Reza Zarrab poses next to stacks of currency in his Istanbul office in this undated photo that was introduced as evidence in the trial of Halkbank executive Hakan Atilla. (Credit: Defense exhibit in U.S. v. Mehmet Hakan Atilla)
About This Investigation: Using the U.S. Freedom of Information Act, OCCRP in 2019 obtained more than 750,000 bank transaction records, previously confidential communications and other documents that were the basis of the U.S. investigation and 2016 prosecution of Reza Zarrab. For more than a year, OCCRP, Courthouse News Service, Sweden’s SVT and other partners analyzed the data in an exclusive database, supplemented it with interviews, Turkish investigative reports and other documents collected from across the Middle East and Europe.
A Turk who hauled massive amounts of gold in a record-breaking sanctions-busting scheme remembers his first conversation about it vividly, some 12 years on.
In 2008, Adem Karahan was recruited to help funnel billions of dollars, first by carrying suitcases full of gold or cash and later as a proxy for companies moving money through bank wires, all to help Iran evade U.S. economic sanctions by delivering illicit cash from oil sales.
In an exclusive interview, Karahan told Courthouse News Service and OCCRP that the boss of the operation, Turkish-Iranian money launderer Reza Zarrab, assured him he had nothing to fear from Turkish authorities.
“The government is in on it,” Karahan recalls Zarrab saying.
When Karahan expressed disbelief, Zarrab added, “You will see it soon.’’
Zarrab was right.
Five years later, Istanbul police pursuing allegations of bribery involving top government officials said exactly the same thing.
And in the U.S. District Court for the Southern District of New York in 2017, Zarrab himself unraveled the international conspiracy that used Turkey’s state-run Halkbank in what prosecutors called a “fraud of global proportions” in violation of U.S. sanctions aimed at curbing Iranian nuclear arms development.
In testimony that rattled U.S.-Turkish relations, Zarrab said Turkish President Recep Tayyip Erdoğan ordered the illicit trade. Zarrab also accused former senior Turkish officials, including former Economy Minister Zafer Çağlayan, of accepting enormous bribes to look the other way.
The scheme, which ran for as long as eight years, made Zarrab fabulously wealthy before he turned 30. In a conservative estimate for the Iran conspiracy, prosecutors said it moved at least $20 billion from 2010 to 2015 alone.
Zarrab was well paid for his work. A Standard Chartered Bank Newark branch Suspicious Activity Report (SAR) filed to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) in late 2016 notes that Karahan once told Turkish authorities that Zarrab charged 8 percent for his services.
The SAR was likely a response to comments from Karahan, who was quoted in Turkish media as saying, “Four percent went to politicians, and four percent went to Zarrab.”
That’s $800 million in three years for Zarrab alone, assuming he paid as much in bribes as Karahan claimed. Turkish officials have said Zarrab shelled out tens of millions of dollars to one politician alone.
The 2013 Turkish bribery investigation was quashed, and police and prosecutors who briefly jailed Zarrab were punished.
Erdoğan also tried to protect the money launderer in 2016 and 2017, when the FBI snared Zarrab as he arrived in Miami, forever interrupting a Florida vacation for him, his Turkish pop-star wife, Ebru Gündeş, and their young daughter.
The Turkish government launched an intense Washington lobbying campaign, seeking to scuttle the case. Erdoğan himself contacted President Donald Trump, asking for Zarrab’s release. It came to nothing.
Zarrab pleaded guilty to various crimes related to fraud and money laundering, and became a government witness in return for leniency. His testimony helped convict Mehmet Hakan Atilla, a Halkbank manager, and he is widely expected to testify again next year when the bank itself stands trial.
Karahan, who for years helped execute the brazen money laundering scheme, said Zarrab has told only part of the story. He said the conspiracy started earlier, lasted longer, extended further, and involved more people and countries than jurors in Atilla’s trial were told.
Speaking through a translator in hours of telephone interviews over several months, Karahan implicated former Iran President Mahmoud Ahmadinejad and a relative of Erdoğan who serves in the Turkish government.
Karahan, who said he started work for Zarrab as a security guard in 2006 before joining the money laundering operation, detailed a variety of smuggling operations. He said he carried gold to Dubai and currency to a number of countries, including Iran, Russia, and the United Arab Emirates, from 2008 to 2013. He said he opened shell companies in his own name at Zarrab’s direction for use in money laundering.
Karahan provided bank records, travel documents, photographs and other evidence to support his claims.
U.S. prosecutors estimated that Zarrab’s money laundering conspiracy started in 2010, but Karahan said the scheme began at least two years earlier, at the time when Zarrab told him about the Turkish government’s involvement.
In fact, the roots of Zarrab’s work on behalf of Iran go far deeper.
‘Economic Jihad’
Born in Tehran in 1983, Zarrab grew up and was educated through high school in Istanbul, where his family had moved when he was a baby. The family moved again in 1999, establishing a residential and business base in Dubai.
The youngest of three siblings, he returned to Turkey three years later to establish a branch of the family business. About a decade later, in letters to Ahmadinejad and the head of Iran’s central bank, he described the family business as having “half a century of experience in foreign exchange.”
U.S. authorities later recovered electronic versions of the letters — what they considered confessions of criminal intent — from Zarrab’s email account.
Zarrab had written Ahmadinejad in answer to Ayatollah Khamenei’s call for “economic jihad” to beat the crippling international sanctions.
“The wise leader of the Islamic Revolution of Iran has announced this to be the year of Economic Jihad,” reads a version of the letter addressed to the head of Iran’s central bank. “The Zarrab family… considers it to be our national and moral duty to declare our willingness to participate in any kind of cooperation in order to implement monetary and foreign exchange anti-sanction policies.”
U.S. prosecutors interpreted the letter, written in December 2011, as an offer to provide services. Karahan said they had that wrong: The correspondence was actually a pledge of continued loyalty, affirming an existing corrupt relationship.
“Ahmadinejad is a good friend of Zarrab’s father,” he said.
When asked in court how he was able to pitch his services directly to the head of Iran’s central bank, Zarrab replied that “acquaintances of my father” arranged a meeting. When asked how he had learned the business of foreign currency exchange, he said, “That’s my father’s profession.”
His father, Hossein Zarrab, was indeed a businessman with close ties to the Iranian government. In October 2012, he was photographed with several officials at the opening of the Zarrab family’s Kaveh Tikmeh Dash Steel Industries Company in northwestern Iran. Ahmadinejad personally approved the project, Iran’s state news agency has reported.
Karahan said he accompanied Reza Zarrab to a 2011 meeting with Ahmadinejad in Tehran.
“We were taking money — euros, dollars and [UAE] dirham,” Karahan said. “We were at the hotel there. Reza called me and said, ‘I’ll meet Ahmadinejad.’ We went and waited outside. They met for 20 minutes, then left.”
Karahan said he was left with the impression that Ahmadinejad was on the take.
“He has been a president of Iran; of course he took a bribe,” Karahan said. “This business wouldn’t happen without a bribe. Wherever Zarrab is, there is bribery.”
Reporters could not independently verify Karahan’s account of the Tehran meeting.
Company records in Iran reveal at least nine legal entities in which both Hossein and Reza Zarrab were board members. Most were established in 2008 to support the family steel business. Shahin Khabbaz Tamimi, Zarrab’s mother, and Sheida Zarrab, his elder sister, were also directors of some of the companies.
Hossein, meanwhile, helped establish businesses that his son would use to launder money for Iran. These included Royal Denizcilik, a Turkish shipping company that later provided cover for illegal money transfers by issuing multimillion-dollar fake food invoices to the Credit Institute for Development, an Iranian bank later sanctioned by the U.S. Treasury’s Office of Foreign Assets Control (OFAC).
Hossein and Reza were among Royal Denizcilik’s shareholders, along with Reza’s mother, Shahin Khabbaz Tamimi, his uncle, Ahad Khabbaz Tamimi, and his brother, Mohammad Zarrab.
Like Father, Like Son
Reza isn’t the only member of the Zarrab family to run afoul of U.S. sanctions.
In April 2013, Hossein Zarrab and his Dubai-based company, Al Nafees Exchange LLC, were fined $9.1 million by OFAC for Iran-linked financial transactions.
But the elder Zarrab has been far more successful in talking his way out of trouble.
In 2014, the fine was reduced to $2.3 million after Hossein claimed Al Nafees was a small and relatively insignificant currency exchange company.
OFAC’s then-director, Adam Szubin, agreed.
“Based on your response, OFAC concluded the following: Al Nafees is a small company with one location in the UAE and is not a sophisticated or complex financial entity,’’ Szubin wrote in a letter to Hossein.
“Al Nafees’ small size and low profitability suggest that it would be unlikely to survive were OFAC to impose the full amount.”
Banking data obtained by OCCRP tells a different story — one that calls into question what OFAC really knew about Al Nafees. Between January 2007 and April 2012, Al Nafees processed some $3.58 billion in financial transactions for thousands of companies around the world.
Much of that money was of dubious origin.
In 2010 and early 2011, for example, nearly $170 million was wired to Al Nafees by Kapital Kiymetli Madenler and Pirlanta Kiymetli Madenler. Those Turkish companies were directed by employees of Reza Zarrab who were identified by Turkish authorities as members of his criminal organization.
Kapital Kiymetli Madenler was fronted by Karahan, who said the firm had “no commercial activity” and was used only to facilitate money transfers that ultimately benefited Iran.
Al Nafees was named in Reza Zarrab’s U.S. indictment in 2015. It is unclear if the company remains in business.
Court exhibits described Al Nafees’ attempts to obscure its illicit business. Company staff stripped Iran-identifying information from documentation for wire transfers processed by U.S. financial institutions for the benefit of Mellat Exchange, an Iranian exchange house owned by the state-owned Bank Mellat. Bank Mellat was itself under U.S. sanctions at the time.
Al Nafees’ high-revenue business is also confirmed in a December 2016 letter from Preet Bharara, then U.S. Attorney for the Southern District of New York, to a federal judge in the Zarrab case. The letter describes $3.02 billion in wire transfers linked to Al Nafees that passed through six U.S. banks beginning in 2007.
And while Hossein told OFAC that Al Nafees operated from a single location in the UAE, the website of Royal Holding, the parent of Zarrab’s business group, advertised locations in Russia, Turkey and China.
U.S. court documents filed in 2016 show that Hossein never even paid the reduced fine, yet he has faced no subsequent sanctions or criminal charges in the U.S. for any of his financial activities.
Jonathan Schanzer, a former Treasury Department terrorism finance analyst, attributes the easy treatment to politics at the time.
“One could argue that this is consistent with a broader Obama administration policy of easing up on Iranian violations during a sensitive period of time during which the JPOA and JCPOA are being negotiated,” Schanzer said, referring to the 2015 Iran nuclear limitation deal known as the Joint Comprehensive Plan of Action, and an interim agreement that preceded it.
Szubin, who was Treasury’s top official dealing with anti-terrorism matters, testified against Reza Zarrab in 2017. He did not respond to a request for comment for this article.
Hossein Zarrab continued to run gold, steel, and other industrial companies in Iran even after the 2013 OFAC fine. In July 2013, he established Kaveh Gold Refining Company, whose stated activities included “all activities in the field of refining, manufacturing and processing precious metals; buying and selling, imports and exports.”
Hossein’s partner in the business, Amir Fath Razi, was also a partner with Reza Zarrab in Zafer Kuyumculuk, a Turkish jewelry business established in 2003.
Tons of Gold
Before a change in U.S. sanctions in July 2013, Zarrab skillfully exploited what experts called a “golden loophole” that allowed Iran to benefit from trade in the precious metal. What became known as Zarrab’s “gas-for-gold” scheme involved the proceeds of oil sales to Turkey by the National Iranian Oil Company.
Much of Iran’s money was held in a special account at Halkbank, which is accused of actively participating in the scheme by shifting it into Zarrab’s account. Atilla, once a top bank official, served time in a U.S. prison for facilitating the transactions. After his release he returned to Turkey, where he was appointed head of Istanbul’s largest stock exchange.
Zarrab bought gold where he could. Then Karahan and other couriers carried it in suitcases to Dubai, home to one of the world’s biggest gold markets — and gold trading companies controlled by Zarrab. Cash from these gold sales was then used to pay for things Iran needed in the global economy but couldn’t otherwise buy because of the U.S. and U.N. sanctions.
Karahan said he was part of a 22-member team that transported at least 200 tons of gold. The couriers, split into two working groups on alternating shifts, were paid by the bag as an incentive to haul two bags holding 20 to 30 kilograms of gold per day.
“We were taking 20 suitcases for 10 people,” Karahan said. “Because he was paying $500 for one of the bags, that would come to $1,000. We were taking it and getting $1,000.”
As Iran’s needs for money grew, so did Zarrab’s gold trade. Zarrab told Turkish police that in January 2013 he controlled the delivery of 1.5 tons of gold worth $65 million whose ultimate buyer was Iranian billionaire Babak Zanjani.
The gold was sent by Omanye Gold Mining, a company in Ghana. But the plane delivering it was diverted by bad weather to a different airport and the shipment was impounded by Turkish officials.
Banking data obtained by reporters shows that a U.K. shell company, Digimax Trading LLP made four payments to Omanye Gold in December 2012, the same month the Zanjani gold deal was reportedly concluded. Digimax Trading also transacted directly with several other companies controlled by Zarrab in deals worth around $9 million. Those companies included Turkish firms Royal Denizcilik, Volgam Kuyumculuk and Saran Kuyumculuk, the OCCRP transaction data reveals.
Zarrab’s relationship with Zanjani has long been the subject of intrigue. Zarrab on the witness stand in New York named Zanjani as the source of the gold, saying he “sent one-and-a-half tons
of gold from Ghana to us to sell to my company in Turkey.”
But Zarrab downplayed the relationship, saying he and Zanjani were not partners.
Karahan contradicted that account.
“Zanjani and Zarrab were partners in every work,” said Karahan, who added that he attended meetings with the two in Dubai, the base of Zanjani’s Sorinet business empire, some months before the gold flight.
“Because the meeting was partially in Persian and Turkish, I didn’t understand much,” Karahan said. “We had food. Zarrab asked for money from Zanjani and he said ‘ok.’ That is all. Babak Zanjani was sending money to Turkey.”
Karahan could not recall the exact date of the meeting in Dubai, but he provided photographs of his passport pages. One stamp shows an arrival in the UAE in November 2010. In an interview published by an Iranian magazine in 2013, Zanjani acknowledged that he had met Zarrab.
Zanjani has since been condemned to death in Iran for embezzling $2.7 billion of the Islamic Republic’s oil money. The sentence was stayed in hope that he’ll pay up in return for his life.
Friends, Relatives and Criminals
Erdoğan’s son-in-law and current Treasury and Finance Minister Berat Albayrak “instructed” the state-run bank to let Zarrab continue his money laundering scheme after his 2013 arrest in Turkey, according to the U.S. indictment of Halkbank. Despite that allegation, prosecutors have not charged Albayrak.
Before entering politics, Albayrak was CEO of Çalık Holding, a conglomerate whose finance sector holdings include Aktif Bank, which Zarrab has also implicated as a party in his scheme.
According to U.S. court documents, Zarrab and business partner Huseyin Agajooni drained Iranian accounts at Aktif Bank, then offered their services to the Central Bank of Iran and Mellat Exchange, which were unable to move their money out of Turkey without violating U.S. sanctions.
While he has not been charged with a crime, Albayrak’s role in Zarrab’s scheme raises concerns about his influence in U.S.-Turkey diplomacy.
Albayrak is one of three sons-in-law who is known to have coordinated contacts between Erdoğan and President Trump. Trump’s son-in-law, Jared Kushner, and Mehmet Ali Yalçındağ, a partner in Trump Towers Istanbul and son-in-law of Turkish oligarch Aydın Doğan, round out the trio. All have business or diplomatic ties, or both.
According to Karahan, Zarrab’s company Royal Holding had two offices: Business was done in Bahçelievler, but Zarrab met those he wanted to impress at Trump Towers.
“That office was rented to talk to the media,” Karahan said “Since it was a more flamboyant place, they broadcast from there.”
In 2012, Trump attended the building’s ribbon cutting with his daughter, Ivanka. So did then-Prime Minister Erdoğan and Yalçındağ, whom the New York Times later reported to be a Turkish emissary for the Trump administration. Trump in 2015 called his involvement in the property a potential “conflict of interest.”
Yalçindağ helped arrange White House meetings for Albayrak with Trump, Kushner and U.S. Treasury Secretary Steven Mnuchin in April 2019, the New York Times reported. That meeting came in advance of the U.S. indictment of Halkbank, which Erdoğan was trying to prevent through a personal appeal to Trump.
In an August 24, 2020, letter to Attorney General William Barr, Senator Ron Wyden called the meeting “troubling” in light of Zarrab’s allegations.
“President Trump, Secretary Mnuchin and Jared Kushner held this White House meeting despite the fact that Albayrak, along with President Erdoğan, appear to be personally implicated in the Halkbank scheme,” Wyden wrote.
Albayrak in particular has emerged as a key figure in Wyden’s investigation of Trump administration interference in the Halkbank prosecution.
Trump “promised Turkish officials in the Oval Office that he would use his authority to halt any further enforcement actions against the bank,” the Senate Committee on Finance said in a statement.
Trump contacted both the Treasury and the Justice Departments about the Halbank case, according to an admission provided by Treasury to the finance committee.
Under pressure from Wyden, the top Democrat on the Senate Finance Committee, Mnuchin has also disclosed that he met three times with Albayrak. They had a bilateral meeting on July 21, 2018; a pull-aside at a World Bank and International Monetary Fund meeting on April 12, 2019; and a White House meeting three days later. In February, Mnuchin told a congressional committee the meetings included discussions on Halkbank.
Raising more questions about Albayrak’s ties to the case, Karahan said Zarrab relied on senior Turkish officials when his operations hit a snag. In one instance, Aktif Bank rejected Karahan’s application for an account that was to be used by the Zarrab network — until his boss got involved.
Karahan said Zarrab told him he went to the bank with Egemen Bağış, then Turkey’s minister of European Union affairs.
“They went upstairs and met. After, they came downstairs and said an account can be opened,” said Karahan.
Karahan said Zarrab told him that he also sought help from Albayrak and from Ahmet Çalık, the founder of the bank’s parent company, which was at one time run by Albayrak.
Albayrak was never charged, though both he and Bağış were implicated in the Zarrab bribery scandal. In 2013, Turkish police alleged that Bağış received a silver plate and $500,000 cash delivered in a box for chocolates.
Reached about the findings of this investigation, Wyden called the revelations “outrageous.”
“These allegations further implicate Albayrak in the Halkbank scheme, and raise new questions about the administration’s apparent open-door policy for meeting with sanctions violators,” Wyden said. “In summary, the treasury secretary discussed Halkbank, while it was under indictment for the largest sanctions evasion scheme in U.S. history, with a key player in the scheme.
“In the big picture, all evidence points to President Trump interfering in a criminal investigation and sanctions enforcement as a favor to President Erdogan,” Wyden added.
Mixing Business for Cover
Zarrab’s vehicle for moving money was the Royal Denizcilik. In Turkish, “denizcilik” translates as “marine,” a fitting name for what was ostensibly a shipping firm. The company provided a facade of legitimacy that helped deflect attention from its real source of revenue: money laundering.
The full extent of Zarrab’s illicit business will likely never be known, but a document from Royal Denizcilik’s Halkbank account indicates this one company alone brought in 4.4 billion Turkish lira (around $2.5 billion) in just the first four months of 2013. The document lists gold and food sales as its revenue source.
The company issued a series of multi-million-dollar invoices for shipments of olive oil, frozen chicken breasts, and coconut oil simultaneously on August 1, 2013. The paperwork was filed just weeks after U.S authorities closed the “golden loophole.” After that, Zarrab claimed he was moving food, which was exempt from the U.S. sanctions regime.
Zarrab later testified that the shipments never took place. Forged invoices merely served as cover for money movement.
While Royal Denizcilik was in the fake food business, Karahan told reporters that the company also engaged in some legitimate deals. For example, Royal Denizcilik’s archived website states that it built luxury restaurant riverboats for a Radisson hotel in Moscow.
“He delivered [the boats] late,” Karahan said. “He was fined, but he delivered.”
The website also states that Royal Denizcilik provided consultancy services and supplied machinery to the Zarrab family’s steel plant in Iran.
Karahan has been trying to tell his story ever since he and Zarrab were detained at Istanbul Police Headquarters in December 2013.
“We stayed there for four days,” Karahan said. “Me and Suleyman Aslan, former general manager of Halkbank, were in the same custody.”
Karahan had no love lost for his former cellmate.
“If America arrests Suleyman Aslan, I’d be so happy, because he took bribes,” Karahan said, echoing Zarrab’s U.S. District Court testimony.
Aslan was indicted with Zarrab, Atilla, the Halkbank manager,and Çağlayan, the former economy minister. Also indicted was Zarrab’s brother, Mohammad. To date, only Reza Zarrab and Atilla have been prosecuted.
Karahan said he sympathizes with Attila and believes him to be innocent.
“He neither took bribes nor was involved — just a few phone conversations,” Karahan said of Atilla.
Prosecutors never accused Atilla of bribery, and the case against him largely hinged on wiretapped phone calls with co-conspirators whom he appeared to advise on how to conduct their scheme without attracting attention. His light sentence of 32 months reflected what the judge called a “minor role” in the operation.
While detained for several days and initially accused of involvement in money laundering, Karahan was never convicted of a crime. He has said he would be willing to testify and tell the truth should he be approached by U.S. authorities.
Neither the U.S. prosecutors nor FBI investigators would say if they have tried to contact any of Zarrab’s former insiders as they prepare for next year’s Halkbank trial. Both the prosecutors and investigators declined to comment.
Jason Papakheli, Aparna Surendra, Eric Barrett, and Roshanak Taghavi contributed to this report.
Part two: By Suitcase and by Wire: How Reza Zarrab Smuggled Russia’s Money
Part three: Reza Zarrab: The Money Launderer Who Wanted to Be Jacques Cousteau
Source: Court House News
