Paradise Papers reveal how Assad's cousin used front companies to bypass US sanctions

The cousin of Syria's President Bashar al-Assad has been personally named in documents released under the 'Paradise Papers' investigation, which detail his connections with four Lebanese companies created between 2001 and 2003.

Rami Makhlouf was able to bypass US Treasury sanctions to invest heavily in Romanian and Polish businesses and effectively maintain normal practices at Syriatel, the country's national telephone handler.

Other notable Middle Eastern figures named in the Paradise Papers include Prince Khaled bin Sultan bin Abdulaziz of Saudi Arabia and Queen Noor of Jordan.

One company connected to Makhlouf, Middle East law firm SAL, was involved in negotiating contracts - with further details expected in the next few weeks - while three more were listed as holding companies - a term for investment vehicles than can be used for a multitude of financial tasks, shadowy or legitimate, essentially a front company.

A selection of Makhlouf's front companies had previously been exposed in the Panama Papers and the Swissleaks.

The Panama Papers leak showed that Makhlouf secretively registered three Syrian companies - Pangates International, Maxima Middle East Trading and Morgan Additives Manufacturing - through the Panama-based law firm Mossack Fonseca.

Using these front companies, the Syrian regime was able to bypass international sanctions, a tactic that has been used by other targets of US sanctions, including Iran and North Korea. Mossack Fonseca themselves reportedly worked with more than 30 entities that had been blacklisted by the US Treasury.

So what is known about the new companies that have been linked to Makhlouf?

Rock Holding

Rock is a Romanian holding company, owned by Rami's father-in-law, the Syrian ambassador to Romania, Walid Othman. Othman has been personally linked to a number of major Romanian business deals in real estate, telecomms and timber.

Drex Telecom (DTH) Holding

Drex was also named in the Panama Papers release. Registered in the British Virgin Islands in 2000, it was allegedly used as a vehicle to allow Makhlouf to continue his ownership of Syriatel.

A contemporaneous press release from the US Treasury shows that the company had been targeted for new sanctions.

DOM Development Holding

It is currently thought this holding company is linked to a Polish real estate investment firm that bought up large areas of Warsaw in 2008. Over four years, it invested hundreds of millions of dollars in Polish real estate, only to suddenly close in 2012. Officials related to this firm failed to respond to The New Arab's requests for comment by time of publication.

Lessons learned?

Although it is not illegal to keep money offshore, activists have repeatedly argued that anonymous offshore accounts allow for shady, sometimes illegal, business to proliferate.

Makhlouf, once termed the "poster boy for corruption" in official US diplomatic correspondence, was brought under US Treasury sanctions in 2008 for facilitating Syrian corruption. Since then he has continued his billion-dollar businesses in the aviation, telecommunications, real estate, oil and construction sectors

At the time these sanctions were imposed, his wealth was rumoured at around $6 billion. The Treasury sanctions made it illegal for Americans and US entities to conduct business with Makhlouf, or any business associated with him.

But due to his offshore accounts, Makhlouf was still able to invest his allegedly ill-gotten gains abroad through anonymous holding companies. Fast forward to 2012 and only $260 million of foreign investment had been frozen by the UK and Switzerland - the rest apparently hidden behind a string of faceless fronts.

The vast majority of Makhlouf's wealth, noted US officials, was accumulated through the skimming of profits from Syrian state assets. Other investments were made indirectly, through holding companies.

In 2006 and 2007, Makhlouf worked to consolidate the Syrian regime's capital, setting up two holding companies for the benefit of the Syrian president and his inner circle.

Cham Holding and Souria Holding were exposed in 2016's Panama Papers release and showed the scale of the Syrian regime's international real estate projects and infrastructure deals.

Since that release, little has changed, and further historical evidence has emerged over the scale of the regime's international dealings - regardless of sanctions.

As in North Korea and Iran, offshore banking has allowed shady practices to continue in secret and for corruption to thrive in a land where sanctions can't touch them.

Robert Cusack is a staff writer at The New Arab. 
Follow him on Twitter: @rob_cusack