The Organized Crime and Corruption Reporting Project (OCCRP) published a report highlighting the sophisticated system for laundering money, which included jurisdictions of the UK, Russia, Moldova, Latvia and Belize. It has been estimated that more than $20 billion, stolen from the Russian government by corrupt politicians or earned through organized crime activity, was laundered.
OCCRP is a nonprofit international organization of journalists, which was founded in 2007 with the purpose of carrying out journalistic investigations and international assistance to independent publications in Eastern Europe and Central Asia. The organization was honored with various awards from the media.
The so-called “Laundromat” was a system that was designed to clear the way to move money from Russian companies and banks into EU banks. Laundromat’s job was to create the illusion of legal business activity, explaining the source of the money by courts’ decisions signing off on the transactions to make them appear to be legitimate. The legitimization of the funds was made with help of British and Latvian banks and corrupt judges in Moldova.
Money came from 19 Russian banks, mostly owned by Russian State or State Security functionaries. Owner of one of these banks – The Master-Bank – was Igor Putin, cousin of Russian President Vladimir Putin.
More than 20 judges in 15 Moldovan courts helped launder the money. Over three years, they issued more than 50 court orders certifying about US$ 20 billion in debt. This is a staggering amount for a country such as Moldova that had a GDP of just under US$ 8.5 billion in 2013. Some of these judges are now under investigation while others have resigned.
Typically a transaction began with two United Kingdom phantom companies, hiding their real owners in the offshore tax haven.
The companies sign a bogus contract in which one agrees to lend the other large sums, although no money ever actually changed hands. It is likely that the same owner owned both companies but that ownership was hidden behind “proxy” figures.
The tax haven of choice in this operation was Belize, and the sums involved in each transaction were huge, ranging from US$ 100-800 million. The contracts in each case stipulated that the debt was guaranteed by companies in the Russian Federation, almost always run by a Moldovan citizen. This Moldovan presence gave the operation access to the courts in Moldova, which would ultimately permit the movement of the dirty money into the legitimate banking system.
The next step was for the “borrowing” company to refuse to repay the debt to the “loaning” company, thereby shifting the debt to the Russian companies who had guaranteed the loan. The “loaning” company then would take the matter to court in Moldova where a judge would issue an order “certifying” the debt as real and ordering the Russian company to pay.
Then the Russian company would transfer dirty money into an account set up by the “loaning” company. For every case, the money was sent to an intermediary bank called Moldindconbank—an institution connected to one of the country’s most powerful businessmen.
Finally the money was wired to the “loaning” company’s account, which was always at the Latvian-based Trasta Komercbanka.
And once money is in Latvia, it is in the European Union, backed by a court order and clean and ready to use.
It is interesting that this huge criminal scheme was discovered not by law enforcement organs, but by the nonprofit international organization of journalists OCCRP.
OCCRP annually gives a ‘Person of the Year Award’ to the person who does the most to enable and promote organized criminal activity.
In 2014 this award went to Vladimir Putin.
