The FinCEN Leak - The Israeli Angle

Leaked Suspicious Activity Reports submitted to the U.S. Treasury Department detail unusual transfers involving five companies and raising concern over possible money laundering. Leviev’s lawyer: "The money transfers involve companies outside Leviev’s circle of companies and over which he had no control."

The FinCEN Leak - The Israeli Angle

Bank report: Suspicious money transfers between Lev Leviev and his former partners

Leaked Suspicious Activity Reports submitted to the U.S. Treasury Department detail unusual transfers involving five companies and raising concern over possible money laundering. Leviev’s lawyer: "The money transfers involve companies outside Leviev’s circle of companies and over which he had no control."

Leaked Suspicious Activity Reports submitted to the U.S. Treasury Department detail unusual transfers involving five companies and raising concern over possible money laundering. Leviev’s lawyer: "The money transfers involve companies outside Leviev’s circle of companies and over which he had no control."

Uri Blau, Washington

Photo: Yossi Zeliger

September 20, 2020

Summary

C

ompanies owned by Israeli businessman Lev Leviev are at the center of a Suspicious Activity Report (SAR) submitted by JPMorgan Chase Bank to the U.S. Treasury Department, the contents of which appear here in print for the first time.

Attached to the report was an Excel spreadsheet detailing money transfers over a two-year period between five affiliated companies in the diamond industry, and between these five companies and customers and suppliers. It mounted to the enormous tune of some $769 million. Leviev was mentioned in the report because during the period in question, he or his daughter, Chagit Sofiev-Leviev, held a 50-percent ownership stake in two of the companies - Elefant Diamonds LLC and Taly Diamonds LLC. The money transfers in the accounts of these two companies during the period to which the report refers amounted to around $123 million.

Alongside thousands of other SARs, the document with Leviev’s name was submitted to the U.S. Congress as part of the investigation into Russia’s alleged involvement in the 2016 U.S. presidential election campaign. Leaked originally to BuzzFeed News, the SARs were then passed on to the International Consortium of Investigative Journalists (ICIJ), after which they were reviewed and analyzed by around 400 journalists from 108 media outlets worldwide. Shomrim - The Center for Media and Democracy and the writer of this piece are the ICIJ’s Israeli partners. See accompanying article for more on the leak.

Photo: ICIJ

It’s important to stress that the submission to FinCEN of a SAR doesn’t mean that the individual or company mentioned in the document has done anything illegal. The transactions to which the report refers could be part of totally legitimate business activities that were carried out in a manner that aroused the suspicion of the financial institution that reported them.

The bank minces no words when outlining the suspicions that formed the basis for submitting report, noting that some of the transfers appear atypical of the diamond business and the customers’ patterns of activity

The JPMorgan report relates to a series of money transfers totaling $769,662,239 that were made between 2014 and 2016 in nine accounts belonging to the five companies. The authorized signatories for most of the accounts are the same individuals, and so, for example, one individual (along with others) had signing rights for six of the accounts, two others were authorized to sign for four of the accounts, and so forth.

Leviev’s daughter, Chagit Sofiev-Leviev, is the authorized signatory for three of the accounts that had high volume transfers. The bank report outlines money transfers from one of Elefant’s business accounts, for example, in the amount of around $70 million between March 2014 and June 2016; and one of the Taly Diamonds accounts lists transactions of more than $18 million in about a year and a half, between June 2014 and November 2015.

The bank minces no words when outlining the suspicions that formed the basis for submitting report, noting that some of the transfers appear atypical of the diamond business and the customers’ patterns of activity. The report also alleges suspicious activities in connection with the beneficiaries of the accounts, the authorized signatories and their owners. Some of the transactions, the bank claims, were cash transfers that give rise to concerns of layering, a term used to describe efforts to make the source of illegal money as difficult to detect as possible by progressively adding legitimacy to it. A sum of close to $60 million, the report says, was recorded as relating to "a loan" in the context of "a home," but the report doesn’t elaborate.

the bank claims, were cash transfers that give rise to concerns of layering, a term used to describe efforts to make the source of illegal money as difficult to detect as possible by progressively adding legitimacy to it

$769 million in 2 years. Diamond mine in Russia (photo: ALLROSA web site)

Leviev has been at the center of public attention for the past decade. He lost his holdings in Africa Israel after a debt settlement; his son was arrested on suspicion of diamond smuggling; and an employee of a company he controls committed suicide following questioning by the authorities. The JPMorgan report doesn’t address these issues, but some of the companies it mentions have starred in the media due to legal battles between their controlling shareholders.

In 2012, Leviev dissolved a business partnership he had established a decade earlier with the Julius Klein Group. The move led to years of legal wrangling in the United States, accompanied by bad press for everyone involved in the case. A year after the partnership was dissolved, Leviev filed a lawsuit in New York against his former partners, alleging that the Klein Group had ostracized him and left him in the dark regarding his own business. The lawsuit alleged that since September 2012, he hadn’t received any profits from the joint company, KLG Jewelry. Leviev asked the court to prevent his former partners from selling rare diamonds in their possession. The dispute between the parties went into arbitration, and in March 2017, a New York Federal Court judge ruled in favor of Leviev, awarding him $209 million.

Despite the ongoing legal battles and bad blood between the partners, and in tandem with them, the JPMorgan report details the transfer of funds between companies controlled by the plaintiffs and defendants

In another instance, Leviev's daughter, Chagit, was sued by her former partners in Taly Diamonds LLC for allegedly taking control of the liquidation of the company and carrying out "a fire sale" of its diamond inventory.

Despite the ongoing legal battles and bad blood between the partners, and in tandem with them, the JPMorgan report details the transfer of funds between companies controlled by the plaintiffs and defendants. KLG, for example, transferred $3,049,100 to the Julius Klein Group on November 6, 2014, and more than $2 million about a week later.

The report also mentions money transfers to LLD Diamonds, which made headlines in 2018 in the wake of a police investigation into allegations that the company had used a network of couriers to smuggle diamonds worth 300 million shekels from Russia to Israel, and vice versa. The suspects in the case included Leviev's son, Zevulun, and the company's CEO, Reuven Shmuelov.

Mazal Hadadi, a company employee who was interviewed in connection with the case, fell to her death from the 10th floor of the Diamond Exchange building in Ramat Gan following her questioning, with media reports raising several questions concerning the circumstances of her death, including the location of the small window from which she fell and various other signs. The state prosecution subsequently announced that the police investigation had yielded no evidence of criminal involvement in her death.

The JPMorgan report details numerous money transfers to LLD. Taly Diamonds, for example, made dozens of transfers to the company, with the sums ranging from tens of thousands of dollars to millions.

Speaking on behalf of Leviev's group of companies, Attorney Charles Michael said that the companies have no knowledge of the existence or preparation of a Suspicious Activity Report. According to Michael, the money transfers in question involve companies outside Leviev’s circle of companies and over which he had no control. Furthermore, the attorney said, the transactions were conducted from 2014 onward, a period in which Leviev’s companies pulled out of the partnerships or announced their intention to do so. "Leviev's group of companies has done absolutely nothing wrong," Michael said. "The authorities in the United States, or anywhere else in the world, have not accused the companies of anything. I urge you to act responsibly and refrain from making use of unverified documents to reach unjustified conclusions."

spokesman for the Julius Klein Group sent the following comment: "As a leading Diamond establishment for more than two generations, Julius Klein hasmeasured up to two of the Industry’s most strict codes of conduct: The De Beers Group BestPractice Principles (BPP) and the RJC - the world’s leading standard-setting organisation forthe entire jewellery and watch industry. These two independent sets of ethical, social and environmental guidelines are carefullymonitored by third parties to ensure full compliance.These schemes include the requirement to have a policy on Money Laundering, TerrorismFinancing and other financial offences, including a commitment that all entities comply withnational and, where appropriate, international legislation and regulations with respect tomoney laundering and other financial offences".

Taly Diamonds and Elefant Diamonds Did not reply to Shomrim’s questions.