A leak of secret documents from the US financial intelligence agency FinCEN reveals criminal schemes by oligarchs from various countries, enabling them to launder about $2 trillion through the world’s largest banks between 1999 and 2017. The information was published by the international investigative journalism project Cassandra, which involves 110 media outlets across 88 countries, including ICIJ, BuzzFeed News and OCCRP.
#FinCENFiles: Secret documents show how criminals use famous banks to finance terror and death, and the government doesn’t stop it https://t.co/7Jv9RU5txj
— BuzzFeed News (@BuzzFeedNews) September 20, 2020
The investigation is based on a leak of more than 2,100 reports of suspicious financial activity (SARs) that global banks file with FinCEN.
A number of high-profile FinCEN-linked financial operations are connected to Russian oligarchs. Among them are businessmen Oleg Deripaska, Arkady and Boris Rotenberg, the former head of Boris Yeltsin’s administration and presidential adviser Valentin Yumashev, and cellist Sergei Roldugin.
According to FinCEN, the American holding company Bank of New York Mellon, from 1997 to 2016, transferred more than $1.3 billion, “related to Oleg Deripaska.” According to the documents, through Deutsche Bank between 2003 and 2017 transactions totaling $11 billion were made in Deripaska’s interests.
The Rotenberg brothers, despite sanctions, conducted international settlements through Barclays in London, BBC reports as part of the investigation. Arkady Rotenberg wired $7.5 million to buy René Magritte’s La Poitrine. The US Senate had previously pointed to the case, but the businessman’s spokesman rejected the allegations, calling the deal legal.
Putin adviser Valentin Yumashev, according to the journalists, received $6 million from Epion Holdings Limited on the British Virgin Islands. The company, based on available information, is owned by billionaire Alisher Usmanov.
A company linked to cellist Roldugin, Sandalwood Continental, received $830,000 in October 2010 from Cyprus-based Dulston Ventures allegedly for extending a loan agreement. According to the consortium, Dulston Ventures appears in the list of affiliated entities of several Russian companies that form part of Severgroup, billionaire Alexei Mordashov’s conglomerate.
The ICIJ database compiled from FinCEN reports contains information on 3,810 potentially suspicious transactions involving the biggest Russian banks (Sberbank, VTB, Rosbank, Alfa-Bank, Vnesheconombank, Gazprombank, Raiffeisen Bank and others).
In total, Russian financial institutions received $7.28 billion and sent $3.50 billion. The most active foreign counterparty in these transfers was Bank of New York Mellon (2,992 transactions).
Among Ukrainian companies named in the scandal are entities linked to Ihor Kolomoyskyi, Rinat Akhmetov, Dmytro Firtash, Viktor Yanukovych ally Yuriy Ivanyushchenko, Andriy Kluyev and others.
According to FinCEN, from December 2015 to May 2016 Deutsche Bank wired $240 million to a shell company on the British Virgin Islands, which, according to US lawsuits, was controlled by billionaire Ihor Kolomoyskyi and his business partner.
In a suit filed in 2019 in the Delaware court, it is alleged that Kolomoyskyi used the shell company Claresholm Marketing Ltd. to carry out a “series of brazen fraudulent schemes” through Ukraine’s PrivatBank, which together with its partner controlled it until the end of 2016. New owners of the bank argue that Kolomoyskyi and his associates drained billions from the bank through fictitious loans, and then laundered the money through investments in the US.
The prosecution says that most of the money reportedly stolen from PrivatBank between 2008 and 2016 was invested in the United States, including commercial real estate in Texas and Ohio, steel mills in Kentucky, West Virginia and Michigan, and a mobile-phone manufacturing plant in Illinois.
A Reuters investigation showed that oligarch Dmytro Firtash, allegedly linked to the Russian mobster Semyon Mogilevich, made a fortune importing natural gas from Russia into Ukraine at artificially low prices. In 2013, Firtash was charged by the United States with bribing Indian officials to secure a profitable titanium mining deal, and he later posted bail.
From 2003 to 2017, Firtash’s entities conducted 756 transactions through major US and UK banks totaling $2.37 billion. According to FinCEN, in August 2008 Firtash’s enterprise Bothli Trade AG sent more than $78,000 to Standard Chartered Bank accounts in the name of Periyasamy Sunderalingam. The latter helped Firtash pay bribes to Indian officials, according to a US indictment.
In 2014, Nadra Bank, owned by Firtash, sent more than $1 billion through New York branches of Standard Chartered and Bank of New York Mellon. Some of these transfers related to Firtash’s money, FinCEN alleges.
Against the background of the leak publication on Monday, September 21, HSBC, the UK’s largest bank, fell to a 25-year low.
HSBC falls to a 25-year low Monday. Here’s how that looks also just in case, some hit songs at that time to underscore how long it’s been since the share price was at this level. pic.twitter.com/8HBekiflxI
— David Ingles (@DavidInglesTV) September 21, 2020
According to FinCEN, HSBC allowed oligarchs to move millions of stolen dollars even after the scheme was deemed fraudulent. Between 2013 and 2014, the bank conducted transactions totaling more than $80 million.
Expert views
The FinCEN leak could weigh on ordinary bank customers as KYC/AML rules tighten, warn experts.
“All the restrictions we see in banks today stem solely from such stories. But they are too big to fail, so they choke ordinary users, and banks shut off the oxygen for ordinary users,” writes Mikhail Chobanian, founder of Kuna exchange.
According to him, money laundering through traditional financial institutions is driven by their handling of the main financial flows:
“Banks run the world, they ‘finance’ politicians, they have lobbies, and most importantly — they print money, and that is the main energy in the world,” said Chobanian in ForkLog’s interview.
The profits of JPMorgan, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon from handling “dirty” money are likely so large that fines do not frighten them, says Sergey Troshin, head of the Six Nines data centre.
“Banks and fiat enjoy popularity for money laundering because of entrenched business ties. If a scheme has run for decades, the people involved are vetted and all sides are satisfied with the outcome, why change anything?”
Cryptocurrencies, in this sense, cannot be considered an ideal instrument for laundering, continues Vladimir Smerkis, co-founder of Tokenbox.io.
“Cryptocurrencies are more transparent than large banks and cash. We know which wallet and which exchange funds are sent from. Tools like Crystal from Bitfury are used by many major platforms and law enforcement agencies around the world to track gray bitcoins,” explains the expert.
Smerkis added that the financial market urgently needs rules that would make laundering and the financing of contentious operations unprofitable, and drive broad adoption of cryptocurrencies as the most honest and transparent money of the 21st century.
Aleksandr Kirienko, managing partner at Exante, agrees:
“Cryptocurrencies will not help to whitewash ‘dirty’ money. In the classic sense, money laundering in cryptocurrencies does not exist; this process concerns the banking sector alone. Laundered money through cryptocurrencies does not enter the banking system. They are exchanged for banking services, possibly cash, but do not flow back into banks.”
Corruption in banks is explained by their control by an ‘unelected bureaucracy,’ adds Pandora Core CEO Maxim Orlovsky:
“This international bureaucratic apparatus exists as an entity in itself, divorced from the real economy. Banks are therefore easier to bribe and use in the system of organised crime, financing wars and terrorism. Not so with cryptocurrencies regulated by the laws of supply and demand and tied to the real economy.”
In March 2019, OCCRP’s investigation into money-laundering through the Troika Dialog investment bank showed that offshore zones grant greater anonymity than the public bitcoin network. Transaction reports between offshore firms can be shut down on an offline server or simply deleted; the blockchain does not offer such an option.
Падение Олимпа: как офшорный скандал вокруг инвестбанка “Тройка Диалог” развенчивает миф о том, что биткоин удобен для отмывания денег
Bitcoin is thus effectively less convenient and less safe for laundering money.
In July 2019, Messari found that traditional money is used for laundering 800 times more often than Bitcoin.
In March 2020, Chainalysis found that only one in a hundred Bitcoin transactions is linked to illegal activity.
In July, the total amount of bitcoins linked to illicit activity exceeded 890,000 BTC (about $9.7 billion at the time).
In September FinCEN proposed tightening rules on anti-money-laundering and terrorist-financing affecting crypto firms and exchanges.
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