Financial forensics firm Kroll has traced $1.14bn of the $2.9bn of suspect loans issued by three Moldovan banks between 2012 and 2014, according to a brief version of the second report delivered by Kroll and published by the Moldovan central bank.
Kroll was employed to trace the “$1bn frauds” in the country’s banking system that led to the bankruptcy of the three largest Moldovan banks and a cost amounting to 10% of GDP for the state.
Following the fraud in the banking sector, Banca de Economii, Banca Sociala and Unibank collapsed at the end of 2014. The assets stolen, by a complex money laundering system involving two unnamed Latvian banks, are estimated by Kroll at a somewhat lower $600mn.
In the first report, Kroll established that the money siphoned off from the three Moldovan banks reached a group of firms linked to businessman Ilan Shor, the main suspect in the case, while the final beneficiary of the money was left unspecified. The second report was expected to suggest procedures to recover the money from the final beneficiaries.
The abridged version of the second report published by the central bank said Kroll had traced $1.14bn of funds that left the three banks, but the outflows from the banks was much higher: $2.9bn. A core money laundering mechanism involving two Latvian banks was identified by Kroll.
Former prime minister Vlad Filat was sentenced in 2016 to nine years in prison for his involvement in the fraud. In 2017 a Moldovan court sentenced Shor to seven and a half years in prison although he is at liberty until his appeal is judged. Corporate raider Veaceslav Platon was also sentenced in a case related to the frauds. Meanwhile Filat and Platon have accused the ruling coalition’s head Vlad Plahotniuc of being behind the $1bn fraud.
However, the report does not reveal the identity of the final beneficiaries of the frauds as Kroll explains that this would hinder further investigation and the recovery of the money.
Most of the $2.9bn loans extended by the three banks as part of the fraud were returned to Moldova after being laundered in two unnamed Latvian banks.
The total loan exposure of the three Moldovan banks increased from $49mn at the beginning of 2012 to approximately $1bn by the end of November 2014. By the end of October 2014, nearly 70% of the total loan exposure was to Shor Group companies. This exposure increased again during November 2014 to around 80% of the total loan assets of the three Moldovan banks.
The suspected fraud involved the issuing of hundreds of loans to linked companies, the majority of which were transferred to a laundering mechanism in Latvia, Kroll explained. While the majority of the loan funds were then channeled back to Moldova to repay existing loans and to allow the continuation of lending, at least $600mn was dissipated to other destinations.
The largest part of the $1.14bn traced by Kroll ended up in Latvian banks ($300mn) but a significant part ended up in other Moldovan banks ($170mn). Some $80mn was returned to the original three banks, to other accounts that were legitimate, after it was laundered.
Some of the fund flows which have been traced to date have revealed a number of individuals who appear to have either been carrying out the suspected fraudulent activity, or to have obtained some benefit from the outflow of the funds, the report reads.
However, the flows to individuals are rather insignificant compared to the size of the fraud. “Receipts into personal accounts or into companies known to be linked to these individuals totalled approximately $50mn,” the report reads.
As stated in the introduction to the report, in order to protect due process with regard to ongoing or future civil or criminal procedures, Kroll stressed that it is important that the “apparent beneficiaries” are kept confidential except in cases which can contribute to any ongoing procedures. Details will be provided to the relevant authorities under separate cover, Kroll also said.