By Stelios Orphanides
Cypriot banks and companies registered in Cyprus are involved in one of the world’s largest financial fraud schemes which allowed criminals to launder more than $20.8bn (€19.2bn) from Russia, a joint investigative project has revealed.
The scheme, dubbed the “Russian Laundromat,” involved mainly fictitious loan agreements between companies set up by criminals outside Russia which in turn Russian companies and an individual from Moldova guaranteed, allowed criminals to siphon large amounts of money out of Russia through banks mainly in Europe and Asia to accounts held by shell and offshore companies between 2011 and 2014, the Organised Crime and Corruption Reporting Project (OCCRP) said on its website.
For the scheme to work, it required the debtor company to default, the creditor company to take the case to a Moldovan court where corrupt judges ordered the Russian company guarantee the agreement to repay the debt. The Moldovan court appointed a judicial executor to oversee the transfer who then opened an account at Moldindconbank.
After the Russian company deposited the money there settling the debt, the funds were subsequently transferred to Latvia’s Trasta Komercbanka and from there to shell companies throughout the world, including Cyprus. The money was then used for various purposes including the purchase of luxury goods such as jewellery, to pay tuition fees, the tours of rock bands, to promote the Kremlin’s agenda in the European union and much more.
Trasta Komercbanka had its licence revoked last year over its failure to comply with anti-money laundering regulations.
According to the OCCRP website, companies in Cyprus received $871.3m of these funds. The transfers took place mainly in the first three months of 2013 and after a brief interruption -most likely caused by the banking crisis that year-, they resumed in the summer of 2013 and went on until February 2014.
Trasta Komercbanka and its Cyprus unit, received $3.2bn, while the subsidiaries of the Ukrainian PrivatBank in Cyprus and Latvia received almost $2bn in total, according to the OCCRP. Latvia’s Baltikums Bank AS, including its Cyprus operations, got $701.9m. A total of $529.1m was channelled via Hellenic Bank while a total of $19.8m went through Laiki Bank.
Accounts at the Cyprus unit of Greece’s Eurobank received $177.7m and at Russia’s Promsvyazbank PJSC $44.9m, the OCCRP reported.
Cypriot companies involved in the scheme have also made payments to various recipients, according to the OCCRP. Crystalord Ltd paid $1.6m to Austria’s ventilation systems manufacturer Frivent GmbH and $179,999 to the New York based asset management company ED Capital Management, while Kedassia Ltd paid a total of $1.8m to the US-based Arben International, which imports furniture into Russia and China, and $1,792 to an account supposedly held by the commercial court of Vienna, Handelsgericht Wien.
The anti-money laundering squad Mokas declined to comment when the Cyprus Business Mail asked for related information.
“We cannot share with third parties (information on) whether there is a record about any legal entity or individual in the unit’s database,” a Mokas official said in December in response to a question.
The OCCRP said that “law enforcement in Moldova, Latvia, the United Kingdom, and Russia continue to investigate the Laundromat, but attempts to bring those responsible to justice and to recover the money have been hampered in part by the reluctance of Russian officials to cooperate”.
The investigation into the Russian Laundromat was the product of colaboration of journalists and media organisations, including Novaya Gazeta, The Guardian, Sueddeutsche Zeitung, Newsweeks and other.