A Russian banker arrested for allegedly cheating depositors out of RUB30bn ($380mn) also allegedly defrauded the nation's Deposit Insurance Agency (DIA) in an elaborate scam, bne IntelliNews can reveal.
Magomed Muhiyev, who is originally from the southern Russian republic of Ingushetia, was arrested earlier in February by employees of the Interior Ministry's Economic Security and Anti-Corruption Department after trying to leave Russia on a rented private jet.
The investigation into Muhiyev was accelerated in December when officials from the Central Bank of Russia (CBR) informed the ministry about the possible mass embezzlement of funds.
Those stung by the alleged schemes include the DIA, which has been involved in shutting down over 150 banks over the past two and a half years, and in 2015 had its deposit insurance coverage limit for individuals raised to RUB1.4mn by the Kremlin.
Muhiyev, who had headed Antal Bank, was allegedly involved in a fraud spanning a network of eight other Russian lenders, including Lada Credit, Greenfieldbank, Doris Bank, Sodruzhestvo Bank, Mezhregionbank, Regional Bank of Savings, NST Bank and Maximum Bank.
All these banks had allegedly "served the interests of the same parties", and some of them have the same owners and management staff, according to Kommersant. The main financial structure of the group was Antal Bank, which had its license revoked in September following the disappearance of RUB14.7bn in client funds.
The fraud, which is known among the criminal fraternity as the "vacuum cleaner", sucks up vast amount of funds from deposits by offering high double-digit interest rates. These funds were allegedly transferred using correspondent banking and interbank loans to Antal Bank, from where the owners acquired assets with artificially-inflated values.
When some of the banks went bust, the DIA stepped in and bailed out the depositors. Muhiyev's management retained the contact details of the same depositors and would contact them with new offers from different lenders in their network, sources close to Muhiyev's holdings alleged to bne IntelliNews.
Management from several of the banks are believed to have cooperated with the Interior Ministry to expose and entrap Muhiyev.
"We think they laid a trap for him," a source close to one of Muhiyev's companies told bne IntelliNews. "They told him to come back to negotiate a deal and then threw him in prison. He is a key player in Ingushetia and he probably thought of himself as politically indispensable like [Ramzan] Kadyrov in Chechnya."
Muhiyev, who was refused bail, owns food production assets in Russia, the Heliopark chain of 12 hotels and various assets in Germany, according to sources close to his Moscow operations.
Given the scale of the theft, the Interior Ministry assigned its top investigator Oleg Silchenko, who specialises in bank fraud. Silchenko, who is fast becoming Russia's answer to prohibition crimefigher Eliot Ness, is renowned for his previous crusades in exposing embezzlement at the Bank of Moscow and the BTA Bank.
Some of the proceeds from the defrauding of depositors may be linked to a Moldovan bank fraud, which rocked the tiny former Soviet state last year.
Alexander Grigoryev, the alleged mastermind of the banking frauds, was arrested in November for his involvement in a money laundering syndicate of 60 banks and 500 people said to be responsible for channelling $46bn out of Russia.
Grigoryev, the former vice president of the Moscow Boxing Federation, is a co-owner of several bankrupt banks, including Zapadny, Transportny Doinvest, and Russian Land Bank, which together allegedly owe clients a total of more than RUB75bn.
Grigoryev is accused of two counts of large-scale fraud amounting to RUB105bn. Kommersant reported that the businessman is accused of channelling prime assets out of banks about to be declared insolvent, as well as closing real estate deals on behalf of bankrupt credit institutions.
However, the biggest scam he is accused of running involved more than 60 small banks and some 500 people, constituting a money laundering and outflow operation with a record turnover of over RUB1 trillion a year.
The scheme could involve Moldovan, Lithuanian, and Estonian banks servicing Russian and offshore shell firms that channelled money out of Russia under the pretence of issuing compensation for fake trade deals with local nationals.
In 2010-2013 alone, Moldovan courts withdrew $18.5bn worth of compensation from Russian resident firms, which in reality was a cover-up for illegal capital flight, acording to Moldova's anti-money-laundering body. Grigoryev allegedly paid a RUB300mn bribe to an unnamed high-level official to avoid detention but to no avail.
The nationwide-investigation into Grigoryev and Muhiyev continues but has been hampered by threats made to former employees who turned informants, according to Russian media reports.
The CBR headed by Elvira Nabiullina is accelerating a clean-up of a banking sector, where corruption and graft is endemic. Since 2013, the regulator has stripped licenses from over 200 Russian banks, 80 of these in 2015 alone, reducing the total number to less than 700. The CBR has been denying licenses to credit institutions suspected of money laundering and funding terrorism, as well as encouraging takeovers of weakly capitalised and troubled banks by larger players.
Andrei Kostin, the chief executive of Russia's second-largest lender VTB, suggested last year that 500 banks could closed in the next five years.
The central bank on February 15 revoked the licenses of Unifin and Rostov Kapitalbank due to "high-risk lending policies" and failure to meet their obligations to creditors.