Investigative journalists say they have traced the flow of up to $80bn siphoned off in Russia with the involvement of the Moldovan judiciary to offshore firms between 2011 and 2014, an operation dubbed the “Russian Laundromat”.
Officials from Russia’s Federal Security Service (FSB), not necessarily involving the institution but allegedly with political support at a much higher level, conducted the Laundromat and are now attempting to hinder the investigations by Moldovan and Latvian prosecutors, according to the investigations.
The research was carried out by investigative journalists from Russia’s Novaya Gazeta in partnership with their peers at foreign media including the Guardian and Sueddeutsche Zeitung, helped by the Organised Crime and Corruption Reporting Project (OCCRP). They say the operation involved sums of at least $22bn, possibly up to $80bn.
The authors of the frauds include oligarchs, Moscow bankers and figures working for or connected to the FSB (the successor to the KGB). Top Moldovan top politicians as well as central bank and judiciary officials at executive level played a key role in facilitating the flow of money from Russia, the research found.
A broad overview of the $156bn in transactions, resulting in the siphoning off of $22bn via Moldova, including the source, the identity of those who designed and operated the scheme, and the final recipients of the money was published by Novaya Gazeta, but much of the critical information potentially involving institutions and authorities in Moldova and other countries has remained unexplored so far due to the complexity of the operations.
An initial investigation into Novaya Gazeta’s pool of data, carried out by Moldova’s RISE investigative journalism organisation project, named local businessman and politician Ilan Shor as one of the final recipients of the money. Six companies in the Shor group of companies were the final recipients of $22mn.
Shor has previously testified against former prime minister Vlad Filat, who was indicted in Moldova for receiving bribes based on his statements. Investigations into Shor’s other alleged frauds in the banking system - he was identified as the beneficiary of the $1bn siphoned off from three Moldovan banks – are progressing slowly, and there is speculation they may never be concluded given the help Shor has given to Filat’s political rival Vlad Plahotniuc, who is now the formal leader of the ruling majority.
However, much more is expected to surface in regard to the involvement of key politicians like Plahotniuc, populist politician Renato Usatii, who derived his wealth from businesses involving Russia’s state railway company, reportedly a source in the Laundromat case, and reputed corporate raider Veaceslav Platon.
The mechanics of the Laundromat were revealed by OCCRP in 2014, but Novaya Gazeta’s investigations go further in identifying the source of the money stolen from Russia and its flow through foreign banks. Beside Moldova’s Moldinconbank, an established player in the scheme, and the Latvian banks, whose licenses have already been withdrawn over their involvement in the scheme, a multitude of shell companies in Russia, the UK and offshore tax havens were identified by the journalists based on open sources including documents leaked from Panamanian law firm Mossack Fonseca.
In brief, the Russian companies that were the subject of the fund siphoning were ordered by corrupt Moldovan judges to pay large amounts of money to offshore entities after they were appointed guarantors of fake contracts among shell companies. The Russian companies, run by accomplices involved in the deal, opened bank accounts in Moldova and bailiffs simply executed the transfer of money from their accounts to the accounts held by offshore firms in the same Moldovan bank, Moldinconbank, which was an important element of the scam. The Moldovan bank admitted carrying out the transfers, but claimed they were perfectly legal.
Latvia’s now defunct Trasta Komercbanka is the only Latvian bank mentioned by name in the Laundromat case. The bank allegedly took in laundered money from Moldindconbank.
However, Trasta – which had its license pulled by Latvian regulator FKTK in March 2016 after numerous exposes by bne IntelliNews as a centre of money laundering – was likely one of several banks in the Baltic state involved in the scam, the OCCRP alleges. Latvia’s lax regulations made the country a haven for shady money, mostly originating from Russia, in recent years, as well as a “service centre” offering advice on how to use bogus offshore companies to launder money or evade taxes.
Riga began to crack down on money laundering only recently, when Latvia’s reputation for offering services to clean up illegal money got in the way of the country’s membership application to the OECD in 2016. A special unit to fight money laundering was set up within the financial regulator the FKTK in June.
Among those involved in the deal, Novaya Gazeta names Igor Putin, a cousin of the Russian president. He was a business partner of Alexander Grigoriev, allegedly a key player in the Russian Laundromat. Grigoriev is accused of stealing assets from Doninvest Commercial Bank in Rostov, but Novaya Gazeta claims that his involvement in the Russian Laundromat is not being investigated.
In addition, the Russian newspaper was informed by unnamed Moldovan officials that FSB officers are hindering the investigations of Moldovan prosecutors into the case. Two FSB officers arrived in Moldova in 2014 with the official purpose of helping with the investigations, but their actions were afterwards aimed at exactly the opposite, the sources claimed.
Three years later, top Moldovan officials also claimed Moscow was preventing Moldova’s investigations into the case. Moldovan Prime Minister Pavel Filip and parliament speaker Andrian Candu summoned Russian ambassador Farid Muhametshin on March 9 over what they called “the harassment of Moldovan officials” visiting Russia with the aim of investigating the money laundering by the Russian authorities. Specifically, it said Moldovan officials were stopped and searched on their entry to Russia, and subjected to “humiliating treatment” by Russian security services. Russia also tried to put visiting Moldovans under international monitoring.
At the UK end of the operation, the Guardian revealed that British banks such as HSBC, the Royal Bank of Scotland, Lloyds, Barclays and Coutts processed nearly $740mn from a vast money-laundering operation run by Russian criminals with links to the Russian government and the KGB. Most of the money ended, however, in more remote banks in Hong Kong, China, Denmark and Middle East.