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Tags: Iran | Ecuador | money | laundering

Otto Reich: Iran May Be 'Laundering' Money in Ecuadorian Banks

By    |   Wednesday, 18 July 2012 06:03 PM EDT

Otto Reich’s Perspective: 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 Jan. 12, President Rafael Correa of Ecuador and President Mahmud Ahmadinejad of Iran 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 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 90s 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.

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:

Delgado is the cousin of Ecuador’s President Rafael Correa, and is president of the Central Bank. He is 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, as being linked to the scandal known as “diplomatic cocaine,” in which Italian police in Milan found an Ecuadorian diplomatic pouch containing cocaine. So far, Delgado has decided not to make any public comment about this incident.

Delgado has traveled to Iran on several occasions this year. 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 held 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 $500,000 in cash.

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 Delgado in his capacity as president of the Central Bank and administrator of intervened banks. Delgado 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 been active in 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 percent 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.

Following his meetings in Russia, 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. Caicedo Urresta — Cofiec executive president — and Delgado participated in all the meetings.

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.

A 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 U.S. 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.

Based on documents, as well as the mechanism described above, we believe that President Correa intends to design a financial system that will allow 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, continues to travel frequently to the United States, where he controls financial companies and bank accounts in Miami.

Otto J. Reich is a former U.S. assistant secretary of state for the western hemisphere, U.S. ambassador to Venezuela and senior staff member of the National Security Council. He is president of the consulting firm Otto Reich & Associates LLC. Ezequiel Vázquez Ger is an associate at Otto Reich Associates LLC.

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Wednesday, 18 July 2012 06:03 PM
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