How did al-Assad use offshore transactions and exploit Islamic banking?

EMRAH USTA*

In The Washington Post article titled “Why haven’t Syrian banks collapsed under sanctions and war?” dated Aug. 3, 2015, an analysis about why the Syrian banks have not collapsed despite all sanctions, international blocks and harsh interventions and about six banks, including private and public banks, being suspended pointed out that despite all the theft and violations against 14 private banks, the affiliates of the banks were distributed in Lebanon, Saudi Arabia, Kuwait and Bahrain.

The Panama offshore documents, which appeared in the finance sector as tax fraud after the Wikileaks documents shook the world, revealed the secret financial accounts of state presidents. How come there were money transfers in Syria, where there was all kinds of terror and which was closed to international money transfers? The question of whether the tax fraud transactions took place via the gulf countries in Syria, where the regime of Syrian President Bashar al-Assad uses all kinds of opportunities, from helicopters to war jets, can be answered with this report of Chatham House.

The al-Assad regime pursued a series of liberalization policies in the banking sector in 2003. In The Washington Post article, we can see that Syria adopted the capitalist market principles in the direction of social market economy by designing the turning point of this liberalization, which is understood to be a part of the government’s policy. 

Moreover, even though these banks and the income of the country significantly lost money much later after the war, regions such as Al-Hasakah fed both the Islamic State of Iraq and the Levant (ISIL) and the Democratic Union Party (PYD). The banking sector of the regimen could stand thanks to both the aid coming from Bahrain and the war economy provided by ISIL.

This economy was controlled by Hafez Makhlouf, a cousin of al-Assad, and it was known that the Syrian economy was under their control at a rate of up to 60 percent, according to estimates. Besides, it was revealed in the Panama documents that he had a company. Makhlouf was someone who, as it was known, frequently visited Russia and sought an out for the economic situation that Syria was in. He even looked out for the rich Alevi class in Syria before the war and rendered them the benchmark of the economy. 

However, Cham Holding and the Cham Investment Group, of which Makhlouf is the executive board chairman, have been active in Bahrain since 2008. Also, the Cham Group is partners with the Bahrain Islamic Al Salam Bank. It seems that the al-Assad regime has offshore accounts without the intervention of United Nations rules, including especially the Bahrain Islamic Al Salam Bank. 

Besides this, off the record economy contributed and enriched not only the al-Assad regime, but also ISIL and the PYD with petroleum income. It can be seen that al-Assad sustains the affiliates in Syria with this off the record economic support and can stay alive even if the banks are exposed to international sanctions.

Makhlouf did not ensure the transfer of this capital stock via Cham Holding but via Dubai-based Amlak Finance, Dubai Holding, Dubai Investment and Emaar Properties companies to Syria. He used it for the reconstruction of the arms and soldiers in Syria via a bank. It is without a doubt that U.S. Treasury inspectors identified the financial circulation of al-Assad in Bahrain. This financial circulation by al-Assad via Al Salam was controlled throughout the civil war via Emaar Properties and its affiliate, Amlak Finance.

Therefore, a unilateral control panel was applied via the Bahrain Islam Al Salam Bank. The most difficult issue to identify is the designing of the Gulf countries’ banking network in conformity with the canon laws.

According to Islamic law, the forbiddance of the concept of interest is an obstacle for the determination of the amount of cash usage by the sharia banking system. Therefore, it is hard to know the cash amount of this monetary circulation in Bahrain. 

One might believe that the U.S. is having a hard time identifying the network of this capital in the long-term relationships between Bahrain and Saudi Arabia. The financial grips in line with sharia bring along a parallel concept in the determination of the amount, like the Western leaders with the Panama accounts. The international system is having a hard time understanding these accounts that do not go through financial grips or do not form reductions.

In fact, Arab League and Organization of Islamic Cooperation (OIC) members guarantee transparency in all Islamic financial transactions in order to protect their own banking system. The issue of transparency is of importance in places such as Bahrain or Dubai, where the financial mobility is high. Likewise, it is obvious that Qatar also used the same financial system in the past. 

As for al-Assad, it is seen that he ensures a Bahrain-based money flow using his companies through this Islamic financial window. 


*Emrah Usta is political analyst and columnist with a focus on current affairs and Gulf security.