A Hamburg bank is suspected of being a ‘financial hub’ for Iranian terror.

POLITICO has reported that

• An investigation has led Varengold Bank to all but close commercial banking operations.
• Varengold Bank A small Hamburg bank was at the centre of a clandestine financial network Iran relied on for years to funnel money to its terror proxies in the Middle East, including Hezbollah in Lebanon and Yemen’s Houthi rebels, officials from two Western intelligence agencies say.
• Western intelligence flagged evidence to German financial authorities that the Islamic Republic was using Varengold Bank AG to fund its terror affiliates, leading to a sweeping investigation that has forced the bank to all but shut down its commercial banking operations.

Money laundering concerns

German financial regulator Bafin announced an investigation into Varengold last year, citing money laundering concerns, but did not disclose the suspected links between the bank and Tehran’s terror network.

Varengold denies any wrongdoing and insists that its dealings with Iran were limited to the shipment of humanitarian aid, including medical equipment and food.

A Varengold spokesperson said in a statement to POLITICO.

• “Our customers in the commercial banking or payment transaction business are mainly producers and global wholesalers of food and pharmaceuticals,”
• “In this context, the bank supports, for example, exporters and importers in processing payments for urgently needed humanitarian goods that were not subject to EU or US sanctions.”

Yet according to Western intelligence sources, some of the Iranian front companies that used Varengold are linked to Iran’s Quds Force, an affiliate of the Islamic Revolutionary Guard Corps (IRGC) that trains and finances Iran’s terror proxies in the Middle East.

Instead of handing the IRGC and Quds Force cash to fund their clandestine operations, Iran's central government grants them allotments of oil, which they then sell, primarily to China, via a labyrinthine underground financial network to skirt sanctions.

The advantage for the buyer is that the price of the sanctioned crude is significantly lower than market rates.

Bank transfers and invoices viewed by POLITICO detailed some of the dealings between Varengold and known Iranian front companies that are part of the secret network, including two firms sanctioned by the U.S. government for their connections to the Quds Force.

The Varengold spokesperson said the bank was unaware of any links between its customers and the Quds Force.

The affair has also raised questions about why Varengold’s auditor, PwC, gave the bank a clean bill of health. A spokesman for PwC declined to comment.

One of the intelligence officials said

• Adding there had been ample reason to suspect something was amiss at the bank.
• “No one ever connected the dots,”
• “In recent years Varengold has become a financial hub for the Iranians to transfer funds to Europe.”

Signs of trouble

The first signs of trouble at Varengold emerged last year.

On June 2, Varengold announced that Bafin had begun a probe into its commercial banking division and issued a profit warning. The news had a devastating impact on Varengold’s share price, triggering a more than 70 percent collapse. With its core payments business all but paralyzed, Varengold was forced to lay off about 20 percent of its workforce of some 100 employees.

On August 3, Bafin said in a press release

• It had discovered “high money laundering risks and grave deficits” with Varengold’s compliance safeguards.
• “Credit institutions like Varengold Bank must ensure that they are not abused for money laundering or terror financing,” Bafin said, without making specific accusations that such abuse had occurred.

The danger of terror financing was not a theoretical one, according to the western intelligence officials, all of whom spoke to POLITICO on the condition that they not be named in order to discuss privileged information.

By the time the authority began investigating the bank, the officials said, Varengold had already laundered billions in illicit transactions.

As part of Bafin’s intervention, the authority barred Varengold from carrying out transactions with entities and persons connected to Iran — a pillar of its business. Bafin also installed a special auditor to supervise the bank’s activities and ensure it didn’t violate the regulator’s orders.

Underground economy

Many of the transfers under scrutiny involved what Bafin referred to as “payment agents" — suspected Iranian front companies — that held accounts in Varengold.

Iran relies on front companies to launder the proceeds from the sale of oil and petrochemicals, primarily to China and Russia, the officials said. Those transactions are often disguised as humanitarian aid, which isn’t sanctioned.

Under U.S. sanctions imposed on Iran in connection with its nuclear program, foreign companies and banks that conduct business with the Islamic Republic outside of humanitarian aid risk severe penalties, including being barred from the U.S. market.

One of the front companies that appears in transaction records related to Varengold is

• Hong Kong-registered Hua Gong HK Trading Ltd.
• It was founded in October 2018, shortly after the U.S. began to reintroduce sanctions against Iran.
• Western diplomats say Hua Gong is a front company operated by the Tahayyori Guarantee Society, one of Iran’s biggest “money exchange houses,” or clearinghouses for illicit foreign transactions.

On June 5,

• 2020 Hua Gong submitted a request to Varengold to transfer €201,617 to Geneva-based Royys Capital, which officials said is also controlled by Iran.
• The transfer request is part of a trove of financial documents published by WikiIran, an opposition website, and independently verified by POLITICO.
• Neither Hua Gong nor Royys could be reached for comment.
• Royys went into liquidition in July, just weeks after German authorities moved in on Varengold.

Another Varengold transaction to catch investigators’ attention involved two Turkey-registered firms.

• In April 2021, Istanbul-based Baslam Transport and Foreign Trade billed Rain Trade Gida Ic Ve Dis Ticaret Limited Sirketi, also of Istanbul, €5.5 million for “sunflower seed oil,” which the latter paid via its Varengold account.
• Investigators believe the deal really involved payment for Iranian crude.
• On December 8, 2022, the U.S. government sanctioned Rain Trade “for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the IRGC-Quds Force.”
• That same day, Washington also sanctioned Baslam for seeking “to facilitate the illicit sale of Iranian oil to purchasers in the People’s Republic of China.”

SOURCE

https://www.politico.eu/article/hamburg-bank-suspected-as-financial-hub-for-iranian-terror/