Publication: Monitor Volume: 6 Issue: 153

Russian law enforcement agencies have announced that they are prosecuting thirty-seven criminal cases involving money laundering carried out by what a Russian newspaper described today as “a good half of Russia’s largest companies and enterprises,” including oil companies, alcohol producers and grain trading companies. The paper quoted officials from Moscow’s police and special anti-organized crime unit as saying that the heads of one offshore bank, International Cassaf Bank Corporation, were involved laundering more than US$300 million abroad. The bank, which is registered on the Pacific island of Nauru, reportedly used a number of complex schemes to launder money on behalf of a number of leading Russian corporations, including Rosvooruzhenie, Russia’s state arms exporting agency. According to investigators, at least US$30 million in “dirty” money passed through Cassaf Bank’s accounts each month. One laundering scheme involved that bank’s correspondent accounts in three Russian banks–Atlant-bank, Rossissky Kredit bank and MDM bank–in Switzerland’s Inter-Maritime Bank and in the Bank of New York (BONY), among others. MDM bank has been associated in the Russian press with Aleksandr Mamut, reportedly a key Kremlin insider, while BONY has been at the center of a scandal involving alleged Russian money laundering. Today’s report cites unnamed Russian special services officials as saying that during their investigations of these cases, they found “confirmation of practically all the accusations made earlier in the West” concerning Russian money laundering (Vremya novosti, August 7).

The fact that a Nauru-registered bank is at the center of this new money laundering scandal is not surprising: Late last year, Viktor Melnikov, deputy chairman of Russia’s Central Bank, told the Washington Post that US$70 billion was transferred in 1998 from Russian banks to the accounts of banks chartered on Nauru (see the Monitor, October 29, 1999). Earlier this year, in response to charges that it had become a laundering center for “dirty” Russian money, Nauru announced it would review its banking system (Moscow Times, February 10). During the Group of Seven meeting in Japan in July, the leading industrialized nations announced they would take tough new measures against money laundering and might cut off banking relations with some offending countries. The previous month, the G-7’s Financial Action Task Force put both Nauru and Russia on a list of financial centers deemed “uncooperative” in the fight against money laundering (Moscow Times, July 11).

This latest scandal comes on the heels of allegations that money from the IMF’s US$4.8 billion “stabilization credit” to Russia in the summer of 1998 was diverted to various banks, including BONY (see the Monitor, July 17, 25, 31). Last week, Mlada fronta DNES, the largest-circulation daily newspaper in the Czech Republic, reported that the Czech law enforcement authorities had evidence that money from the IMF credit was laundered in American banks. The paper quoted unnamed Czech counterintelligence officials as saying that last summer they discovered a network of questionable financial transactions between BONY and the Prague affiliates of Komercni Banka and Invedticni a postovni banka, and that these transactions turned out to be part of an operation to launder IMF money bound for Russia. The Czech authorities reportedly informed the FBI of their findings. The Czech paper, quoting sources in the Czech police, reported that funds were still being moved between BONY and accounts in Czech banks belonging to Russian citizens. The article linked the money laundering activities involving the Czech banks with Semyon Mogilevich, an alleged Russian mobster who reportedly laundered money through BONY (Russian agencies, August 3; see also the Monitor, August 27, October 6, 1999). Mogilevich was deported from the Czech Republic in 1995, after which he reportedly he began operating out of Budapest. Earlier this year, an interview with Moskovskie novosti, he denied all the allegations against him, saying he was simply a wheat trader (see the Monitor, February 22).