A palace in Marrakesh: How Schwab moved $35m in payments for Epstein days before his arrest

LONDON – Charles Schwab wired about US$27.7 million (S$35 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.

Details of the transactions show how the US brokerage handled funds for Epstein over the course of several months at a time when he was under intense public scrutiny in 2018.

Schwab flagged the payments in a suspicious activity report (SAR) to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on July 13, seven days after Epstein’s arrest, according to documents released by the US Department of Justice (DOJ).

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 Mr 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 US$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 US$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 e-mailed response.

Schwab declined to provide details on exactly when its risk team began investigating.

Under the US 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 US$10,000 daily to assist in detecting and preventing money laundering.

FinCEN declined to comment. A lawyer for Mr Kahn did not respond to questions.

Mr Marc Leon, the realtor in Marrakesh, said by e-mail 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 4.6ha, a property listing included in the DOJ’s file cache said.

It boasts of multiple gardens with hundreds of olive trees and more than 2,000 palms in an area bigger than New York’s Washington Square Park or around six standard soccer pitches.

Mr 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 US federal sex trafficking charges.

Epstein moved funds

Epstein turned to Schwab in 2019 as Deutsche Bank was winding down accounts held by the convicted sex offender, who 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 US 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.

E-mails 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 Mr Leon in March of that year.

After considering various financial arrangements, the files show, Epstein instructed associates to move funds to Mr Leon.

Schwab then received an order from Southern Trust to wire €11.15 million, roughly equivalent to US$12.7 million at the time, to Mr Leon on June 26, 2019, Schwab said in the SAR.

The SAR was contained in the batch the DOJ released publicly, but had since been withdrawn for unknown reasons.

The funds were sent to a Julius Baer account in Switzerland held by Mr 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 US$14.95 million, the SAR shows.

Schwab said the funds were sent to an account of Mr 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 US$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 about its policy at that time for processing international wire transfers when accounts had insufficient funds, Schwab declined to comment.

Mr 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 e-mail included in the other DOJ documents shows Epstein’s accountant, Mr Kahn, asked to cancel the transfer on July 9.

Mr 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.

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,” Mr Leon said. REUTERS