By Naomi Rovnick, Brad Heath and Nivedita Balu
LONDON/WASHINGTON/TORONTO, Feb 19 (Reuters) - Charles Schwab wired about $27.7 million on behalf of Jeffrey Epstein to a realtor in Morocco as the disgraced financier tried to purchase a palace in the 10 days before his 2019 arrest, including one transfer from an account which lacked sufficient funds, files released by the U.S. Department of Justice show.
Details of the transactions, reported by Reuters for the first time, show how the U.S. brokerage handled funds for Epstein over the course of several months at a time when he was under intense public scrutiny after reports in the Miami Herald in 2018.
Schwab flagged the payments in a suspicious activity report (SAR) to the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) on July 13, seven days after Epstein's arrest, the documents show.
An examination of more than a hundred documents shows Schwab opened three accounts for Epstein's companies in April 2019, including one for Southern Trust, a business that was attempting to buy the opulent Bin Ennakhil palace in Marrakesh, Morocco.
The Schwab corporate account listed Richard Kahn, Epstein's accountant, as authorised individual and Epstein as Southern Trust's president and sole beneficial owner.
Between June 26 and July 9, 2019, Southern Trust instructed Schwab to wire about $12.7 million in euros for the purchase but then reversed the order. Schwab then received another wire request, which was signed by Epstein, and sent $14.95 million to buy the same property, even though there were insufficient funds in the account pending the return of the original payment.
Schwab declined to comment on details of the accounts, saying federal regulation, privacy laws and its policies and procedures require it to maintain confidentiality.
"An associate of Epstein opened accounts in April 2019. Shortly after, our Risk team began investigating the accounts and within 60 days of starting the review, we notified the client of our decision to close and terminate the relationship. We also referred the matter to federal law enforcement," it said in an emailed response to Reuters.
Schwab declined to provide details on exactly when its risk team began investigating.
Under the U.S. Bank Secrecy Act, financial firms must file a suspicious activity report no later than 30 days after the initial detection of facts, in addition to filing reports of cash transactions that exceed $10,000 daily to assist in detecting and preventing money laundering.
FinCEN declined to comment. A lawyer for Kahn did not respond to Reuters' questions.
Marc Leon, the realtor in Marrakesh, told Reuters by email that Epstein first tried to buy Bin Ennakhil in 2011 and negotiations on the terms and price continued over the years.
With gold-draped walls, a hammam steam spa, 60 marble fountains and an outdoor pool and jacuzzi, Bin Ennakhil spreads across a total plot of 4.6 hectares, a property listing included in the DOJ's file cache said. It boasts multiple gardens with hundreds of olive trees and more than 2,000 palms, the listing said, in an area bigger than New York's Washington Square Park or around six standard soccer pitches.
Leon also defended his role in facilitating Epstein's bid for the property.
"Epstein had been convicted of sex crimes (in 2008) and had served his sentence. There was therefore nothing to prevent him from attempting to purchase property in Morocco. We had no way of knowing that he had continued his terrible crimes," he said.
Epstein died in jail in August 2019 while facing U.S. federal sex trafficking charges.
EPSTEIN INSTRUCTED FUNDS TO BE MOVED
Epstein turned to Schwab in 2019 as Deutsche Bank was winding down accounts held by the convicted sex offender, who had pleaded guilty in 2008 to soliciting prostitution from an underage girl and went to prison.
Schwab was among at least seven financial firms subpoenaed by the U.S. Virgin Islands in 2020 requesting documents in relation to the co-executors of Epstein's estate. The subpoena did not name Schwab as a defendant and contained no accusations of wrongdoing against the brokerage.
Emails and wire transfer requests contained in the DOJ documents, which may not be comprehensive, show that Epstein discussed purchasing the luxury property in Marrakesh with his associates in the spring of 2019.
Southern Trust, the company owned by Epstein, agreed to buy the property through Leon in March of that year.
After considering various financial arrangements, the files show, Epstein instructed associates to move funds to Leon.
Schwab then received an order from Southern Trust to wire 11.15 million euros, roughly equivalent to $12.7 million at the time, to Leon on June 26, 2019, Schwab said in the SAR, which was seen by Reuters.
The SAR was contained in the batch the DOJ had released publicly, but has since been withdrawn for reasons Reuters could not ascertain. The DOJ declined to comment on the file.
The funds were sent to a Julius Baer account in Switzerland held by Leon, who was based in Marrakesh at the time, the SAR shows.
A file on the DOJ website also shows the request.
The next day, Schwab received a call from a person whose identity is redacted from the SAR requesting the termination of the transfer. Asked why, they told Schwab that terms on the real-estate deal had not been "agreeable".
The person also said another payment would be made for a larger sum to a different account, the SAR shows.
Schwab was successful in reversing the order, which would be credited back on July 10, the SAR shows.
Two days before Epstein's arrest, in a July 4 wire transfer request signed by Epstein and his co-signatory, Southern Trust instructed Schwab to send Leon $14.95 million, the SAR shows.
Schwab said the funds were sent to an account of Leon's at Julius Baer, the SAR shows.
Yet Epstein's Southern Trust account did not have sufficient funds because Schwab had not yet returned money from the earlier transfer, the SAR says.
While Schwab could have had a reasonable expectation that the payment would be transferred back to Epstein's account, the bank would have been exposed to risk until the funds were returned.
Reuters could not establish when the $12.7 million ultimately landed back in Epstein's account but the funds were due to arrive on July 10, the SAR dated July 13 shows.
Asked by Reuters about its policy at that time for processing international wire transfers when accounts had insufficient funds, Schwab declined to comment.
Reuters was not able to establish whether Julius Baer accepted the transfers. A spokesperson for Julius Baer declined to comment.
Leon said: "The anti-money laundering checks in force were carried out by the banking institutions involved in the future transaction, which ultimately never took place."
It was not until July 9, three days after Epstein's arrest, that Schwab cancelled the second transfer at the request of an individual acting on Epstein's behalf whose name is redacted, the SAR shows.
An email included in the other DOJ documents shows Epstein's accountant Kahn asked to cancel the transfer on July 9.
Kahn has been ordered to testify before Congress next week to answer questions about whether he helped to facilitate Epstein's crimes through his management of the late sex offender's financial affairs, House Oversight Committee member Robert Garcia said in a media statement in January.
Reuters has no evidence that Kahn is guilty of wrongdoing.
In a follow-up exchange with Schwab after Epstein's arrest, an unidentified Epstein associate asked if future transfers for Southern Trust's account would still require two signatures as more money would be sent soon, the SAR shows.
Epstein had been charged with sex trafficking of minors and remained in jail, the DOJ said on July 8.
Schwab told FinCEN in the July 13 SAR it had "concerns with attempted wires for the purpose of real estate, in light of negative media surrounding Jeffrey Epstein" and worries about him being a possible flight risk ahead of a bail hearing.
"This investigation is the result of an internal referral," the document shows Schwab saying.
While Epstein's deal fell through, the palace of Bin Ennakhil - which means "amidst the palms" - in Marrakesh is no longer vacant.
"The property has since been sold to another buyer," Leon told Reuters.
(Reporting by Naomi Rovnick in London, Brad Heath in Washington and Nivedita Balu in Toronto. Additional reporting by Ariane Luthi in Zurich and Tommy Reggiori Wilkes in London. Editing by Elisa Martinuzzi, Catherine Evans and Alexander Smith)
