimes News