The Blog

Guns From Londonistan

Arming the Iranian military.

11:00 PM, Jan 15, 2009 • By REUBEN F. JOHNSON
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"Londonistan" is the nickname given to the UK capitol in 1995 by France's counterterrorism service, partly out of frustration over the safe haven that the city offers to radical Islamist groups that have been exiled from their home countries and/or other EU nations. The year 2009 began with a story that offers a whole new dimension as to how that nickname fits better than most of us would have imagined.

This past week one of the major UK banks, Lloyds TBS Group, paid $350 million to New York State and U.S. Federal authorities in an out-of-court settlement. The fine was paid over charges that Lloyds obscured the fact that billions of dollars that had passed from its office and then through U..S banks and finally on to other foreign destinations had originated in Iran, Libya, and Sudan in violation of U.S. sanctions on those nations. It is the largest fine ever paid in the history of the Manhattan DA's office.

In all, some $300 million from Iran are believed to have transferred on to American financial institutions via Lloyds, and another $20 million from Sudan. Both nations are accused of financing numerous terrorist organisations, and it appears that the Iranian money may have been used to purchase materials that were used in that nation's ballistic missile and nuclear weapons development programs. Lloyds activities in acting as a laundering agent in this manner date back as far as 1995, according to the U.S. Justice Department.

At first glance this subterfuge appears to be a one-off set of incidents, but there are nine other banks being investigated for engaging in similar transactions. Officials in the DA's office talk of a "systemic, wide-ranging scheme."

Funds from Iran and other nations that U.S. banks are forbidden by law from dealing with were made "anonymous" by Lloyds employees instructed in how to delete information that would identify the originating source,.

Lloyds has not even a shred of plausible deniability in this matter. A section of the bank's training manual for new employees instructed personnel how to strip out transfer data and then re-enter the payment information into the Lloyds payment system in order to make appear as though London -- and not Teheran, Khartoum, or Tripoli -- was the point of origin for untold millions in transfers. The training was obviously quite effective. U.S. authorities who handled the case were quoted as saying that Lloyds "went to great lengths to obliterate any identification" as to where all the money came from.

When the war between Iran and Iraq flared up after the 1979 revolution, the Islamic Republic of Iran Air Force (IRIAF) and other branches of the nation's military were in dire straits. They owned and operated a fleet of largely U.S. and some British military hardware. Spare parts and other support for these systems were supposed to have been cut off by international sanctions that were the result of the Islamic Republic's actions, which included overrunning the U.S. Embassy in Teheran and taking its personnel hostage. Saddam Hussein's military was knocking on the door and Iran had huge fleets of military equipment that they could not support.

The Iranians then proceeded to set up an overseas procurement division for their armed forces, which operated out of a seven-story building at number 4 Victoria Street, London. The official entity at this address was the European headquarters of the National Iranian Oil Company (NIOC). It was in a prestigious location, and the last place one would suspect as the center of a military procurement. Westminster Abbey was across the street and the famous Scotland Yard was also nearby. Nevertheless, the illegal purchase of American-made materiel became the second most important -- if not the primary function -- of the people inside the building.

This "Logistics Support Center" of the IRIAF moved into the NIOC building early on during the Gulf War with Iraq, as did the "Technical Supply Office" of the Iranian Navy. Previously both entities had worked out of a smaller office at 15 Young Street, which was close to Kensington Gardens. Their presence in both buildings was kept hidden from those on the outside and their activities were kept well under wraps to the extent possible.