Latvian prosecutors open probe into bank links to Magnitsky case

By bne IntelliNews October 4, 2012

Tim Gosling in Prague -

Latvian prosecutors are set to investigate claims implicating several of the country's banks in the alleged Russian tax fraud scheme that blew up into an international incident when it led to the 2009 death of lawyer Sergei Magnitsky in detention in Moscow, according to investigative journalism NGO Re:Baltica. The cast of characters implicated represents a roll call of Latvians that have regularly cropped up in relation to questionable Russian and Ukrainian state deals.

The Latvian prosecutor's office announced late on October 2 that it has reversed an earlier decision by the state police not to investigate whether Latvian banks helped to launder at least $63m out of Russia in 2007. The funds are claimed to stem from a huge tax fraud operation alleged by Hermitage Capital against members of Russia's tax police.

Alexander Cernisovs, chief prosecutor responsible for organized crime, told journalists that having studied the evidence from Latvian banks, he has determined that the state police's decision not to start a criminal investigation was contrary to law and unjustified, reports Re:Baltica. He said he has sent the evidence of Latvian banks' involvement back to the police for re-investigation.

Until 2007, Hermitage was one of the biggest investors in Russia. However, the fund's executives fled the country after authorities accused Hermitage fun of making fraudulent claims for a $230m tax rebate, with the executives claiming that on the contrary Hermitage was the victim of officials who had in fact stolen the cash. Magnitsky, a lawyer retained by the fund, was arrested as he investigated the claim, and died in custody provoking a massive international outcry. Hermitage founder William Browder and associates have been waging a campaign against the officials they claim were involved since, and have succeeded in getting both the US and EU to implement sanctions against dozens.

Browder is now pressing Latvia to follow up the claims that some of the cash was routed through the country. Re:Baltica reported earlier that, according to Hermitage representatives, the Latvian authorities had until now responded only formally to requests to investigate the case. The agency responsible for regulating banks, the Financial and Capital Market Commission, had pointed out that it lacked the power to freeze the bank accounts through which the money was allegedly laundered.

In July, Re:Baltica sent a report to the Latvian regulatory authorities outlining schemes illustrating the banks and offshore companies (registered in New Zealand, Panama, Seychelles Islands and the UK) engaged in the alleged money laundering. The total amount that travelled from the Russian treasury to Latvian banks is more than $63.2m, according to the report. Close to $20m arrived into Latvian banks through two Moldova-registered firms, Bunicon-Impex SRL and Elenast-Com SRL, it claims. Some of these millions were used to make investments, including in Dubai real estate, and some spent on luxury cars.

Another $43m was reportedly deposited in Latvia's Privatbank by UK firm Technomark Business, the director of which is Latvian citizen Juris Vitmanis. The owner is Fynel Ltd, a company domiciled in Cyprus - a favoured offshore destination for Russian and Ukrainian entities - which was founded by Stanislavs Gorins. The directors of Fynel Ltd include Juris Vitmanis, Eriks Vanagels, Daniels Bangers, and Martins Rauda. Many of these names will be familiar to bne readers as they've cropped up in several investigations detailing their alleged involvement in questionable schemes, mainly surrounding state purchases in Russia and Ukraine, operating through Latvian- and UK-registered companies. Re:Baltica also claims that more than one of these names is connected to Gints Poiss, former council head at Parex Bank, which collapsed to devastating effect in 2008 and had to be bailed out by the government.

Hermitage representatives have told Re:Baltica that they hope Baltic authorities will investigate the Magnitsky matter, and that they have asked the Latvian General Prosecutor and the Latvian bank supervisor Financial Capital and Market Commission to freeze relevant accounts at Aizkraukle Bank, Baltic International Bank, Baltic Trust Bank, Rietumu Bank, Trasta Kommercbanka and Paritatas Bank.

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