Otto J. Reich & Ezequiel Vázquez-Ger: Iran May be ‘Laundering’ Money in Ecuadorian Banks | Newsmax

July 18, 2012 5:13 pmComments OffViews: 4

Ecuadorian banks shield Iran’s money

By Otto J. Reich & Ezequiel Vázquez-Ger | Originally published in Newsmax


Ecuador’s Central Bank issued a press release on Monday denying accusations made by several members of its National Assembly about a financial triangulation mechanism that would permit Iran to launder money in Ecuador. Why did the Central Bank feel obliged to deny such a serious accusation made by respected members of its Congress?  The facts may be even more serious than the allegations.

On January 12, 2012, President of Ecuador Rafael Correa and President of Iran Mahmud Ahmadinejad held a meeting in Quito, Ecuador, in which they discussed a series of financial and banking issues. According to the official record of the meeting, both Presidents agreed to use a bank called Bank Cofiec as the principal financial link between Iran and Ecuador.  Cofiec is a small private bank (about $20 million in deposits) that had been intervened by the government of Ecuador in the late 90’s and is still under its control.  The real purpose is to conduct transactions directly with Iran by avoiding Ecuador’s Central Bank, and instead channeling them through a bank with no public accountability or exposure.

Jan-12-2012. Official record of the meeting between Correa and Ahmadinejad

This get-together set the pattern for further bilateral meetings, trips to Iran and Russia by delegations that included the President of the Central Bank of Ecuador, Pedro Delgado, members of Cofiec Bank, among others, and actions intended to set a path for building a financial triangulation mechanism that would permit Iran to move money around UN sanctions.

Below are a series of facts and allegations that document this pattern and shed light on a potential scandal that is just beginning to emerge.  At a minimum, the Correa Government needs to allow greater transparency into this situation, to reassure the world that, contrary to appearances, it is not laundering money to aid the Iranian regime:

1) Key players

i. Pedro Delgado:  Delgado is the cousin of Ecuador’s President Rafael Correa, is President of the Central Bank and the person allegedly in charge of conducting the covert relations between Ecuador and Iran.  He is married to María Verónica Endara Clavijos, currently Ecuador’s Consul General in Miami.  Delgado’s name appeared in the press earlier this year, being linked to the scandal known as “diplomatic cocaine”, in which the Italian police in Milan found an Ecuadorian diplomatic pouch containing cocaine.  So far, Delgado has decided not to make any public comment about this episode and not even to show up in court.

Delgado has traveled to Iran on several occasions this year.  In one, in mid- February, before arriving in Iran, Delgado made stops in Miami, London and Moscow. In Miami and London he reportedly held meetings with important law firms to learn about the potential negative impact of deepening Ecuador’s relations with Iran. In Russia he had meetings with three banks.: VTB (Vneshtorgbank), VEB (Vneshekonombank) and CJSC Bank Melli Iran ZAO. In the first one (VTB), he appears to have opened safe-deposit boxes and deposited half a million dollars in cash.

ii. Cofiec Bank:  Cofiec Bank had been intervened in 1999 and is currently controlled by the Ecuadorean government. This means that although the bank is private and subject to private law, in practice it is controlled by Pedro Delgado in his capacity as President of the Central Bank and administrator of intervened banks.  Delgado has represented Cofiec in meetings in Russia and Iran. His brother in law, Francisco Endara Clavijos, (brother of the aforementioned Ecuadorian Consul General in Miami) also has an active participation in the board meetings.

Cofiec is one bank through which the Iranian Embassy operates in Ecuador.  According to the latest internal official report of the bank, the Iranian Embassy deposits totaled $1,981,998.00 which in turn represents 7% of the bank’s total deposits.

As mentioned before, Cofiec was the bank suggested by President Correa during his meeting with President Ahmadinejad to operate as an intermediary with Iran.  Various internal documents subsequent to the aforementioned presidential meeting show that Gino Caicedo Urresta, President of Cofiec Bank, began negotiations with various Iranian banks to establish a correspondent relationship with them.  According to documents we have seen from an internal risk analysis undertaken by Cofiec regarding this decision, which established that it was a hazardous initiative, Cofiec proceeded because “it is President Correa’s policy” to promote this kind of operation with Iran.

Feb-8-2012. Cofiec Bank Risk Analysis regarding the opening of bank accounts in Pasargad Bank

2) Meetings in Iran and financial triangulation

Following his meetings in Russia, Pedro Delgado and the Ecuadorian delegation, which included members from Cofiec Bank, appear to have flown to Iran and held meetings with Pasargad Bank, the Export Development Bank of Iran, Saman Banc and Parsian Bank.  The aforementioned Caicedo Urresta -Cofiec Executive President- and Delgado participated in all the meetings.

Feb-10-2012. Cofiec internal memorandum discussing the opening of bank account on iranian banks

The meeting with Bank Pasargad was particularly important (Pasargad is one of Iran’s biggest and most important banks) since both parties allegedly agreed on the necessary steps to establish a correspondent system. The record of the proceedings illustrates the triangulation facility that Cofiec would provide to Pasargad. This triangulation would become effective by Cofiec opening bank accounts in third countries in currencies other than the US dollar.  Afterwards, Pasargad would send a request to Cofiec to register its name internally on an account with the same currency. Once both countries start trading, Pasargad would start sending or receiving funds through Cofiec’s account in the third country bank.

Since Ecuador’s official currency is the US dollar, Ecuador can provide dollars to Pasargad, if this bank so desires. Furthermore, if one takes into account the existence of the SUCRE –Unique System of Regional Compensation- an electronic currency used by ALBA Central Banks (Cuba-Venezuela-Ecuador-Bolivia-Nicaragua) to offset their accounts directly without having international banking authorities supervising their activities, the result is clear: Iran can use this mechanism to move money freely throughout Latin America behind the shield of an Ecuadorian bank.

Feb-24-2012. Report from the President of Cofiec on his visit and meetings in Iran.

3) Conclusion

The reports and evidence reviewed, as well as the mechanism described above, show what appears to be the clear intention of President Rafael Correa to design a financial system that allows Iran to operate surreptitiously in Latin America. This system was probably conceived by President Correa and is being implemented by his cousin –and President of the Central Bank- Pedro Delgado. Its main tentacle is Bank Cofiec, that acts as a shell in order to circumvent the Central Bank of Ecuador.

The US Government should attempt to verify these reports while considering the possibility that Ecuador’s government-controlled financial system, institutions and individuals are actively bypassing financial sanctions against Iran.

Moreover, it is deplorable that Pedro Delgado, who appears to be the principal link between Ecuador and Iran in this scheme, continues to travel frequently to the United States, where he controls financial companies and bank accounts in Miami.

Otto J. Reich is president of the consulting firm Otto Reich & Associates LLC. He is a former U.S. assistant secretary of state for the Western Hemisphere, and U.S. ambassador to Venezuela. Twitter: @ottoreich

Ezequiel Vázquez Ger is an associate at Otto Reich Associates LLC and collaborates with the non-profit organization The Americas Forum. Twitter:@ezequielvazquez

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