For the Hudson Institute's Kleptocracy Initiative, I looked at how Iran managed to mask its ownership of a Manhattan skyscraper using, of all things, an American shell company:
According to court documents, Tehran followed a relatively tried and true method for masking its ownership of 650 Fifth Avenue. Representatives from Bank Melli – an Iranian bank “controlled by Iran’s government,” per Bloomberg, that had helped finance the construction of 650 Fifth Avenue – formed Assa Co. Ltd., an entity domiciled in Jersey. Assa Co. Ltd. then turned to New York to form a shell company called Assa Corporation.
Elsewhere, the Pahlavi Foundation, following the Shah’s overthrow, transitioned into the Alavi Foundation, and formed a partnership with Bank Melli in 1989 “to avoid paying taxes on rental income” from 650 Fifth Avenue, according to the U.S.’s Department of Justice. Alavi then proceeded to transfer some 35 percent of its partnership with Bank Melli to Assa, which was followed some time later by another 5 percent transfer to the shell company. All told, Alavi ended with 60 percent of a stake in the Manhattan skyscraper – with the Tehran-controlled Bank Melli, via its New York-based shell company, retaining some 40 percent ownership. (As Alavi’s director wrote in 1991, “We were also able to successfully carry out cultural and Islamic activities in the country of the Great Satan.”)
For another regime, such obfuscation would have been simply that: obfuscation, via an American shell company. However, following the 1995 imposition of sanctions against Iran, the set-up wasn’t simply a means of highlighting how opaque the U.S.’s company-formation sector remains. Rather, Tehran’s entire scheme was now illegal – it was a move, as Global Witness wrote, “in direct breach of anti-terrorism sanctions.” Said Joon H. Kim, acting U.S. attorney for the Southern District of New York, “For over a decade, hiding in plain sight, this 36-story Manhattan office tower secretly served as a front for the Iranian government and as a gateway for millions of dollars to be funneled to Iran in clear violation of U.S. sanctions laws.”