[Federal Register Volume 78, Number 80 (Thursday, April 25, 2013)]
[Notices]
[Pages 24596-24599]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-09785]


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DEPARTMENT OF THE TREASURY

Financial Crimes Enforcement Network


Notice of Finding That Halawi Exchange Co. Is a Financial 
Institution of Primary Money Laundering Concern

AGENCY: Financial Crimes Enforcement Network, Treasury (``FinCEN'').

ACTION: Notice of finding.

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SUMMARY: This document provides notice that the Director of FinCEN 
found on April 22, 2013, that Halawi Exchange Co. (``Halawi Exchange'') 
is a financial institution operating outside the United States that is 
of primary money laundering concern.

DATES: The finding referred to in this notice was effective as of April 
22, 2013.

FOR FURTHER INFORMATION CONTACT: FinCEN, (800) 949-2732.

SUPPLEMENTARY INFORMATION: 

I. Statutory Provisions

    On October 26, 2001, the President signed into law the Uniting and 
Strengthening America by Providing Appropriate Tools Required to 
Intercept and Obstruct Terrorism Act of 2001 (the ``USA PATRIOT Act''), 
Public Law 107-56. Title III of the USA PATRIOT Act amends the anti-
money laundering provisions of the Bank Secrecy Act (``BSA''), codified 
at 12 U.S.C. 1829b, 12 U.S.C 1951-1959, and 31 U.S.C. 5311-5314, 5316-
5332, to promote the prevention, detection, and prosecution of 
international money laundering and the financing of terrorism. 
Regulations implementing the BSA appear at 31 CFR Chapter X. The 
authority of the Secretary of the Treasury (the ``Secretary'') to 
administer the BSA and its implementing regulations has been delegated 
to the Director of FinCEN.
    Section 311 of the USA PATRIOT Act (``Section 311''), codified at 
31 U.S.C. 5318A, grants the Secretary the authority, upon finding that 
reasonable grounds exist for concluding that a foreign jurisdiction, 
financial institution, class of transaction, or type of account is of 
``primary money laundering concern,'' to require domestic financial 
institutions and financial agencies to take certain ``special 
measures'' to address the primary money laundering concern.

II. The Extent to Which Halawi Exchange Is Used for Legitimate Business 
Purposes in Lebanon

A. Halawi Exchange

    Halawi Exchange offers a variety of financial services, primarily 
currency exchange and transmission of funds. Halawi Exchange, along 
with other related entities, is organized under a holding company known 
as Halawi Holding SAL, which also owns several other related companies 
in Lebanon. The Halawi companies are based in Beirut, Lebanon, share 
key corporate leadership, maintain offices at the same addresses, share 
common phone numbers and common email addresses, and frequently 
reference their close connection to one another. They are also 
regularly displayed together on corporate signage and on public 
materials, one of which shows them

[[Page 24597]]

collectively under a banner which reads ``Collaboration Under One 
Thumb.''
    Available information suggests that Halawi Exchange, in addition to 
the activities of concern discussed below, engages in other, 
unremarkable transactions of a type, volume, and variety typical of 
Lebanese exchange houses or brokerages. If these services were offered 
to U.S. customers and if they took place wholly or substantially in the 
United States, the Halawi Exchange would be treated as a financial 
institution under the BSA, defined at 31 CFR 1010.100(t)(3). 
Specifically, Halawi Exchange offer services that would be defined as 
money transmission, activities defined at 31 CFR 1010.100(ff), in 
addition to other services it may offer.
    Halawi Exchange identifies itself as ``a family business under the 
Halawi group.'' In 2012, Halawi Exchange expanded to cover five 
branches in Lebanon and a sister company in London under the name 
``Halawi Exchange Co. LTD.'' It lists its partners as Mahmoud Halawi 
and Ali Halawi who, according to Halawi Exchange, maintain ``daily 
involvement in management and operations of the company.'' Halawi 
Exchange also advertises that it operates in the Sudan, United Arab 
Emirates, Saudi Arabia, Qatar, Kuwait, Bahrain, Jordan, the United 
Kingdom, and Australia.
    Mahmoud Halawi is the sole or majority owner and senior management 
officer at Halawi Exchange, Halawi Holding SAL, and Halawi Investment 
Trust SAL. He is also President of the Money Changers Association in 
Lebanon. His son, Fouad Halawi, is a Director at Halawi Holding SAL and 
has served as a manager at Halawi Exchange.

B. Lebanon

    Lebanon is a financial hub for banking activities in the Middle 
East and eastern Mediterranean and has a sophisticated banking 
sector.\1\ There are 72 banks operating in Lebanon,\2\ and all major 
banks have correspondent relationships with U.S. financial 
institutions. The five largest commercial banks account for an 
estimated 61% of total banking assets for the country, which are 
estimated at $95 billion.\3\ The government retains no direct ownership 
of any commercial banks and maintains an indirect ownership stake in 
one bank.\4\ Despite slowed economic growth following domestic 
political instability and regional turmoil in 2011, Lebanon's banking 
sector continues to rely on significant capital inflows from the 
Lebanese diaspora community,\5\ which has been a large contributor to 
banking sector liquidity and capitalization, estimated by the World 
Bank at $7.6 billion--18% of GDP--in 2011.\6\ Banks' exposure to the 
heavily-indebted sovereign, with total government debt projected at 
132% of GDP in 2012, remains a significant risk to stability and growth 
of the financial sector.\7\
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    \1\ ``2012 International Narcotics Control Strategy Report 
(`INCSR'),'' Bureau of International Narcotics and Law Enforcement 
Affairs, The Department of State, March 7, 2012, www.state.gov/g/inl/rls/nrcrpt/2010/vol2/137212.htm).
    \2\ ``Complete List of Operating Banks in Lebanon,'' Banque du 
Liban (www.bdl.gov.lb). www.bdl.gov.lb/bfs/CB/index.htm as of 1/30/
2013.
    \3\ Estimated from values in the ``2012 Investment Climate 
Statement--Lebanon,'' Bureau of Economic and Business Affairs, June 
2012 Report. www.state.gov/e/eb/rls/othr/ics/2012/191182.htm.
    \4\ ``2012 Index of Economic Freedom,'' The Heritage Foundation. 
http://www.heritage.org/index/country/lebanon.
    \5\ ``2012 Investment Climate Statement--Lebanon,'' Bureau of 
Economic and Business Affairs, The Department of State, June 2012 
Report. www.state.gov/e/eb/rls/othr/ics/2012/191182.htm.
    \6\ The latest available World Bank data estimated in November 
2012 that remittances were $7.6bn for 2012. ``Remittances Data: 
Inflows,'' Migration and Remittances, The World Bank, November 2012. 
http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/
0,,contentMDK:21121930~menuPK:3145470~pagePK:64165401~piPK:64165026~t
heSitePK:476883,00.html.
    \7\ ``IMF Executive Board Concludes 2011 Article IV Consultation 
with Lebanon Public Information Notice (PIN) No. 12/11, 
``International Monetary Fund, February 8, 2012. http://www.imf.org/external/np/sec/pn/2012/pn1211.htm.
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    Money exchange businesses became a major feature of Lebanon's 
financial sector during the Lebanese civil war and have played a key 
role in providing services such as international funds transfers, 
currency conversion, and payments and deposits for domestic and 
expatriate Lebanese clientele since 1990. In 2001, Lebanon's Central 
Bank, Banque du Liban (``BdL''), published a set of circulars expanding 
regulations for exchange houses operating in the country.\8\ Since the 
enactment of the 2001 law, 732 money exchange businesses have 
registered with BdL, and currently there are 374 active licensed 
businesses.\9\ Each of these active licensed businesses must process 
payments through business accounts established in Lebanese banks.\10\
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    \8\ BdL, Law 347 Regulating the Money Changer Profession in 
Lebanon, August 6, 2001.
    \9\ BdL, List of Exchange Institutions, May 2012, http://www.bdl.gov.lb/bfs/MS/Money_Dealers_arabic.pdf.
    \10\ BdL, Intermediate BdL Circular 264, dated May 21, 2011, 
pages 3-4, http://www.bdl.gov.lb/circ/intpdf/int264_en.pdf.
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    Lebanon also faces money laundering and terrorist financing 
vulnerabilities \11\ due to weaknesses in its Anti-Money Laundering/
Combating the Financing of Terrorism (``AML/CFT'') regime, porous 
borders, ineffective and inconsistent regulation, and a challenging and 
complex domestic and regional political and security environment, among 
other factors. Of concern is the possibility that a portion of the 
substantial flow of remittances could be associated with trade-based 
money laundering and other illicit finance activities. For example, 
Lebanon imposes currency reporting requirements on banks and money 
exchange businesses that undertake cross-border cash and precious metal 
activity,\12\ but has no corresponding cross-border declaration 
requirement for the public at Lebanese points of entry, resulting in a 
significant cash-smuggling vulnerability.
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    \11\ 2012 INCSR.
    \12\ Special Investigation Commission, Intermediate BdL Circular 
263, dated May 21, 2011, http://www.sic.gov.lb/circular263.shtml.
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    These vulnerabilities have been recently exploited to support 
trade-based money laundering. FinCEN identified Lebanese Canadian Bank 
(``LCB'') as an institution of primary money laundering concern in 
February 2011 (the ``LCB 311 Action''),\13\ which was preceded by the 
Office of Foreign Assets Control's (``OFAC's'') designation of Lebanese 
Ayman Joumaa as a Specially Designated Narcotics Trafficker (``SDNT''), 
as well as of three Lebanon-based money exchange businesses used by 
Ayman Joumaa and his organization to launder illicit proceeds, Elissa 
Exchange Company, Hassan Ayash Exchange, and New Line Exchange Trust 
Co., under the Foreign Narcotics Kingpin Act Designation in January 
2011.\14\ In the LCB 311 Action, FinCEN determined that LCB was 
facilitating the money laundering activities of the Joumaa drug 
trafficking and money laundering network. This network moved illegal 
drugs from South America to Europe and the Middle East via West Africa 
and laundered hundreds of millions of dollars monthly through accounts 
held at LCB, as well as through trade-based money laundering involving 
consumer goods throughout the world, including through used car 
dealerships in the United States. Further, the LCB 311 Action exposed 
the terrorist organization Hizballah's links to LCB and that Hizballah 
derived financial

[[Page 24598]]

support from criminal activities of Joumaa's network.
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    \13\ FinCEN, Finding That the Lebanese Canadian Bank SAL Is a 
Financial Institution of Primary Money Laundering Concern, 76 F.R. 
9403, dated February 17, 2011, http://www.gpo.gov/fdsys/pkg/FR-2011-02-17/pdf/2011-3346.pdf.
    \14\ Press Release, ``Treasury Targets Major Lebanese-Based Drug 
Trafficking and Money Laundering Network,'' 1/26/11, http://www.treasury.gov/press-center/press-releases/Pages/tg1035.aspx; 
Additions to OFAC's SDN list, dated January 26, 2011, http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110126.aspx.
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    Following these Treasury actions, two U.S. Attorney's Offices took 
actions against Ayman Joumaa, Elissa Exchange, and Hassan Ayash 
Exchange. In December 2011, a grand jury in the Eastern District of 
Virginia returned an indictment against Ayman Joumaa for conspiracy to 
distribute narcotics and conspiracy to commit money laundering related 
to drug trafficking by Mexican and Colombian drug cartels.\15\ In 
August 2012, the U.S. Attorney's Office for the Southern District of 
New York (``SDNY'') seized $150 million as part of a civil money 
laundering and forfeiture action against Hizballah-linked LCB, Elissa 
Exchange, and Hassan Ayash Exchange based on money laundering schemes 
involving Ayman Joumaa, the exchange houses, and U.S. car dealers.\16\ 
The ``SDNY Complaint'' listed, by name, 30 U.S. car dealers and a U.S. 
shipping company that facilitated the scheme.
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    \15\ The United States Attorney's Office for the Eastern 
District of Virginia Press Release, ``U.S. Charges Alleged Lebanese 
Drug Kingpin With Laundering Drug Proceeds For Mexican And Colombian 
Drug Cartels'' December 13, 2011, http://www.justice.gov/usao/vae/news/2011/12/20111213joumaanr.html.
    \16\ The United States Attorney's Office for the Southern 
District of New York press release and civil complaint.
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    BdL re-evaluated AML/CFT regulations regarding money exchange 
businesses following the Treasury actions. In May and August 2011, BdL 
revised Lebanon's AML/CFT regulations regarding supervised banks and 
other non-bank financial institutions by publishing seven decisions 
\17\ modifying Law 347 (dated August 6, 2001). BdL required all of 
these active licensed money exchangers to maintain business accounts at 
a formal financial institution, such as a registered Lebanese bank 
subject to BdL supervision, and prohibited exchangers from operating 
accounts at Lebanese banks on behalf of their clients.\18\
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    \17\ In May 2011 Intermediate Decisions 10725, 10726 and 10728 
and in August 2011 Intermediate Decisions 10787, 10789, 10791, and 
10792 were published regarding AML/CFT regulations of exchange 
businesses.
    \18\ BdL, Intermediate BdL Circular 264, dated May 21, 2011, 
pages 3-4, http://www.bdl.gov.lb/circ/intpdf/int264_en.pdf.
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    Despite some improvements to its financial sector supervision, 
Lebanon still has not acceded to the UN Convention for the Suppression 
of the Financing of Terrorism. And Hizballah, an organization which the 
United States designated as a Foreign Terrorist Organization in October 
1997 and a Specially Designated Global Terrorist under Executive Order 
13224 in October 2001,\19\ is a recognized political party with an 
active role in the Lebanese government. Though it has adopted laws 
domestically criminalizing any funds resulting from the financing, or 
contribution to the financing, of terrorism,\20\ the active 
participatory role of a designated terrorist group in the Lebanese 
government and civil society calls into question the broader efficacy 
of Lebanon's AML/CFT regime.


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    \19\ Hizballah is a Lebanon-based terrorist group. Until 
September 11, 2001, Hizballah was responsible for more American 
deaths than any other terrorist organization.
    \20\ For additional information about Lebanon's legal framework 
and special mechanisms for anti-money laundering and terrorist 
financing measures, see The Middle East and North Africa Financial 
Task Force (MENAFATF) Mutual Evaluation Report, Lebanese Republic, 
November 10, 2009 (www.menafatf.org).
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III. The Extent to Which Halawi Exchange and Its Subsidiaries Have Been 
Used To Facilitate or Promote Money Laundering in or Through Lebanon

    According to information available to the U.S. Government, Halawi 
Exchange, its subsidiaries, and their respective management, ownership, 
and key employees are engaged in illicit financial activity. A pattern 
of regular, round-number, large-denomination international wire 
transfers consistent with money laundering are processed through Halawi 
Exchange. Many of these transactions appear to be structured because 
they are separated into multiple smaller transactions for no apparent 
reason. Halawi Exchange facilitates transactions as part of a large-
scale trade-based money laundering scheme that involves the purchase of 
used cars in the United States for export to West Africa. Additionally, 
Halawi Exchange, and its management, ownership, and key employees are 
complicit in providing money laundering services for an international 
narcotics trafficking and money laundering network that is affiliated 
with Hizballah.

A. Past and Current Association With Used Car Trade-Based Money 
Laundering Scheme

    Halawi Exchange facilitates transactions for a network of 
individuals and companies which launder money through the purchase and 
sale of used cars in the United States for export to West Africa. In 
support of this network, management, ownership, and key employees of 
Halawi Exchange coordinate transactions--processed within and outside 
of Halawi Exchange--on behalf of Benin-based money launderers and their 
associates. A significant portion of the funds are intended for U.S.-
based car dealerships for the purchase of cars which are then shipped 
to Benin.
    As of late 2012, Halawi Exchange was primarily used by Benin-based 
Lebanese car lot owners to wire transfer money to their U.S. suppliers. 
The proceeds of car sales were hand-transported in the form of bulk 
cash U.S. dollars from Cotonou, Benin to Beirut, Lebanon via air travel 
and deposited directly into one of the Halawi Exchange offices, which 
allowed bulk cash deposits to be made without requiring documentation 
of where the money originated. Halawi Exchange, through its network of 
established international exchange houses, initiated wire transfers to 
the United States without using the Lebanese banking system in order to 
avoid scrutiny associated with Treasury's designations of Hassan Ayash 
Exchange, Elissa Exchange, and its LCB 311 Action. The money was wire 
transferred indirectly to the United States through countries that 
included China, Singapore, and the UAE, which were perceived to receive 
less scrutiny by the U.S. Government.
    Participants in this network have coordinated the movement of 
millions of dollars per month, a significant portion of which has moved 
through Halawi Exchange. For example, in early 2012, Halawi Exchange, 
its management, its ownership, or key employees were involved in 
arranging multiple wire transfers totaling over $4 million on behalf of 
this network. Additionally, as of mid-2012, central figures in this 
scheme planned to move $224 million worth of vehicle shipping contracts 
through this network via a Halawi-owned Benin-based car lot, which 
receives vehicle shipments from the United States. Mahmoud Halawi was 
heavily involved in the establishment of this car lot, which is run by 
Ahmed Tofeily, a Benin-based money launderer, and continues to be 
involved in its operations. This car lot was established six months 
after the SDNY Complaint. Additionally, Tofeily--a Halawi agent/
employee--owns and operates a car lot in Benin named Auto Deal (AKA Ste 
Auto Deal, Societe Auto Deal) which purchases cars in Canada and 
exports them through the United States. Tofeily worked closely with 
Halawi Exchange and wired all of his money through it. This car lot--
identified as maintaining no brick and mortar structures--has wired 
hundreds of thousands of dollars throughout 2012 from Benin to U.S.-
based car dealerships.

[[Page 24599]]

    From 2008 to 2011, Halawi Exchange, its management, and employees 
sent numerous international wire transfers to U.S.-based used car 
companies consistent with the practice of laundering money through the 
purchase of cars in the United States for export to West Africa. Ali 
Halawi--a partner at Halawi Exchange--is listed by name on many of 
these transfers. A large number of these transfers were sent through 
accounts at LCB, which has been identified by Treasury as a financial 
institution of primary money laundering concern under Section 311 for 
its role in facilitating the money laundering activities of Ayman 
Joumaa's international narcotics trafficking and money laundering 
network. Some of the U.S.-based car dealerships that received funds 
transfers from Halawi Exchange were later identified in the SDNY 
Complaint as participants in the Joumaa network's money laundering 
activities.
    Joumaa's network moved illegal drugs from South America to Europe 
and the Middle East via West Africa and laundered hundreds of millions 
of dollars monthly through accounts held at LCB, as well as through 
trade-based money laundering involving consumer goods throughout the 
world, including through used car dealerships in the United States. 
This criminal scheme involved bulk cash smuggling operations and use of 
several Lebanese exchange houses that utilized accounts at LCB 
branches, as discussed in the LCB 311 Action.
    Halawi Exchange has also worked with other Lebanese exchange 
houses, including Rmeiti Exchange, to facilitate money laundering 
activities. For example, Halawi Exchange, Rmeiti Exchange, and other 
exchange houses sent over $9 million in dozens of round-number, large-
denomination international wire transfers from unknown sources to the 
same U.S. car shipping business from 2007 through 2010.

B. Past and Current Connection to Designated Narcotics Kingpins and 
Their Associates

    SDNTs Ibrahim Chebli and Abbas Hussein Harb regularly coordinated 
and executed financial transactions--including bulk cash transfers--
that were processed through the Halawi Exchange. Harb and Chebli were 
designated by Treasury in June 2012 pursuant to the Kingpin Act for 
collaboration with Joumaa in the movement of millions of dollars of 
narcotics-related proceeds. Harb's Columbia- and Venezuela-based 
organization has laundered money for the Joumaa network through the 
Lebanese financial sector. Additionally, Chebli used his position as 
the manager of the Abbassieh branch of Fenicia Bank in Lebanon to 
facilitate the movement of money for Joumaa and Harb.\21\
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    \21\ Exhibit 25--Press Release, ``Treasury Targets Major Money 
Laundering Network Linked to Drug Trafficker Ayman Joumaa and a Key 
Hizballah Supporter in South America,'' 6/27/11, http://www.treasury.gov/press-center/press-releases/Pages/tg1624.aspx
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C. Past and Current Connection to Another International Narcotics 
Trafficking and Money Laundering Network With Ties to Hizballah

    Management and key employees at Lebanon-based Halawi Exchange and 
members of the Halawi family coordinate, execute, receive, or are 
otherwise involved in millions of dollars worth of transactions for 
members of another international narcotics trafficking and money 
laundering network. For example, high-level management at Lebanon-based 
Halawi Exchange and members of the Halawi family were involved in the 
movement of over $4 million in late 2012 for this international 
narcotics trafficking and money laundering network. Additionally, Fouad 
Halawi, acting in his capacity as a senior official at Halawi Holding, 
was responsible for the receipt and transfer of funds for this 
narcotics trafficking and money laundering network and provided 
accounting services for its senior leadership. To avoid detection, the 
involved parties scheduled structured payments by splitting larger sums 
into smaller, more frequent transactions which they often moved through 
numerous high-risk jurisdictions.
    This additional international narcotics trafficking and money 
laundering network has been involved in extensive international 
narcotics trafficking operations. For example, it is known to have 
trafficked heroin from Lebanon to the United States and hundred-
kilogram quantities of cocaine from South America to Nigeria for 
distribution in Europe and Lebanon. It is also known to have trafficked 
cocaine out of Lebanon in multi-ton quantities. The head of this 
network has operated an extensive money laundering organization, 
including a series of offshore corporate shell companies and underlying 
bank accounts, established by intermediaries, to receive and send money 
transfers throughout the world. It has arranged the laundering of 
profits from large-scale narcotics trafficking operations. Transfers 
coordinated by this network have impacted the United States, Canada, 
Europe, the Middle East, Asia, Australia, and South America. This 
international narcotics trafficking and money laundering network is 
affiliated with Hizballah.
    Additionally, Halawi Exchange is known to have laundered profits 
from drug trafficking and cocaine-related money laundering for a 
Hizballah leader and narcotics trafficker. Halawi Exchange has also 
been routinely used by other Hizballah associates as a means to 
transfer illicit funds.

IV. The Extent to Which This Action Is Sufficient To Guard Against 
International Money Laundering and Other Financial Crimes

    FinCEN's April 22, 2013, notice of finding that Halawi Exchange is 
an institution of primary money laundering concern, along with the 
Special Measures simultaneously proposed pursuant to the Finding, will 
guard against the international money laundering and other financial 
crimes described above directly by restricting the ability of Halawi 
Exchange to access the U.S. financial system to process transactions, 
and indirectly by public notification to the international financial 
community of the risks posed by dealing with Halawi Exchange.

    Dated: April 20, 2013.
Jennifer Shasky Calvery,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2013-09785 Filed 4-23-13; 11:15 am]
BILLING CODE 4810-02-P