Putin has every money man in his pocket and more...
Russians Not Fazed by Shady Banks
Sunday, 20 February 2000
M O S C O W (AP)
FOR MOST Russians, banks are not symbols of stability. They exist not for
lending or protecting money, but rather to serve the needs of business,
which sometimes requires hiding income from the government.
This world, where banks appear and disappear, often to little notice by
regulators, is the backdrop of a $7 billion money-laundering scandal.
The murky maze of Russian banking was on display last week in New
York, where a former Bank of New York executive and her husband
pleaded guilty to money-laundering charges.
Lucy Edwards, the bank's former Eastern European Division vice
president, and Peter Berlin admitted helping Russian bankers wash the
billions through accounts at the bank in order to avoid Russian taxes and to
cover up the money's connection to crimes - including money used as
ransom for a kidnapping in Russia.
The case also revealed the operations of so-called `pocket banks,'
established to take care of the financial transactions of an individual
company.
Prosecutors say Edwards, Berlin and unidentified Russian coconspirators
offered to transfer money in and out of Russia via two such pocket banks,
making it easier to avoid complying with currency control regulations.
In that case, customers were assured that funds would be transferred
abroad without them having to open an account at an authorized bank or
provide a contract, an import transaction passport, or a permit authorizing
such a transfer.
Prosecutors say the funds were transferred abroad by two Russian banks,
DKB and Flamingo, using correspondent bank accounts at The Bank of
New York.
Russian businesses also directed customers to pay for goods or services
by wiring funds to front companies set up by Berlin. They then received the
proceeds in cash from DKB in Russia or had DKB wire the funds from the
front companies' accounts to offshore accounts.
Oleg Solovov, former deputy manager at DKB, said his bank had done
nothing wrong according to Russian law.
"If someone wants to send money abroad ... if they submit all the proper
papers, the bank has no right not to conduct the transfer," he told ORT
television on Saturday.
The DKB and Flamingo banks have gone out of business, but the
prominent banks that established them, Sobinbank and MDM, are still on
the scene.
Alexander Mamut, who had close ties with former President Boris
Yeltsin's inner circle, was a Sobinbank board member who later took the
helm of MDM. He has denied any wrongdoing. MDM says it had no
dealing with either DKB or Flamingo since 1996.
Sobinbank officials could not be reached for comment Friday.
Last autumn police raided offices of both Flamingo and Sobinbank.
At Flamingo, they found $535,000 whose origin bank officials had trouble
explaining. In Sobinbank's vault, officials found $1.6 million and 13 pounds
of gold ingots, hidden in a niche. The money's owner, a top official in the
state-controlled company that manufactures space rockets, said it came
from a bank loan intended to help build a country home outside Moscow.
He denied knowing where the gold came from.
Russian police said at the time that money suspected to have been
channeled to Bank of New York via Flamingo came from Sobinbank, but
no legal action has followed.
Nor have government promises to restructure the country's banking system
and introduce stricter regulations since a national financial crisis in August
1998.
A state agency charged with rebuilding the banking system after the crisis
hasn't had the power or determination to stop bank owners from siphoning
off assets.
And Russian officials have so far kept mum on Edwards' and Berlin's
testimony.
Among the sea of questions left in the case is what affect - if any - it will
have on acting President Vladmir Putin, who is running to keep his spot for
good on March 26.
He has spoken often of his commitment to combating corruption and has
worked to distance himself from his predecessor's scandal-tinged
administration. But his determination to investigate allegations against
Yeltsin's inner circle remains to be proven.
Nikolai Petrov, a political analyst with the Carnegie Endowment, said he
believes Putin may sanction legal proceedings against some of the most
controversial Russian tycoons in the run-up to the vote.
"As the former security chief, he definitely has plenty of evidence against
any of them," Petrov said in a telephone interview. "Every leading
businessman here has somehow broken the law." |
