Publication: Monitor Volume: 6 Issue: 81

Congressman Jim Leach, who heads the House of Representatives’ Banking and Financial Services Committee, is in Moscow with a group of fellow U.S. legislators for a series of meetings on the issue of money laundering. The trip was made in connection with hearings called by Russia’s State Duma to examine the Bank of New York (BONY) money laundering scandal and its implications for Russia. Those hearings, which will include testimony from U.S. officials , were supposed to start this week, but have been postponed until June. Leach, who organized last summer’s hearings in Washington related to the BONY scandal, met yesterday with Sergei Stepashin, the former prime minister who was elected last week by the State Duma to head the Audit Chamber, Russia’s federal agency charged with monitoring the use of government money. Stepashin said after the meeting that the two sides had agreed to exchange additional information concerning money laundering, but added the BONY scandal had a political “hue.” He also said that no money from the International Monetary Fund was laundered through BONY.

At the same time, Stepashin quoted a Federal Bureau of Investigation official who participated in the meeting as saying that the Russian special services did not always fulfill requests from the FBI, despite the fact that there is an information-sharing agreement between the Bureau and Russia’s Federal Security Service (FSB). Stepashin said that he planned to meet with the heads of FSB, Interior Ministry and Foreign Intelligence Service (SVR) to improve cooperation between these agencies and the Audit Chamber on various issues, including those related to the BONY scandal. For his part, Leach said that the American side was more concerned with the laundering of criminal money in the United States, while the Russian side was more concerned about the issue of capital flight (Russian agencies, April 24). Leach is set to meet today with Andrei Illarionov, the economist whom President-elect Vladimir Putin recently picked to be his economic adviser, and Viktor Gerashchenko, head of Russia’s Central Bank (Kommersant, April 25).

The tone of Stepashin’s and Leach’s comments underscored the different emphases the Russian and U.S. sides have placed on the BONY scandal. Russia has tended to stress that the funds that passed through BONY were simply from Russian businesses trying to avoid Russia’s Byzantine and punitive tax system. U.S. officials and those from other Western countries have focused on charges that money made by Russian gangsters or looted by Russian officials–including from IMF credits–went through BONY. Last year, the Wall Street Journal reported that US$200 million from IMF loans had been diverted to BONY, while USA Today put the number at a staggering US$10 billion (see the Monitor, August 27, 1999). Like the Russian government, the IMF says there is no proof that its credits to Russia were misused. The initiator of the Duma hearings planned for June, Aleksandr Shokhin, the former economics minister who now heads the Duma’s committee on credit organizations, said that the U.S. congressmen were interested not in fanning the BONY scandal, but in “real steps in the fight against money laundering and cleaning up the financial sphere.” Shokhin said the Russian side was also interested in this, and thus that the two sides were “doomed to a constructive dialogue” (Kommersant, April 25).