Moldova begins second investigation into $1bn bank frauds

By bne IntelliNews October 8, 2015

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Moldova’s central bank has hired corporate risk-management firm Kroll, along with Steptoe & Johnson, for the second stage of investigations into the alleged frauds at three troubled banks – Banca de Economii, Banca Sociala and Unibank – which resulted in upwards of $1bn disappearing from the country's economy, roughly 15% of the former Soviet nation's GDP.

The consultants will carry out investigations in close coordination with Moldovan authorities for roughly 16 weeks, after which further steps with the aim of recovering at least part of the money will be decided.

The central bank has asked the country's population to allow Kroll to carry out the investigations, which are to be confidential, and when possible and appropriate the central bank has promised to publish the findings.

In a first stage of the investigations, carried out earlier this year, Kroll identified, based on central bank’s information, the basic transactions that occured and the current situation.

The three banks were placed under special administration last autumn and will be liquidated under a controlled regime by the end of this month. The central bank has extended emergency aid loans of around $1bn to the three banks, with the money likely to be become part of the country’s public debt if not recovered from the banks’ debtors.

The first Kroll report identified a group of firms controlled by Ilan Shor, a local investor and now politician, as the apparent beneficiary of the web of transactions extended initially by the three banks. However, the final beneficiaries were not identified.

The loans were sold by Banca Sociala to Fortuna United, a UK-registered shell company controlled by Seychelles-registered entities. Contacted by the BBC for an investigation on the case, Fortuna’s representative said they were informed about the final beneficiaries of the Seychelles-registered companies but cannot disclose them.

Moldova's government will be hoping that the announcement of a second investigation will go some way to calming protests, who have been camping out for over a month in central Chisinau demanding the resignation of the government and anyone connected with the banking or justice system that allowed this fraud to take place or who has so far failed to find and punish those responsible.

The IMF also included continued investigations on the list of actions that must be taken before negotiations on a new stand-by arrangement can take place.

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