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January 08, 2010 

Management Consultant Arrested and Charged With Violating Iran Embargo

Mahmoud Reza Banki, a management consultant formerly employed by McKinsey and Co., was arrested yesterday by Immigration and Customs Enforcement agents following an indictment charging him with violating the U.S. sanctions on Iran and operating an unlicensed money transfer business between the U.S. and Iran.

According to the indictment, from January 2006 to September 2009, Banki, who is 33 years old and a U.S. citizen, allegedly provided money transmitting services to residents of Iran by operating a "hawala," which is a type of informal value-transfer system in which money does not physically cross international boundaries through the banking system. In the hawala system, funds are transferred by customers to a hawala operator, or "hawaladar," in one country, and corresponding funds, less any fees, are disbursed to recipients in another country by hawaladar associates on that end.

Banki allegedly received wire transfers in a personal bank account he maintained at Bank of America in Manhattan totaling about $4.7 million from companies and individuals located in Saudi Arabia, Kuwait, Latvia, Slovenia, Russia, Sweden, the Philippines, the United States, and other countries. Banki apparently did not know the wire originators personally. He allegedly received the funds with the understanding that an equivalent amount of Iranian currency would, in turn, be disbursed to intended recipients residing in Iran. Banki informed an Iran-based co-conspirator when funds had been received, and the co-conspirator then disbursed the funds in Iran, less any fees.

Banki allegedly used specific funds transferred into his Bank of America account to make joint investments in the United States with the Iran-based co-conspirator. Among other things, Banki used the funds to purchase a $2.4 million Manhattan condominium; to invest in securities for his own benefit and that of the co-conspirator; and to make payments on his credit card accounts, including about $55,000 in one month alone in the summer of 2007.

Banki is charged with violating the International Emergency Economic Powers Act (IEEPA), together with Executive Orders and U.S. Department of Treasury regulations; conducting an unlicensed money transmitting business; and conspiracy to commit those crimes. If convicted, Banki faces a maximum sentence of five years in prison on each of the conspiracy and unlicensed money transmitting counts and 20 years in prison on the IEEPA violation count.

This case is being prosecuted by the Complex Frauds and Asset Forfeiture Units of the U.S. Attorney's Office, Southern District of New York.

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Using B of A makes this something less than a true "hawala". Person to person transfers with the hawaladar - a true "honor" system would never involve any institution in any way. It is very difficult to track and to trace. Collection of funds into the bank account was a terrific and fortunate RED FLAG.

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