The US recently sanctioned several South African companies it accused of being part of an intricate money laundering network trading in gems and artworks to finance a “global terrorist”.

It now turns out one of those companies was among this government’s biggest diamond-buying clients.

This means that the South African state has done business with a company the US has effectively accused of money laundering for terrorists.

What makes this particularly bad is that South Africa was put on the Financial Action Task Force’s “grey list” in February. 

A South African Treasury Department document said this meant the country’s “effectiveness in combatting financial crimes like corruption and money-laundering as well as terror financing are deemed to be below international standards.”

In Parliament this week Hawks head Godfrey Lebeya said tackling money laundering and terrorist funding were among its priorities.

Sanctions across countries

On 18 April the US’s Department of the Treasury’s Office of Foreign Assets Control announced sanctions against 52 individuals and companies from, or based in, several countries including the UK, Hong Kong, Côte d’Ivoire, Belgium and South Africa.

It was alleged the network was involved in gem and art dealing and was clandestinely pumping money to blood diamond-linked and terror accused Nazem Said Ahmad, a dual Belgian-Lebanese citizen.

Last month the US also criminally charged him, as well as others including his son Firas, who does business in South Africa, over allegations relating to money laundering and evading US sanctions.

The US pointed to Nazem Ahmad as being a key financier of Hezbollah (also spelt Hizballah).

Hezbollah is a political party in Lebanon that also has a military wing – the US is among the countries that view it as a terrorist organisation.

While South African government departments did not indicate their exact stance on Hezbollah to DM168, it appears this country has sided with the US on it, in terms of illicit financing.

Top 10 diamond buyer

One of the US-sanctioned companies implicated in the Ahmad network is MSD SPRL Diamond Trading, based in Bedfordview, Johannesburg. 

DM168 can reveal that according to a response to Parliamentary questions, for the 2020 to 2021 financial year, MSD SPRL Diamond Trading was named among the State Diamond Trader’s top 10 buyers.

The State Diamond Trader is a state-owned entity.

Its website says its mandate “is to buy and sell rough diamonds and to promote equitable access to and beneficiation of the country’s diamond resources”.

This week DM168 sent the State Diamond Trader the US’s sanctions announcement that included MSD SPRL Diamond Trading and asked about this.

State Diamond Trader spokesperson Tsholofelo Tselapedi said it had not been aware of the US announcement and was studying it.

“The State Diamond Trader is a state entity and accordingly does not support any activities that would be deemed as contrary to

South African laws,” she said.

“As stated above, the State Diamond does not support companies that commit acts that are contrary to South African laws.”

Layering and laundering

DM168 unsuccessfully tried, via several email addresses linked to MSD SPRL Diamond Trading, and calls to a number listed for it, to get a response on the US’s allegations against it and those running it.

According to the US’s Treasury Department those it sanctioned around the world had worked together.

“This network facilitated the payment, shipment, and delivery of cash, diamonds, precious gems, art, and luxury goods for the benefit of… Ahmad,” it said.

“[His] associates, along with their legitimate and illegitimate businesses, played an important role in the overall scheme by engaging in ‘layering,’ the name used for the stage in a money laundering operation that disconnects proceeds from the nefarious activity that generated them.”

A US-government issued map, showing the Ahmad group’s alleged trading, showed that diamonds and precious gems were moving between South Africa and the US, and from South Africa to the United Arab Emirates and Hong Kong.

South African companies

According to the US, a Belgian individual named Bassem Murad, who it also sanctioned, ran MSD SPRL Diamond Trading. 

The company was linked to another also based in Bedfordview, MegaGems.

MegaGems was run by Ahmad’s son Firas, who allegedly also controlled another diamond company, Thula Uzwe Trading, which had an address listed in Vereeniging. 

In the case of Murad, the US’s Treasury Department alleged he and MSD SPRL Diamond Trading were “involved in the business venture for the design, development, and construction of a new diamond center to house the offices and facilities for MegaGems and other diamond businesses”.

It further alleged: “Bassem Murad also conducted transactions or acted as a pass-through for funds in the interest of Firas Ahmad in a money laundering layering scheme.”

In the case of Firas Ahmad, the US’s Treasury Department said he “handles many of this father’s business affairs in South Africa. 

MegaGems and ‘false’ accusation 

“Firas Ahmad obfuscated his ultimate beneficial ownership of MegaGems through a front company,” the US alleged.

“Concealment of his ultimate beneficial ownership is a common tactic used by Nazem Said Ahmad, which his children have also adopted to insulate themselves from legal scrutiny and assist in sanctions evasion schemes on behalf of their father.”

Last week, in an emailed response to questions sent to the company, a MegaGems representative confirmed to DM168 that Firas Ahmad was its director and said “there was never any attempt to conceal this”.

The representative added: “MegaGems doesn’t understand the [US’s] designation and hopes to delist themselves as soon as possible.

“MegaGems never was and never will be involved in any criminal activities.”

The representative said Thula Uzwe – the other company the US alleged Firas Ahmad controlled – was inactive.

SA against illicit money

In December 2019 the US labelled Nazem Ahmad, whose whereabouts are unknown, “a Specially Designated Global Terrorist” over his Hezbollah links.

DM168 approached the Department of International Relations and Cooperation to clarify the government’s stance on Hezbollah but was referred to the State Security Agency.

The State Security Agency this week told DM168 to refer to a statement it issued in November last year in reaction to the US sanctioning four alleged Isis members in South Africa.

In that statement, Minister in the Presidency at the time, Mondli Gungubele, said: “We will not allow our territory to be used to fund terrorism in other countries.

“As such and working with our counterparts in the fight against terrorism, we will do everything in our power to uncover and root out acts of terrorism and illicit financing in particular.”

Terrorist vs sociopolitical force

The statement did not mention Hezbollah.

But it suggests the South African government is on the US’s side in terms of illicit money flows.

In 2019 the South African Jewish Report quoted individuals and groups calling on this country to join the UK in banning Hezbollah.

The United Nations Security Council, in reports on Lebanon and hostilities between Hezbollah and Israel, explained why there were various state stances on Hezbollah.

“Some draw a distinction between Hezbollah’s political and military wings and have designated only its military wing as a terrorist organisation,” it said.

“Other members, including the UK and the US, have listed the Shi’a group in its entirety as a terrorist organisation. In contrast, Russia sees Hezbollah as a legitimate sociopolitical force.”

UK crackdown 

The UK has also acted against the Ahmad group.

Last month it sanctioned Nazem Ahmad.

Sundar Nagarajan, of India, was also arrested in London last month after the US sanctioned him.

It was alleged that Nagarajan was Nazem Ahmad’s main accountant.

The US’s Treasury Department said in a statement: “Sundar Nagarajan was the central manager of financial ledgers detailing the network’s operations in Hong Kong, the United Arab Emirates, and South Africa.”

The US government issued a $10-million reward for information on Nazem Said Ahmad.

Picasso and a penthouse

Meanwhile, in its efforts to crack down on Hezbollah, the US previously issued a reward of up to $10-million for information on Nazem Ahmad.

A notice about the reward alleged he made money “through his longstanding ties to the ‘blood diamond’ trade”.

“Ahmad stores some of his personal funds in high-value art in a preemptive attempt to mitigate the effects of US sanctions, and he opened an art gallery in Beirut as a front to launder money,” it said.

“Ahmad has an extensive art collection worth tens of millions of dollars, including works by Pablo Picasso and Andy Warhol, many of which have been on display in his gallery and penthouse in Beirut.” DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.