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SHIA VERSUS BIDHA’A: How the Seeds of Islamist Radicalisation Took Root on the Coast of Kenya

Lamu, home to the Islamic tradition that is most resistant to religious extremism in the region, has become a battleground in the longstanding global Sunni-Shia conflict. By PAUL GOLDSMITH

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SHIA VERSUS BIDHA’A: How the Seeds of Islamist Radicalisation Took Root on the Coast of Kenya
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The Embassy bombing of August 1998 and the twinned attack on a Kikambala tourist hotel and Israeli charter flight in 2002 led to the designation of the coast of East Africa as a primary theatre in the war on terror. Lamu featured prominently in the events that followed the emergence of homegrown terrorists. The new state of affairs was as unexpected as it was counterintuitive. For those who know the archipelago and its people, a remote and peaceful society like Lamu became associated with radical Islam defies the imagination. How this came about is a long story.

Religion and revivalism in the Lamu Archipelago

For people living in a place like Lamu scanning the horizon becomes a habit. For over two millennia, the triangular sails that with clockwork regularity appear in the distance near the end of the kaskasi winds brought new influences and exotic visitors who settled and became part of the Swahili coast’s hybrid mélange. Swahili language and culture evolved out of the long-term dynamic of cosmopolitan interaction interrupted by the occasional system-modifying disruption.

Islam, a source of stability that provided the template for the numerically small Swahili communities dealing with the vagaries of the outside world, took centuries to take root and flourish. During the eighth century C.E., political conflicts associated with the Sunni-Shia schism propelled small groups of Muslim refugees to the coast of east Africa. Islam spread slowly during the following millennium, integrating along the way influences from the hinterland like the kuzungusha ng’ombe and sorio purification rituals that the scholar Gunther Schlee identifies as originating with the proto-Rendille/Somali cultural complex.

The integration of such local practices congruent with Biblical and Quranic traditions apparently synched with the Swahili coast’s legacy of orthodox Islamic scholarship. According to a 16th century report credited to the Qadhi of Mecca, Lamu’s ulama religious council could hold its own in theological discussions with anyone. Lamu prospered as the archipelago’s main harbor, but remained under the control of Pate, which for centuries was the most powerful city-state between Mogadishu and Kilwa.

Pate went into decline after an internal war of succession broke out following the death of Fumo Omari, Pate’s Sultan in 1807. The long poem Al Inkishafi, the most powerful exemplar of classical Swahili poetry, contrasts images of the once powerful Sultanate’s former opulence with Pate’s ruinous state several decades later to illustrate the transient nature of the material world.

According to a 16th century report credited to the Qadhi of Mecca, Lamu’s ulama religious council could hold its own in theological discussions with anyone. Lamu prospered as the archipelago’s main harbor, but remained under the control of Pate, which for centuries was the most powerful city-state between Mogadishu and Kilwa.

The nineteenth century was a period of political turbulence across the Muslim world that prompted a rethink of Islam in Cairo, Istanbul, Mecca, and other centres of Islamic scholarship. Developments opened the door for the pan-Islamic political ideologies of religious rationalists. Reformers like Mohammed Abdul and Jamal Din Al Afghani advocated for Islamic education based on open inquiry and the search for knowledge over slavish commitment to medieval interpretations of Islam. In other areas, where Sufi traditions of experienced based religious knowledge were strong, reform focused on the personal internalization of Islamic values. One scholar writing about the Hadhramaut, a strong source of Islamic influence on the coast of East Africa, described the focus of religious renewal as “a shift from doctrine to praxis – i.e. as an attempt to bring to others the ‘tools’ for proper, good life, for ‘inner’ ability to separate right from wrong.”

The Ba’Alawiyya is Sufi tariqa established by descendants of the Prophet over a thousand years ago in the Hadhramaut. It became known later for championing the expansion of religious education while retaining its emphasis on Sharifite lineage. The Hadhrami diaspora that accelerated during the 1700s spread Ba’Alawiyya influence across the Indian Ocean from Java to East Africa. Several generations of Hadhrami scholars based in the Comoros and Zanzibar had through their scholarship and personal example promoted the quest for personal purity through the study of Islam’s original Quranic sources and traditions. This saw ulama religious councils in Zanzibar and the Comoros displace the influence of those of Lamu and Mombasa as the region’s ranking centres of religious knowledge.

The arrival of the charismatic Jamil al Layl Sharif, Habib Saleh from the Comoro Islands subsequently sparked the revival of Lamu as a centre of Islamic knowledge.

Salih bin Alawi, or Habib Saleh as he came to be known, was born in 1853 on the island of Grande Comoro. At the age of 18, the young Sharif followed his uncle Abdalla bin Alawi to Lamu to study with its Islamic scholars. After a sojourn in the Comoros he returned to Lamu, declaring that Lamu was the only place where he felt spiritually at home.

The arrival of the charismatic Jamil al Layl Sharif, Habib Saleh from the Comoro Islands subsequently sparked the revival of Lamu as a centre of Islamic knowledge.

During the last decade of the nineteenth century Habib Saleh acted on his belief that religious education should be available to everyone. The town’s stratified social order was already being challenged by the growing number of Hadhrami immigrants, Bajuni settlers from the archipelago’s outer islands, and freed slaves who settled in the area now known as Langoni. Habib Saleh built the original Ryadha mosque on a sandy hill above the expanding area of new settlement and went on to establish a mosque college modeled on the ribats established in the Hadhramaut by the previous generation of Alawi scholars. Ryadha offered religious instruction to all at a time when religious knowledge was still central to the power relations in Swahili settlements.

The Ba’Alawiyya taught that a religious leader should seek out obscurity in place of popular recognition, avoid material manifestations of wealth and power, and that they should keep a low public profile while continuing to offer advice to the community in religious matters. Habib Saleh personified these qualities. He also established a new Maulidi, the religious ceremony celebrating the birth of the Prophet, that featured litanies composed by one of his mentors, Al Habshi, recited to the accompaniment of the twari, a percussion instrument similar to the tambourine.

Habib Saleh’s educational pluralism put him into conflict with Lamu’s power establishment based in the old stone town, who tried to curb his activities. When this failed agents of the old order attempted to sabotage his growing influence by starting a fire in the Ryadha area of Langoni. According to the folklore, Habib appealed to his mentor in the Hadhramaut, Al Habshi, who intervened by using his mystical powers to miraculously extinguish the fire from afar.

These events coincided with the turbulent events accompanying the establishment of British imperialism in East Africa. As the archipelago’s pivotal role on the Swahili coast began to ebb, Kiwa Ndeo, the ‘Proud Isle’ as Lamu was known in Swahili verse, emerged as the center of a new Islamic movement that was to gradually spread beyond its coastal base. The town’s two religious streams coalesced after the success of Habib Saleh’s religious education revolution. His sons and grandsons proceeded to extend Lamu’s religious influence across the coast and into the interior of East Africa after the Saint’s death in 1938.

When I took up residence in Lamu in 1974, the Ryadha Mosque College buzzed with activity and housed students from as far away as Zaire, Tanzania, and the Comoro Islands. Lamu’s annual Mauled festival attracted Muslims from diverse backgrounds, including delegations from southern Arabia and Sudan, becoming one of East Africa’s major cultural events in the process. Wealthy Arab and Asian businessmen from Nairobi and beyond used the occasion to donate funds to the academy.

The festival had at some point expanded to include traditional Swahili dances that were performed in the large open area in front of the mosque. Elders from Pate and Ndau performed the slow moving Goma parade in immaculate white kanzu while the youth fought mock battles in the kirumbizi stick-fighting dance to the rapid cadence of the high-pitched zumari. After the conclusion of the Ishaa evening prayers, Miji Kenda gyrated to the rhythm of their ndurenge and mwanzele, the Pokomo did their mwaribe, and the wagema, the specialists in climbing the tall coconut palms to harvest the nuts and tap its sweet sap, performed their distinctive uta dance.

Lamu’s annual Mauled festival attracted Muslims from diverse backgrounds, including delegations from southern Arabia and Sudan, becoming one of East Africa’s major cultural events in the process. Wealthy Arab and Asian businessmen from Nairobi and beyond used the occasion to donate funds to the academy.

Not everyone accepted this exemplar of the Swahili coast’s tolerant and cosmopolitan Islamic culture. A small minority of Wahhabi influenced reformers objected to the use of the twari during the recitation of the Maulidi in Lamu mosques and the non-Islamic performances during the festival. Lamu religious leaders dismissed the complaints by stating that the Maulidi celebrated Habib Saleh’s tradition of inclusion, and that it attract new converts while maintaining positive relations with their non-Muslim neighbors.

Like the annual arrival of the dhows, the Maulidi’s importance for Lamu’s economic cycle had grown as the latter declined, in part due to the arbitrary imposition of customs duty and harassment by government officials. The rest of the year, Lamu’s economy largely depended on the traditional maritime activities and farming. The once vibrant mainland agriculture, however, was suffering due to poor security. Mainland Bajuni, displaced by Shifta bandit attacks in the 1960s, tried to resettle in mainland areas like Magogoni but found the going rough. A friend of mine gave up his farm there after being raised in the air by an elephant and dashed to the ground in front of his terrified children.

The Maulidi gained additional traction during this period as an advertisement for Lamu’s tourism, attracting a growing stream of Western visitors and high profile celebrities. On different occasions I saw the likes of Robert Redford, Omar Sharif, and Mick Jagger walking down the waterfront unrecognized and undisturbed. The hospitality industry became an essential growth sector that compensated for the decline of other livelihoods while revitalizing the production of artisanal crafts and the town’s famous woodcarving tradition. The building boom in Arabia led to a spike in demand for mangrove poles, reviving the international dhow trade. Remittances and returnees from the Gulf and Saudia Arabia provided a boost. After eight decades of economic stagnation, the archipelago’s economy began to sparkle again.

The Maulidi gained additional traction during this period as an advertisement for Lamu’s tourism, attracting a growing stream of Western visitors and high profile celebrities. On different occasions I saw the likes of Robert Redford, Omar Sharif, and Mick Jagger walking down the waterfront unrecognized and undisturbed.

These were simpler times, although much was changing underneath the surface. The tensions fueled by religious dogma and historical divisions elsewhere in the Islamic world were a non-factor except for the running debate over the distinctive Maulidi celebration spearheaded by Kenya’s chief Kadhi, Abdalla Farsi, and other Mombasa-based reformers. This debate was of little import in Lamu. The only dispute of significance was the internal rift between the Ryadha Sharifs that came into the open during the early 1970s when two of Habib Saleh’s grandsons started an alternative madrassa at Sofaa, a new mosque modeled on Ryadha and financed by a patron from the old Mkomani elite.

The contest between the traditionalists and modernisers remained couched in battles over local issues like the debate over the introduction of the Al Habshi version of the Maulidi celebration in place of the more generic Barzanji recitation, and its validation of the sharifs’ elevated spiritual station. It was difficult to see divisions like the longstanding Sunni-Shia conflict arising among the local believers in these settings. But events conspired to make this happen after a small freighter dropped anchor in the Lamu roadstead on an otherwise unremarkable June day in 1985.

Shi’a versus Bidha’a on the Coast of Kenya

 The 1979 Iranian revolution upset the Islamic world’s political and religious status quo. The unanticipated strength of the events set in motion by Ayatollah Khomeini overturned both conventional and leftist concepts of the ‘grand march of modernization in the West, reviving religion as a driver of socio-political change for the first time since the Western Enlightenment.

One of the West’s most prominent academic authorities on Islam, Maxime Rodinson, had built a reputation by stressing that historically it was extremely difficult to find religious sources for Muslim responses to their situation: explanations should be sought in the “the social, cultural and ideological context of the age in which they operated than by their Muslim origin”. The country’s relative prosperity made developments in Iran all the more surprising for upending such theories. Analysts and policy makers were unprepared to assess the implications of what the Lebanese–born scholar, Fuad Ajami, termed “The Impossible Revolution”.

Internal Iranian participants in the upheaval also confused the broad spectrum of anti-government support that united under Khomeini, with the revolution’s Shia religious agenda. The centre did not hold. The Marxist Khalq Party was decimated. The interim Prime Minister, Mehdi Barzagan, didn’t last long. Khomeini banished any hope of accommodation by backing the students who took control of the US Embassy.

The broad spectrum of leftist groups and moderate middle class supporters who joined up with the religious opposition during the uprising could only rue their mistake. Like the many experts caught out by the events, they were left to contemplate Khomeini’s observation that “the Islamic revolution is not about the price of Persian limes.”

It was one of the seminal events of the Twentieth Century. Ayatollah Khomeini ended up on the cover of Time in 1979. The Saudi’s and their Western allies responded by backing Saddam Hussein’s doomed invasion of the contested Iraq-Iran border zone. The mutually calamitous military intervention morphed into a wider soft war to win the hearts and minds of the world’s Muslims, it was only a matter of time before the agents of this proxy battle showed up on Kenyan shores.

Egypt was the first modern Islamic voice to influence Muslims south of the Sahara, and religion did not figure prominently in the message. Gamal Abdel Nassir used the Voice of Egypt to break the European control of the airwaves and focused on anti-imperialist themes reinforcing African aspirations for independence. Egyptian radio broadcasts of the 1960s eschewed the sectional interests of the region’s diverse Muslims and instead cultivated support for the non-aligned movement. But after Nassir’s death, economic power replaced ideology, and patronage links with Saudi Arabia took over as the primary conduit of external influence on the Islamic periphery.

The mutually calamitous military intervention morphed into a wider soft war to win the hearts and minds of the world’s Muslims, it was only a matter of time before the agents of this proxy battle showed up on Kenyan shores.

Most of their funds were transacted on the state level with a view towards cementing ties of economic cooperation while curbing Israeli influence. The rest went to support madrassa education and to train teachers. In Kenya, a new generation of scholars and Imams, many of whom were sponsored by the Saudis, were opposing superstitions like belief in the power of amulets, quasi-religious divination and magic, and other practices tolerated by the Sharifite establishment. But despite its decidedly non-Wahhabi orientation, Lamu’s Ryadha establishment also received Saudi support.

Although Saudi aid at that juncture highlighted secular principles, it was part of a longer-term strategy twinning cultivation of Wahhabi ideology with support for the Kingdom. The Iranian Revolution shook up this patrimonial status quo, and in Kenya, Iran’s new popularity complemented coastal Muslims’ antipathy for the ‘Arabs’.

During my early days on the coast I was frequently confused by the contradictions conveyed by the word “Arab.” As far as I could see, although only religious scholars and relatively recent Hadhrami immigrants actually spoke Arabic, many coastal Muslims aspired to a degree of Arab-ness through dress and language, while real and imputed connections to Arab lineages conferred prestige. Bajuni oral tradition, for example, states that these indigenous African Swahili originated in Mecca. I was naturally perplexed when a Bajuni friend remarked, “Arabs are the worst people in the world.

Other coastals who came from high status ‘Arab’ families expressed a similar attitude, claiming that the Arabs of Arabia are primitive and vain. Jokes about the Saudis in particular were common, especially among coastals returning from the Kingdom who found life in Arabia difficult and suffocating. The large number of coastals who migrated there in search of work found themselves treated as low status migrant workers. Merchants with important business connections sometimes echoed the negative attitudes prevalent among the Swahili and near universal among the Somali. “The Saudis are very nice when you meet them here,” one Mombasa tycoon told me, “but if you deal with them in Arabia they are the worst of savages.”

A convoluted mix of Arab-philia and Swahili cultural autonomy reflected the conservatism of many local scholars and Imams, who tended to steer a neutral line between the influence of internal reformers and external religious patrons. What they shared in common was their reluctance to address the political marginalization of Kenya’s Muslims.

This began to change after the 1979 revolution. Iran became a symbol of the fight back against Westernisation. Their efforts to promote Islamic moral renewal highlighted local grievances over historical injustices and other issues that were never championed by the Arabs and their political clients. For the first time since the late nineteenth century, coastal Muslims could look to a role model in Ayatollah Khomeini who combined religious integrity with political liberation. Pictures of the Ayatollah joined the pantheon of cultural heroes on the coast, sometimes sharing a wall with Bob Marley and Bollywood film stars.

A convoluted mix of Arab-philia and Swahili cultural autonomy reflected the conservatism of many local scholars and Imams, who tended to steer a neutral line between the influence of internal reformers and external religious patrons. What they shared in common was their reluctance to address the political marginalization of Kenya’s Muslims.

During the early 1980s the Iranians initiated efforts to exploit their religious capital by cultivating influence on the coast. They established an Islamic newspaper in Mombasa that discussed social problems and offered religious commentary. The Iranian Embassy sponsored delegations of local notables and sheikhs to visit Iran. Most returned speaking of Iran in glowing terms; the Saudis responded by flying many of the same individuals to Mecca and Medina. The narrative emerging out of these junkets confirm the reports of seamen who reported how they were welcomed as Muslim brothers in Iranian ports like Bandar Abbas but were treated poorly on the other side of the Persian Gulf—where Christian expatriates were received with open arms.

The Iranians’ efforts gradually brought some religious leaders under their influence, including Abdullahi Nassir, former leader of the pro-secession Coast Peoples Party, who was commissioned to deliver a series of lectures across the coast. In Lamu, the internal conflict between the Ryadha and Sofaa sharifs provided another entry point.

In 1983 Sofaa had recruited the assistance of the long-serving Mombasa politician, Sharif Nassir. The two factions typically supported different candidates in local elections, and this presented Nassir with an opportunity to leverage his support among the large Lamu community in Mombasa. The coast’s pre-eminent politician held a harambee at the Sofaa Mosque to raise funds to build a new madrassa and dormitory. Shortly afterwards the Iranians offered their assistance for the same project.

When I visited the mosque in May of 1984 I found a new over-sized version of the original Sofaa and a new educational complex erected on the plot behind it. A block of classes funded by Nassir’s harambee remained incomplete, like a testament to the old order. I was told that Mzee Mwenye, the head of the mosque and its Imam, Mwenye Omari, had embraced the Ithna Asheri school of Shi’ism. When I spoke to them, they said they were grateful to their new Iranian friends for improving the facilities but otherwise nothing significant had changed.

The mosques beautiful new calligraphy with its references to the Shia martyrs Hussein, Hassan, and the Prophet’s daughter, Fatima, indicated otherwise. The conduct of prayers and most everything else was the same, although my father-in-law confirmed that the pro-Shia management had began using the Shia version of the call to prayers before the complaints of the neighborhood’s residents saw it discontinued.

East African Muslims are a multicultural community where until recently sectarian differences rarely served as a source of friction. Bohra, Ismaili, Ithna Asheri, and other Asian Shia Muslims lived among the Sunni majority in coastal towns and cities and even married Sunni wives occasionally. This explains why Sofaa’s Shia affiliation was, for most people in Lamu, more about the ongoing Ryadha-Sofaa feud than a break with Lamu’s Islamic tradition. My father-in-law and many other former regulars continued to pray at Sofaa despite the changes.

The conflict nevertheless began to ramp up over the following months as the two factions engaged in various battles for influence, beginning with the recruitment of children to attend their respective madrassa. My wife was perplexed when competing representatives of Sofaa and Ryadha had come to the house advising her to enroll our children in their respective Quran schools. They warned of the negatives that would result if they remained in their present chuo, which was not affiliated to either faction.

The Sofaa faction won a legal victory when they went to court to prevent the eviction of a popular female maalim based in a vacated Shi’a mosque that had not been used for decades. This was followed by a battle over selection of a new mosque for hosting Friday prayers. The traditional Mskiti wa Jumaa in Mkomani could no longer host the town’s growing numbers, forcing late arrivals to pray on the sidewalks and alleyways outside the mosque. When Sofaa lost their bid to be selected as the second Jumaa mosque, partisans chained the doors of the eight hundred year-old Pwani Mosque – identified with Lamu’s pre-Ba’Alawiyya ulama – that had been chosen instead. The District Commissioner, however, intervened on behalf of the anti-Sofaa clerics.

Lamu people discussed these developments in their usual jocular fashion, referring to the parties as Watu wa Shi’a and Watu wa Bidha’a, the latter being a reference to the criticism of the Maulidi who claimed it was the kind of religious innovation forbidden in the Quran. Most everyone I knew viewed the events as a family affair that had burst into the open with comic effect. No one took down their pictures of the Ayatollah, even though their take on the revolution had soured during the interim.

Prior to these developments, in 1982, a fire consumed a large area of Langoni. It started after a quarrel between a brother and sister ended with the brother setting the house on fire before dawn. The prevailing kuzi winds spread the flames across Langoni’s canopy of palm-thatched roofs, incinerating hundreds of the densely packed mud and wood houses and spreading to the coral rag stone structures lining the Msitu wa Mui, Lamu’s main street which the government had ineffectually renamed Kenyatta Avenue. When the fire moved uphill towards Ryadha, the mosque’s senior Imam, Sayyid Ali Badawy, came out of the mosque waving Habib Saleh’s flag. The wind died and the fire expired without causing further harm. I was upcountry at the time. When I returned to Kiwa Ndeo a week later, a posse of eyewitnesses confirmed this sequence of events.

International and Kenyan donors committed funds for rebuilding a new mabati (corrugated iron)-roofed Langoni, but the promised reconstruction of the homes dragged out. A year later many households were still camping in makeshift structures built on the ruined plots; after two years some victims on the list were still waiting for compensation. Most of the damage occurred on the Sofaa side of town, which ostensibly led to the mission of the mysterious freighter that arrived almost three years later.

When the fire moved uphill towards Ryadha, the mosque’s senior Imam, Sayyid Ali Badawy, came out of the mosque waving Habib Saleh’s flag. The wind died and the fire expired without causing further harm. I was upcountry at the time. When I returned to Kiwa Ndeo a week later, a posse of eyewitnesses confirmed this sequence of events.

The ship carried clothing for the victims of the Lamu fire donated by the Shi’a community in Kuwait. It spent a long time anchored off Manda Island while the Sofaa sharifs negotiated the cargo’s release. Several months later the goods were cleared, but because they were officially listed as charitable donations for the community at large, the Provincial Administration claimed that other religious actors should be allocated equal shares. As it turned out, the shipment contained many items of high quality, and distribution proceeded on a prejudicial basis. Some recipients reported that they found dollars and riyals in the pockets of donated kanzu; a fisherman showed me a Seiko watch he found in the ‘Kuwaiti’ gown he received.

For a while “umepata Kuwaiti gani?” became the first question people asked after the usual greeting. Many of the genuine victims received nothing. My brother-in-law, who lost more than most when his shop and home burned, missed out. The generosity of the foreign benefactors ended up generating more controversy than relief.

The issue was settled when, during Friday prayers a group of youth broke into the storeroom where the Kuwaiti cargo was kept. They made off with the remaining chests and footlockers. They broke them open on the waterfront, dumped out the contents, and ran off after taking the pick of the loot—which was mainly shoes. The public scrambled for what was left, all evidence of the heist vanishing before the faithful in the mosque uttered the final “Assalamu alaykum wa barakatuh” ending the prayers. The news spread fast.

“These guys committed a major sin!” one my neighbors declared.

“What’s so wrong about liberating what was supposed to be gifts for the poor?” I asked.

“Nothing,” he said, clarifying that “it was bad because most of the best things went to the slackers who don’t attend Juma’a prayers.”

That was not the end of it. In the scramble for the footwear most of the pairs were separated. Several times a day someone would call hodi hodi from downstairs, walk up the stairs, and after the usual salutations produce a bag filled with unmatched shoes.

Uko na ndugu ya hiki?” invariable followed, as they placed a single Italian loafer or a fashionable woman’s stiletto on the mat.

The exercise continued for several weeks. Although I surmised many of the shoes were never united with their ‘brothers’, it helped restore a degree of normality to community after the antagonistic Shi’a versus Bidha’a interlude. Twice, women who were not on good terms with my spouse clunk-clunked up the stairs and politely made their enquiries, and I observed how the process resulted in the resumption of normal relations.

Things did not end well for the warring sheikhs. The infighting continued, and the resulting decline in status coincided with the rise of a new generation of more activist reformers with comparatively shallow educational and spiritual qualifications than their predecessors.

Assessing The Aftermath: The Kingdom Strikes Back

At the time I viewed this incident as a victory for local religious sensibilities over the forces of patronage and imported religious models. But the influence of the Ayatollahs’ revolution had opened the way for political Islam to take root in local conditions. No one anticipated the directionality of events over the next two decades.

The Iranian gambit ended up producing the opposite effect in respect to their political interests, with correspondingly negative implications for the Muslims of this region. Infatuation with the Islamic revolution declined as the Iranian government began to show its authoritarian nature, and the Saudis went on the offensive. Iran’s pan-Islamic activism in turn prompted Saudi Arabia to adopt a more aggressive role across the Islamic world. Over the course of the 1980s the Kingdom spent over $4 billion per year to spread the Wahhabi creed abroad. Private sources in the kingdom interpreted the Mujahedeen victory in Afghanistan as divine approval for their version of jihad, and extended their funding for radical Wahhabi movements across to virtually the Islamic world.

The gradual spread of Wahhabi influence provided cover for the proponents of the more extreme Salafi movement before the Embassy bombings of 1998 accelerated the convergence of the global Islamist narratives across the Horn of Africa region. This coincided with the spread of social media and internet-based transmission of Islamist ideologies, which gained ground at the expense of the transmission of formal Islamic knowledge through recognized schools of jurisprudence and the human exemplars of Sufi teachings.

We all know what came next.

The irony is that Lamu, home to the Islamic tradition that is most resistant to religious extremism in the region, has suffered disproportionately from the international cast of Al Qaida sleeper cells and Al Shabaab insurgents based across the Somalia border.

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Mr. Goldsmith is an American researcher and writer who has lived in Kenya for over 40 years.

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Black Votes Don’t Matter: The Shrinking Civic Space of African Immigrants in the US

It is a difficult time to be an immigrant in the US. For those of African descent, theirs is a rare combination of challenges, not only in becoming part of a new nation but also in carrying the baggage that comes with being black in America.

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Black Votes Don’t Matter: The Shrinking Civic Space of African Immigrants in the US
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The United States of America has excelled in projecting an extraordinary image of itself as a free nation with a thriving democracy, where anyone can come and work their way towards a better life through civic participation. However, what the past few years in particular have peeled away betrays a somewhat different truth: that voting in the United States is hard and getting steadily more so. And there’s one group of people who face a particular set of difficulties when seeking to cast their ballot: African immigrants.

Some historic context is needed regarding voting issues within the US. First and foremost, there is a historic precedent of voter suppression in the US that is unequaled within the modern Western world. Much of the targeting of such efforts has directly affected African Americans and people of colour. After slavery was abolished, states would go to incredible lengths to suppress the black vote, including implementing taxes on voting, forcing black people to produce extraneous forms of personal and family identification and making would-be black voters pass vaguely worded and lengthy “literacy tests” in order to cast their ballot. These systems, a part of the infamous Jim Crow laws, were struck down as illegal in 1965 when the country passed the Voting Rights Act.

In the years that followed, those who sought to seek the vote sought out ways to circumvent the law and keep the voter turnout low. Since the latter half of the 20th century, high voter turnout translated to a more liberal result. Take, for example, that a Republican presidential candidate has won the popular vote once since 1988 (George W. Bush in 2004). In the cases of the victories of Donald J. Trump in 2016 and George W. Bush, they skated to victory through the electoral college; a system that traces its roots to suppress the popular vote.

When looking at US politics, it isn’t as much a matter of high voter turnout as it is who comprise the voters that are showing up to vote. The most telling demographic, the group with the highest disparity of aligning with Democrats over Republicans, is African Americans. Hillary Clinton carried the black vote by an 80 point margin – 88 per cent to 8 per cent over Trump in the 2016 election. This margin, coupled with the United States becoming more, not less, diverse has left those seeking to suppress the vote scrambling for answers.

In 2013, efforts to suppress voters gained a major boost when the US Supreme Court overturned section 4(b) of the Voting Rights Act, which outlined that states and districts that had previously been involved in voting discrimination needed pre-clearance of the validity of their electoral processes. The conservative judges ruled this as unconstitutional, that the section “punished” states for past mistakes, not for possible future successes. Justice Ruth Bader Ginsberg dissented strongly, stating that “throwing out preclearance when it has worked and is continuing to work to stop discriminatory changes is like throwing away your umbrella in a rainstorm because you are not getting wet.”

The Voting Rights Act had been brought before court in the wake of a series of issues across the US, primarily having to do with controversial voting ID laws, reports of voter suppression and other forms of disenfranchisement. In a theme that runs across America’s election process, the black community was disproportionately affected.

This brings the issue to focus on African immigrants in the United States. The issue of immigration in the United States has currently brought the federal government to a shutdown for over a month. There is constant rhetoric from the Trump administration targeting illegal immigrants as a major obstacle to the security and economic future of the United States. The issues of building a border wall with Mexico and continuing to provide guaranteed safeties (such as the Deferred Action for Childhood Arrivals programme, which offers protections to the children of illegal immigrants into the US) are being used as bargaining chips at the government level.

A difficult time

It is a difficult time to be an immigrant in the US. For those of African descent, theirs is a rare combination of challenges, not only in becoming part of a new nation, but also in carrying the baggage that comes with being black in America.

African immigrants in the US are a small but rapidly rising group. The increase has been marked since 1970, especially amongst sub-Saharan Africans. According to the Pew Research Center, the number of African-born individuals heading to the US increased nearly 250 per cent between 2000 and 2015, from 881,000 up to 2,060,000. Africans are also the fastest growing demographic among black immigrants, increasing by 137 per cent between 2000 and 2013.

It is a difficult time to be an immigrant in the US. For those of African descent, theirs is a rare combination of challenges, not only in becoming part of a new nation, but also in carrying the baggage that comes with being black in America.

In the US, a major aspect of any voting rights issue is where in the US you’re living. Different states hold different standards, different regulations and varying requirements. When examining how voting standards impacts African immigrants, there needs to be a brief examination of where African immigrants live.

The five states with the highest African immigrant population are California, New York, Texas, Maryland and Virginia. Cities such as Atlanta, Georgia and Minneapolis also have high numbers of such migrants. This is where context becomes even more important; California and New York are known as more immigrant-friendly destinations, and their major metropolitan areas are regarded as “sanctuary cities” for illegal immigrants. New York and Minnesota don’t require a photo ID whereas California may require one for a first-time voter (newly-naturalised US citizens are always first-time voters). Maryland holds a similar policy.

Texas, Virginia and Georgia, on the other hand, are a different matter entirely. Virginia requires a valid photo ID in order for an individual to vote in person. Texas and Georgia are both mired in controversy over the stringent regulations put in place regarding the standards for voter IDs. The state of Texas is currently mired in litigation over the voter ID laws, with opponents arguing that it disproportionately impacts minorities.

In Georgia, where over 70,000 African immigrants reside in the Atlanta metropolitan area, the man who was presiding as the Secretary of State (the office which controls the conducting of elections, a possible conflict of interest) won narrowly and controversially over Stacey Abrams, who would have been the first black woman elected to be a state governor in the US. Abrams repeatedly made claims that there was voter interference, particularly amongst black precincts, where electronic voting was in disarray and reports of voter suppression were rampant. These claims had much of their basis in and around Atlanta, Georgia.

Why does voter ID matter and how does it affect Africans living in America? For starters, the path to US citizenship (which is needed to vote in America) is extremely arduous, long and difficult. The paperwork hoops to jump through are staggering. On average, it takes an immigrant a minimum of five years of continuous residency to become a naturalised US citizen. In cases that need further legal counsel, it can take even longer as the legal side of American immigration courts have become steadily more choked and congested in the new millennium.

Why does voter ID matter and how does it affect Africans living in America? For starters, the path to US citizenship (which is needed to vote in America) is extremely arduous, long and difficult.

For immigrants, the issues surrounding voter ID can often be much murkier. For instance, immigrants can gain driver’s licenses within the United States, which is one of the key forms of identification needed in states with more stringent regulations. This doesn’t mean that immigrants have the appropriate information explained to them regarding the IDs being obtained. The African Advocacy Network of California notes that although driver’s licenses are applied for successfully by immigrants who aren’t naturalised, the fact that they are still unable to vote due to their status isn’t explained to them. This can lead to immigrants attempting to vote, unknowingly engaging in an illegal act of fraud. The penalties for such fraud in the US are harsh. Both illegal and legal immigrants can face deportation if found to be involved in fraudulent voting. Cases of actual voter fraud involving illegal immigrants are incredibly rare, but that doesn’t stop Trump from repeatedly claiming that Hillary Clinton won the popular vote because of millions of “illegals” somehow managing to cast ballots.

Illegal immigrants in Trump’s America

The Obama administration was noted for its strict approach to illegal immigration, deporting hundreds of thousands between 2009 and 2017. That same administration, however, did focus on expanding a programme called the H1-B visa, which encouraged workers from outside of the United States to enter the country to work. Many prominent corporations, including Amazon, Google and Microsoft, heavily leaned on the programme as it eased the transition for professionals to gain a foothold in the US workforce. In addition, the H1-B programme made the path to a Green Card visa (an initial step towards US citizenship) markedly smoother, encouraging immigrants to engage in the process of becoming a citizen.

The Trump administration, on the other hand, has taken a significantly different approach. The current White House passed an executive order titled “Buy American, Hire American” that directly encourages American companies to hire only the most skilled workers from outside of the United States. This will have a long-term impact on the number of H-1B applicants who can head down the path of gaining citizenship.

The Obama administration had an unfortunate track record of harshness regarding immigration, including reopening and examining case files of naturalised citizens (immigrants who gained their citizenship in the US). The Trump White House has, of course, seized on this idea and expanded it. Under this administration, the U.S. Citizenship and Immigration Service (U.S.C.I.S.) has created a new task force to look into cases and possibly “denaturalise” citizens for often muddied reasons, such as making a clerical mistake on a form. In essence, this leaves millions of naturalised United States citizens’ status at the discretion of officials appointed under the Trump administration, one noted for its blatantly anti-immigrant rhetoric.

A prominent path to Green Card visas for African immigrants is the Diversity Lottery programme, which grants visas to citizens from all over the world. Given the administration’s track record, it comes as little surprise that the White House has looked repeatedly into cutting the programme entirely. As egregious as this is, perhaps the repeated ransom holding of the so-called “dreamers” (children of illegal immigrants born in the United States and granted legal protections) is even more insidious. Trump has made a repeated talking point of ending protections for the dreamers, even going so far as to offer continued protection as a bargaining chip for $5.7 billion of funding for a border wall in January of this year.

The Obama administration had an unfortunate track record of harshness regarding immigration, including reopening and examining case files of naturalised citizens (immigrants who gained their citizenship in the US). The Trump White House has, of course, seized on this idea and expanded it.

So how does this apply to African immigrants, specifically? The numbers indicate that immigrants from sub-Saharan Africa are the fastest growing group, and that the vast majority of this immigration has occurred after 1960. This translates into African immigrants having less of an established civic network than other immigrant groups in the US.

Less civic engagement

Less network means less community engagement and less protection for Africans now calling the US their home. This, in turn, translates into issues surrounding social integration facing Africans in America. Those in questionable status are likely to eschew anything to do with getting on the record, including engaging in civic discourse. One example saw the city of San Francisco engaging with members of the African immigrant community to get involved with the local school board elections, despite many holding illegal immigrant status. Illegal immigrants worry about what will happen to their information and whether it will end up in the hands of Immigration and Customs Enforcement (ICE).

This is compounded by the constant shifting and swirling of regulations surrounding immigration within the US. Frankly put, in America, thing currently seem extremely uncertain. Those who would have gained the path to citizenship by being granted immigration visas are suddenly on the outside looking in. Immigrants from Libya, Sudan and Somalia (the three African nations affected under the Trump administration’s travel ban targeting Muslim-majority nations) are suddenly unsure of their status.

Noticeably, despite all of his talk of walls and increased military presence, Trump has not issued a travel ban to a Latin American country. The current administration is seemingly preoccupied with all things immigration, how to stop it, how to grandstand from it, how to flex political muscle by stopping it. In fact, in 2017, despite overall numbers of deportations falling, ICE deported a record number of African immigrants, more than double of the total from 2016. There were reported instances of poor treatment and abuse of deportees by ICE agents. While the numbers are comparatively small, increases in deportation can push African immigrant communities even farther outside of the democratic process. What was the number one country for African immigrant deportations from the US? Somalia.

Less network means less community engagement and less protection for Africans now calling the US their home. This, in turn, translates into issues surrounding social integration facing Africans in America. Those in questionable status are likely to eschew anything to do with getting on the record, including engaging in civic discourse.

Ilhan Omar, herself a Somali immigrant to the US, is now a first-term Congresswoman from Minneapolis, Minnesota. Her election is an indication of a potential future of US politics: that African immigrants can find a voice in politics, in part due to the rallying of their communities. She’s become an outspoken advocate for the Somali community in Minnesota while continually deriding the Trump administration’s anti-immigration policies.

Since her election, Omar has been a frequent target of scathing criticism from the conservative media and the Republican Party, who have even claimed that some of her pro-Palestine comments are blatantly anti-Semitic. While her election to the US Congress is historically significant (she’s the first African-born refugee in the history of the United States Congress), Omar is still just one member of Congress, one voice for an ever-growing population that seems ever-more targeted by executive orders of the Trump administration. Think of it this way: Omar wouldn’t be able to enter the US under the travel ban of Muslim majority countries passed down by Trump.

In essence, this message to newcomers to the US is: DON’T BOTHER GETTING ENGAGED BECAUSE THE CONSEQUENCES COULD OUTWEIGH YOUR EFFORTS. To those emigrating to the US from Africa, this messaging can appear even more insidious, as Adoubou Traore (who himself emigrated from the Ivory Coast), the director of the African Advocacy Network in San Francisco outlines: “Many Africans have inherent doubts about the legitimacy of elections, they’re a headache, their experience makes them not believe that their voices matter. When there is no guarantee that their information won’t be subject to being exploited, from their view: what’s the point?” There isn’t much that would prevent them from holding such views in America. It becomes a community question of why organise if doing so can only lead to more headache?

With issues surrounding racism against black people in America being dissected and moved further towards prominence in national dialogue, it would, at least on the surface, seem as though the communities of African Americans would provide a steady ally for Africans adjusting to life in America. Unfortunately, this is often not the case. There is a noted divide between Africans and black Americans, one that many coming to the US find difficult to bridge. Some of this gap is historically entrenched, some of it is due to the truly lacking breadth of coverage in the US education system regarding African history and culture. The awkward truth is: Africa as a topic in the US is regarded as a monolithic punch line to a bad joke, and is hardly rendered an after-thought in terms of democratic engagement.

In terms of vulnerability to less-than-democratic interests, there are myriad of groups in the United States that could use additional legal and outreach protections. Practically anywhere in America that can’t be categorised as white and suburban finds itself victim to voter suppression efforts. In the US context, the black community is systematically targeted the most.

Laws are seemingly rolled out in force yearly in dozens of states, implementing further restrictions and using scare tactics, lies and intimidation to influence local and national elections with a conservative slant.

The unavoidable truth is that Africans in the US find themselves at an ugly modern crossroads: the centuries of subversive efforts to reduce the so-called “urban” vote at a crossroads with the modern iteration of all-American xenophobic fervour. Though growing fast in population, the democratic influence has not kept stride.

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Death in Vienna: The Death of Erich Rebasso

In the last days of 2008, Erich Rebasso, an Austrian lawyer, sent a letter to the main Vienna headquarters of the Federal Criminal Police, the country’s top law enforcement agency. Its purpose was unusual — the father of four young children was blowing the whistle on himself.

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In the last days of 2008, Erich Rebasso, an Austrian lawyer, sent a letter to the main Vienna headquarters of the Federal Criminal Police, the country’s top law enforcement agency.

Its purpose was unusual — the father of four young children was blowing the whistle on himself.

“I deeply regret having been used for criminal purposes and I am willing to submit the matter to the required criminal review,” Rebasso’s five-page confession concluded.

But it had all come apart. Rebasso admitted he had been used to launder tens of millions of dollars. He explained that, for over a year, he had been accepting payments from Russian criminals and had sent the funds to other bank accounts at their instruction. Then 45, Rebasso specialized in advising Russian clients on how to do business in the West. He had an excellent reputation as a fast, reliable, and discreet partner, and he spoke Russian fluently.

As it turns out, those criminals were using companies that were part of the Troika Laundromat. The massive financial scheme revealed in OCCRP’s latest Laundromat investigation had been put together by Troika Dialog, then Russia’s largest private investment bank. Some of the accounts Rebasso wired to belonged to two of the system’s core offshore companies: Industrial Trade Corp. and Nixford Capital Corp.

Between December 2006 and February 2008, Rebasso used 150 individual transactions to send almost US$ 96 million to laundromat accounts at Ukio Bankas, a Lithuanian bank.

Many of the reasons specified for the transfers made little sense for a law firm. Along with trades involving “fruits and vegetables,” “consumer goods,” and “electronic goods,” Rebasso is even listed as buying “frozen herring” from companies with Ukio bank accounts. More likely, the description was a red herring aimed at Ukio’s compliance department.

Rebasso’s own Austrian bank accounts were held at Raiffeisenlandesbank Niederösterreich-Wien (RLB). Though the bank investigated his large transfers, it appeared to take no further action for two years — at which point it finally pressed him to stop.

The massive financial scheme revealed in OCCRP’s latest Laundromat investigation had been put together by Troika Dialog, then Russia’s largest private investment bank

Rebasso’s confessional letter had little effect. While police looked into the matter, it was two years later when they informed him that they had stopped the proceedings because they believed any potential crime had happened outside their jurisdiction and been committed by foreigners.

Two years after that, Rebasso was dead.

The Sheremetyevo Fraud

According to his statement, Rebasso’s involvement in the money laundering scheme began on a visit to Moscow in November 2006 where he was introduced to Viatcheslav Dremin, a Russian businessman. Dremin told him that he provided financial services to Russians who needed to transfer funds abroad. But the official system for sending money across borders was very bureaucratic, he said, and he needed to speed up the process. He wanted Rebasso to act as his trustee in Vienna to help him move the money faster.

The lawyer accepted. Soon, two Vienna bank accounts belonging to his Austrian company, Schulhof Investigation (later renamed Sostegno), began receiving large sums from companies Dremin represented, along with instructions on where to send them. In every instance, he received his directions via an anonymized email address.

Rebasso worked on behalf of three insurance companies registered in Dagestan, a troubled North Caucasus republic within the Russian Federation.

At least some of the money appeared to be of criminal origin.

One of the companies Dremin represented, National Insurance, was directed by Russian businessman Maxim Vedenin. In 2011, Vedenin would be sentenced to 19 years in prison for robbery and the murders of two prostitutes.

Prior to that, Vedenin’s company had received money from a widely-known fraudulent scheme involving fuel at Moscow’s Sheremetyevo airport that OCCRP uncovered in 2012.

Between 2003 and 2008, Moscow’s busiest airport bought fuel through a long chain of intermediaries that grossly inflated its cost. According to court documents, phantom companies earned at least $200 million in unnecessary markups in 2006 and 2007 alone. The Russian government lost more than 1 billion rubles ($40 million) in tax revenue from the scheme. The higher fuel costs also meant higher airplane ticket prices for the travelling public.

A portion of the money generated by the scheme was laundered through the Troika Laundromat. Vedenin’s company, National Insurance, received some of the proceeds, and then sent them on to Rebasso’s company.

The Austrian lawyer then sent the funds into the Troika Laundromat, using it as a money laundering system. Over the same period, between December 2006 and March 2007, he sent $19.4 million to the accounts of Nixford and Industrial Trade Corp. To justify the transfers to the bank, he provided false invoices indicating he had bought “consumer goods” from the Troika Laundromat companies, or was simply paying “for bills.”

All but one of Dremin’s companies have been dissolved, and he couldn’t be reached for comment.

Raiffeisen Looks In

Despite Rebasso’s efforts to mask his money transfers as legitimate trade deals, his own bank began to investigate the financial activity in the spring of 2007.

On March 15, Rebasso’s office received a letter from his bank’s legal department inquiring about a “sharp increase in transaction amounts” on one of his accounts. The bank wanted to know on whose behalf Rebasso was acting.

A few days later, Rebasso responded in a letter, explaining that he was handling “foreign payments” for three Russian insurance companies. He also provided their names, their information from the Russian commercial register, and evidence of his business relationship with them.

The bank appears to have been satisfied with Rebasso’s explanation, because afterward, his transfers continued.

(A representative of RLB said the bank could not comment on its clients and that it had complied with all anti-money-laundering obligations.)

A Last Client

In mid-2007, Rebasso’s statement to police says, Alfis Mirgunov, one of the Russian partners in his arrangement with Dremin, got in touch. Mirgunov planned to start his own financial enterprise and wanted Rebasso to open bank accounts in Austria on his behalf. Once again, the lawyer agreed.

He opened three new RLB accounts for his company, Schulhof, to handle the anticipated load. The accounts were denominated in U.S. dollars, euros, and Russian rubles and soon, more money started to pour in. Once again, Rebasso received his instructions from an anonymous e-mail address, this time identified only by a sequence of digits.

In mid-2007, Rebasso’s statement to police says, Alfis Mirgunov, one of the Russian partners in his arrangement with Dremin, got in touch. Mirgunov planned to start his own financial enterprise and wanted Rebasso to open bank accounts in Austria on his behalf. Once again, the lawyer agreed.

Over two months near the beginning of 2008, Rebasso wired $68.3 million in 106 individual transfers to a bank account owned by Vantrel Invest Ltd., a New Zealand–registered shelf company.

Vantrel doesn’t appear to be a Troika Laundromat company; rather it is an intermediary that sent millions on to the Laundromat. (Vantrel’s bank account was held at Ukio Bankas, where many Laundromat companies held their accounts.) Documents related to the transactions said they were to buy mobile phones, though this explanation is almost certainly another fiction.

In his confessional letter, Rebasso told the Austrian police that he stopped working for the Russians in 2008. It isn’t known how much money he took for his services.

“I ended this activity at the end of February,” he wrote. “Among other reasons, primarily because the scope overwhelmed my control options.”

His hesitation appeared to be only part of the truth.

In fact, that month, Rebasso’s Austrian bank, RLB, had had enough. His transactions had apparently triggered another serious review, and senior executives told Rebasso he would need his own banking license to continue such large transfers.

The Finlist Fraud

Though he had stopped working with his Russian partners, Rebasso’s troubles were just beginning. He appeared to have become an unwitting facilitator of a fraudulent investment scheme.

According to his letter, in June 2008, Rebasso started receiving emailed complaints from ordinary Russians who said their savings had been stolen.

Rebasso described the correspondents as “rather simple-minded, not very wealthy people who were baited with internet ads.”

Apparently, the victims of the scheme had been offered what appeared to be lucrative investment opportunities through a platform called Finlist Forex Found. Then, without Rebasso’s knowledge, they were instructed to send their money to the accounts of his Austrian company, Sostegno.

Rebasso said the Russian fraudsters provided the investors with fake documents bearing his forged signature (some of these were shared with him by the angry correspondents). When the money arrived in his accounts, Rebasso sent it on without being aware of its origins.

Now the victims were furious, demanding repayment of money he had already sent on to the Laundromat.

Rebasso said the Russian fraudsters provided the investors with fake documents bearing his forged signature (some of these were shared with him by the angry correspondents). When the money arrived in his accounts, Rebasso sent it on without being aware of its origins

Rebasso got in touch with Mirgunov and asked what was happening. The Russian told him he would fix the problem and reimburse anyone who had lost money. But he never did, and by the end of the year, Rebasso sent his letter to the Federal Criminal police.

The Beginning of the End

The police forwarded the case to the public prosecutor’s office in Vienna. Nothing appeared to happen. On Dec. 3, 2010, two years after his complaint, Rebasso was notified that police had ended their case. It had been dismissed because the public prosecutor decided the case was outside Austrian jurisdiction. “Foreign acts of foreigners,” the statement read.

Rebasso’s own story was nearing its end.

In late July 2012, as he walked from his office to his Mercedes SUV in an underground parking lot, he was ambushed by two men. His car was later found empty in a different location, and shortly after his disappearance, his family received a demand: The kidnappers wanted a 435,000–euro ransom. After no deal was reached, Rebasso’s body was found three weeks later in a forest near Vienna. Austrian authorities concluded that he had been suffocated, probably while he was taken into a headlock.

Soon afterward, two former Moscow police officers were arrested and charged in connection with the ransom demand — but not for Rebasso’s kidnapping and murder. They were sentenced to eight and nine years in prison, respectively.

It’s still unclear who ordered Rebasso’s murder and why, though media and police speculated that victims of the investment fraud had hired the officers to recover the money.

More than six years later, the exact circumstances of Rebasso’s death are still unclear.

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The Troika Laundromat: How Vast Offshore Network Moved Billions With Help From Major Russian Bank

The Laundromat wasn’t just a money laundering system. It was also a hidden investment vehicle, a slush fund, a tax evasion scheme, and much more.

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The Troika Laundromat: How Vast Offshore Network Moved Billions With Help From Major Russian Bank
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At first blush, Ruben Vardanyan and Armen Ustyan have nothing in common beyond their Armenian roots.

Vardanyan is a wealthy Russian banker who once led Troika Dialog, the country’s largest private investment bank. He’s spoken at the World Economic Forum in Davos and spent tens of millions of dollars on philanthropic projects in his native Armenia. Ustyan is a seasonal construction worker who shares a chilly apartment with his wife and parents in northern Armenia when he isn’t renovating flats in Moscow.

Ustyan’s name and a copy of his passport appear in the bank documents for an offshore shell company that played a role in Troika’s system. The company was one of at least 75 that formed the complex financial web, which functioned from 2006 to early 2013. Over that period, Troika enabled the flow of US$ 4.6 billion into the system and directed the flow of $4.8 billion out. Among the counterparties on these transactions were major Western banks such as Citigroup Inc., Raiffeisen, and Deutsche Bank. The dozens of companies in the system also generated $8.8 billion of internal transactions to obscure the origin of the cash.But Ustyan’s signatures on documents he says he’s never seen draw a direct line to Troika — and to a financial Laundromat that shuffled billions of dollars through offshore companies on behalf of the bank’s clients, many of whom were members of Russia’s elite. The system enabled people to channel money out of Russia, sidestep restrictions in place at the time, hide their assets abroad, and launder money. It also supplied cash to Russian President Vladimir Putin’s friends and powerful oligarchs, and enabled criminals to mask the illicit origins of their cash.

(Citigroup didn’t respond to a request for comment on this story; Raiffeisen declined to comment, citing client confidentiality; and Deutsche Bank said it had “limited access” to information about Troika client transactions and couldn’t comment on specific businesses for legal reasons.)

At the time, Vardanyan was Troika’s president, chief executive officer, and principal partner. He enjoyed a reputation as a Western-friendly representative of Russian capitalism, known for working to improve the country’s business environment and for co-founding the Moscow School of Management Skolko

As with the previous Laundromats, many of the large transactions were made on the back of fictitious trade deals. The bogus deals were invoiced variously as “goods,” “food goods,” “metal goods,” “bills,” and “auto parts.” All the invoices included in the leak were signed by proxies and sent from Troika.ru email addresses. Meanwhile, employees at Troika were setting up the opaque financial system — dubbed here the Troika Laundromat because of its resemblance to previous money laundering schemes uncovered by OCCRP.

This portrait of the operation emerges from a trove of leaked banking transactions and other documents obtained by OCCRP and the Lithuanian news site 15min.lt, and shared with 21 media partners.

As a whole, the data set includes over 1.3 million banking transactions from 238,000 companies and people, as well as thousands of emails, contracts, and company registration forms. This analysis of Troika’s network is based on a subset of the data.

In an interview, Vardanyan said his bank did nothing wrong and that it acted as other investment banks did at the time. He stressed that he couldn’t have known about every deal his enormous bank facilitated for its clients. Reporters found no evidence that he was ever investigated or accused of any wrongdoing by authorities. His signature was found on only one document in the entire scheme, in which he gives a loan to a Troika Laundromat company.

Vardanyan described the system as a private wealth management service.

Referring to the constellation of offshore companies that comprised the Laundromat, he said: “Those are technical service companies of Troika Dialog clients, among them, mine.”

“It could be called a ‘multi-family office,’” he said. “A similar practice still exists at foreign banks. Most of their clients work through international companies. I repeat: We always acted according to the rules of the world financial market of that time … Obviously, rules change, but measuring a market in the past by today’s laws is like applying modern compliance standards to the time of the Great Depression. You’ll agree that this distorts the true situation.”

Asked about the fictitious trade deals, Vardanyan said Troika Dialog’s revenue topped 2 trillion rubles from 2006–2010 ($63–85 billion, depending on currency fluctuations) and that he “couldn’t possibly know about all the deals in a company of this size.”

Though such practices were considered business as usual in Russia at the time, specialists note that systems like the Troika Laundromat can have serious repercussions.

The schemes stunt national economic development, undermine human security, and diminish the quality of life for people left behind, said Louise Shelley, director and founder of George Mason University’s Terrorism, Transnational Crime, and Corruption Center and author of the book “Dark Commerce.”

“Money laundering countries, particularly in the developing world, are losing enormous amounts of capital that are needed for infrastructure development, education, health, [and] the development of new businesses, of entrepreneurship,” Shelley said. “With this much money lying overseas, you can do all sorts of malicious things. You can interfere in electoral processes. You can help pay for fake news.”

Criminal Services

The Laundromat wasn’t just a money laundering system. It was also a hidden investment vehicle, a slush fund, a tax evasion scheme, and much more.

Troika’s clients also used it to buy properties in Great Britain, Spain, and Montenegro; to acquire luxury yachts and artwork; to pay for medical services and World Cup tickets; to cover tuition at prestigious Western schools for their children, and even to make donations to churches.

In addition, the Troika Laundromat enabled organized criminal groups and fraudsters to launder the proceeds of their crimes. OCCRP and partners have identified several high-level frauds perpetrated in Russia that used Laundromat companies to hide the origins of their money.

Troika’s clients also used it to buy properties in Great Britain, Spain, and Montenegro; to acquire luxury yachts and artwork; to pay for medical services and World Cup tickets; to cover tuition at prestigious Western schools for their children, and even to make donations to churches.

One of these schemes, known as the Sheremetyevo Airport fuel fraud, took place from 2003 to 2008 and artificially inflated aviation fuel prices while depriving the Russian state of more than $40 million in tax revenue. The scheme led to a hike in plane ticket prices. More than $27 million was sent by companies involved in the fraud to Troika Laundromat accounts. Vardanyan has not been implicated in the scheme and said he had no knowledge of it. In 2010, two years after the fraud ended, Troika Dialog began consulting for the airport along with Credit Suisse.

A second significant criminal inquiry tied to the Laundromat, from which $17 million ended up in the system, involves a tax avoidance scheme allegedly perpetrated by several Russian insurance companies. A man named Sergei Tikhomirov was accused of concluding false service contracts with the insurers as a pretext for having them send him large sums of money, which his accusers say he cycled through several accounts before depositing it abroad or cashing in. A portion of the money ended up in the Laundromat. (Tikhomirov did not respond to phone calls seeking comment.)

Roldugin didn’t respond to an email requesting comment, and Vardanyan said that he knew of the cellist, but was not aware that he had any business dealings with Troika.In a third case, at least $69 million went to companies associated with Sergei Roldugin, a Russian cellist and one of Putin’s best friends, who became famous after his vast unexplained wealth was revealed by OCCRP, the International Consortium of Investigative Journalists, and other media partners in the Panama Papers project. Some of the money that Roldugin’s companies received from the Laundromat originated in a massive Russian tax fraud exposed by Sergei Magnitsky, a Russian lawyer who died in jail after revealing it.

The Troika Laundromat enabled organized criminal groups and fraudsters to launder the proceeds of their crimes. OCCRP and partners have identified several high-level frauds perpetrated in Russia that used Laundromat companies to hide the origins of their money.

Companies involved in the fraud exposed by Magnitsky moved more than $130 million through the Troika Laundromat. In fact, hundreds of millions of dollars went into and out of the Laundromat for unknown purposes.

Vardanyan said he was not aware of any of these transactions.

“Understand, I’m no angel,” he said. “In Russia, you have three paths: Be a revolutionary, leave the country, or be a conformist. So I’m a conformist. But I have my own internal restraints: I never participated in loans-for-shares schemes, I never worked with criminals, I’m not a member of any political party. That’s why, even in the ’90s, I went around with no security guards. … I’m trying to preserve myself and my principles.”

Vardanyan and his family were among those who received money from the Laundromat. More than $3.2 million was used to pay for his American Express card, went to accounts belonging to his wife and family, and paid school fees for his three children in Great Britain.

Asked about these sums, Vardanyan said the offshore companies Troika created serviced his own companies in addition to the bank’s clients.

Troika as Capstone

The Troika Laundromat is unique among the Laundromats that have been uncovered in recent years in that it was created by a prestigious financial institution.

Like all investment banks, Troika handled stock and bond issuance, initial public offerings, and acted as an underwriting agent. It also had a strong relationship with the local office of Citibank Inc., with up to 20 percent of Troika’s new investors coming via the American behemoth. That made New York-based Citibank Troika’s biggest “external agent,” according to a 2006 interview with Troika co-founder Pavel Teplukhin. (Citibank didn’t respond to requests for comment.)Established in the early 1990s, Troika Dialog became Russia’s largest private investment bank. It operated under Vardanyan’s leadership until 2012, when it was purchased by Sberbank, the nation’s largest state-owned lender.

The Troika Laundromat is unique among the Laundromats that have been uncovered in recent years in that it was created by a prestigious financial institution.

Other major international banks, including Credit Suisse and Standard Bank Group, did significant business with Troika as well.

Starting in 2006, Troika employees began putting together the pieces of the Troika Laundromat.

Four essential elements are needed to build a functioning Laundromat: a bank with low anti-money laundering compliance standards; a maze of secretive offshore companies to hold accounts at the bank; proxy directors and shareholders for both the companies and the accounts; and the so-called formation agents that can quickly create, maintain, and dissolve the offshore companies as needed.

The bank orchestrated all of these components of the Troika Laundromat, in addition to directing the money flows and fake trade deals that made up its operations.

The pivotal mechanism was based on trade: Shell companies created bogus invoices for non-existent goods and services to be purchased by other companies in the system. The practice provides a fig leaf of legitimate economic activity that makes the transactions appear less suspicious to regulators.

Al-Qaida founder Osama bin Laden used a similar system to move money around the Middle East, she said.“You’re disguising an illegal payment by pretending that it is linked to a shipment of goods,” said Shelley, the George Mason corruption expert. “The trade-based system is one of the most central parts of money laundering in the world today.”

If Troika was the capstone of the Laundromat, its cornerstones were three British Virgin Islands-based shell companies: Brightwell Capital Inc., Gotland Industrial Inc., and Quantus Division Ltd. Brightwell’s first known transaction was on April 12, 2005. Gotland was established on Feb. 17, 2006, and Quantus followed six months later on Aug. 23.

An analysis of these companies’ banking records reveals how they put the Laundromat together: Starting in 2006, they made numerous small payments to a formation agent called IOS Group Inc. to create the dozens of companies that comprised the complete Laundromat. IOS didn’t respond to requests for comment.

The three cornerstone companies then continued making payments to IOS ranging from 40 to almost 5,000 euros over almost six years to keep the entire network operating. Over that span, the total reached over 143,000 euros.

Quantus, for example, paid formation and maintenance fees for the British Virgin Islands-based Kentway SA. This company was later used, among many others, to send millions of dollars to Sandalwood Continental Ltd., a company connected to Sergei Roldugin, the cellist, and one of Vladimir Putin’s oldest friends.

Quantus’ involvement with Kentway demonstrates the many ways in which the Laundromat companies were interconnected. In this case, after first helping establish Kentway, Quantus then funded it with money that Kentway forwarded to Roldugin’s company.

The Bank

To direct the flow of funds through the Laundromat, Troika needed a commercial bank to host accounts for the companies involved. And it needed that bank to avoid looking too closely at the contracts and trades Laundromat businesses used to justify moving money from one offshore company to another.

Troika chose Lithuania’s Ukio Bankas for the job. (The Lithuanian lender would later be seized by the country’s National Bank in 2013 for engaging in risky deals and failing to follow regulators’ orders.) Ukio is known to have set up accounts for 35 companies used in the Troika Laundromat, and likely more.

Because Lithuania wasn’t yet using the euro, Ukio needed correspondent accounts at European banks, such as the Austrian Raiffeisen or the German Commerzbank AG, to handle euro-denominated transactions. Those two lenders and many other large European and U.S. financial institutions accepted Laundromat money, though they did sporadically inquire about the nature of some transactions. After prodding by one of the correspondent banks, for example, some Ukio compliance officers made inquiries about Laundromat payments that didn’t make commercial sense.

“What is the essence of this transaction? We have a contract (attached), but to be honest, I don’t really get what’s happening,” one officer wrote, adding an unhappy face, in relation to a payment that went to a company associated with Roldugin.

By this point, the money had already left Ukio’s accounts.

Asked why Ukio was chosen as the banker for the offshore companies Troika created, Vardanyan said it was just one of about 20 banks Troika used around the world.

The Armenian Proxies

A central figure in many of the transactions involving the Laundromat companies was Armen Ustyan. Far from being an investment banker, Ustyan, 34, works seasonally as a construction worker in Moscow.

Ustyan said he had never heard of Dino Capital SA, the Panama-based Laundromat company whose Ukio bank account was registered using his signature. A copy of his passport was attached, but Ustyan insisted he had no idea how it got there. Ustyan’s signature can be found on contracts and banking paperwork in the Troika Laundromat along with those of a few other Armenians. Wearing an old military jacket and hat, he sat down with reporters this January in his cold living room to answer questions about high finance.

At his mother’s request, he wrote his signature on a piece of paper and concluded that the one associated with Dino Capital had probably been forged.

The Armenian said he knew none of this, though he did recall a slim connection to Troika Dialog: While in Moscow looking for work, Ustyan stayed with a Russian Armenian whose brother he said worked for the investment bank and helped him find employment. In addition to having his signature associated with Dino Capital’s bank account, Ustyan is also listed as an attorney authorized to sign contracts on the company’s behalf, and his signature appears on at least $70 million worth of financial agreements.

The Moscow address is indeed that of Nerses Vagradyan, a Russian citizen of Armenian descent. Nerses’ brother, Samvel Vagradyan, is a director of a Russian company that received millions of dollars from Brightwell, a core Laundromat company. A Samvel Vagradyan is also mentioned on Vardanyan’s website as a donor to the banker’s charitable causes. It’s unknown whether Samvel really worked for Troika.

Neither of the Vagradyan brothers could be reached for comment. Ustyan said he doesn’t believe they used his identity.

Another Armenian front man in the Laundromat appears to be Edik Yeritsyan. His identity was used to register an account at Ukio for the Cyprus-based Popat Holdings Ltd. This company was involved in Laundromat transactions worth millions of dollars.

Yeritsyan told OCCRP that he lost his memory three years ago after a car accident and doesn’t remember some parts of his life. However, Ustyan said that he and Yeritsyan lived together in the same flat they were renovating in Moscow.

This article was first published by The Organized Crime and Corruption Reporting Project (OCCRP) a global network of investigative journalists.

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