The Organised Crime and Corruption Reporting Project recently (21st August) published one of their periodic investigations, concerning a rather large moneylaundering scheme:
Call it the Laundromat. It’s a complex system for laundering more than $20 billion in Russian money stolen from the government by corrupt politicians or earned through organized crime activity. It was designed to not only move money from Russian shell companies into EU banks through Latvia, it had the added feature of getting corrupt or uncaring judges in Moldova to legitimize the funds. The state-of-the-art system provided exceptionally clean money backed by a court ruling at a fraction of the cost of regular laundering schemes. It made up for the low costs by laundering huge volumes. The system used just one bank in Latvia and one bank in Moldova but 19 banks in Russia, some of them controlled by rich and powerful figures including the cousin of Russian President Vladimir Putin.
Here’s how it worked:
The Laundromat was designed to create the illusion of business activity to explain the source of the money, backed by a court which signed off on the transactions to make them legitimate. The businesses, however, were phantom companies shielding the real owners.
A typical transaction began with two companies, often based in the United Kingdom and with their true ownership obscured in the offshore mists of a tax haven. The companies sign a bogus contract in which one agrees to lend the other large sums, although no money ever actually changes hands. It is likely that both companies are owned by the same owner but that ownership is hidden behind “proxy” figures.
The tax haven of choice in this operation was Belize, and the sums involved in each transaction were huge, ranging from US$ 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 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.
And once it is in Latvia, voila! It is in the European Union, backed by a court order and clean and ready to use.
The OCCRP investigation found that 19 Russian banks, some already being investigated for money laundering, used The Laundromat.
Since there’s plenty more to come from the OCCRP on various UK connections that surface in this scam, let us studiously avert our gaze from that particular aspect, and drag in poor old New Zealand instead, which duly crops up in one of the OCCRP’s documents, near the bottom of the page, in its exotic Romanian guise, “Noua Zeelandă”.
For good reasons, whenever one sees the words “New Zealand”, “money laundering”, and “Trasta Komercbanka”, two thoughts follow immediately: “GT Group” and “The New Zealand Registrar of Companies has screwed up again”. Those unfortunate prejudices turn out to be accurate this time, too.
Back in May, I wrote, apropos the very dilatory and incomplete official cleanup of companies incorporated by GT Group and associated company agents:
GT Group continues to register companies with that address in Nayland Road, Stoke, New Zealand. Right now, there are 34 of them.
Then there are a few GT Group strays, here and here, though they at least may be on the brink of being struck off, and more here, here, here, here and here. Thus, in New Zealand, there are still 60-plus registered GT Group companies that are easy to trace.
Chester NZ Limited is one of those companies I flagged up in May, at one of GT Group’s favourite addresses, 369 Queen Street. In one of his typical fitful bouts of activity, the Registrar struck it off on 18th July 2014, along with some, but by no means all of the companies mentioned in my post. Sadly, as a Laundromat document shows (PDF, kindly provided by Paul Radu of the Organised Crime and Corruption Reporting Project), it was far too late by then.
Consequently, there is Chester NZ Limited, on the top right of the PDF, proud conduit of 24,996,517,126 roubles in laundered funds; directed successively, since incorporation in 2010, well after the initial GT Group scandal broke, by the renowned and blindingly obvious GT Group stooges and employees, Charlie Kalopungi and Leah Toureleo of Vanuatu.
That’s a meaty $612,000,000 at the applicable exchange rate, laundered via just one company. One wonders what the other 60 equally easily identified GT Group companies flagged up in May were and are doing.
The survivors, 15+ on a quick rough count, still represent more than $10Bn worth of money laundering capacity, if Chester Group’s life and throughput are any guide. But maybe the New Zealand Registrar of Companies is OK with that. It’s quite hard to tell from his actions to date.
Then there’s the matter of the other 120+ non-GT Group shell companies from my May post round up, which seem to be largely undisturbed. There is at least one change to report: the 10 Panasuisse companies have become a little more elusive. Unfortunately that’s because, sometime between May and August 2014, the folk who support the Companies Office software broke the relevant query. So, for instance, you can see that Genius Management Limited, with its red flag of a former director, Erik Vanagels, is 100% owned by Panasuisse Holding Limited. But if you try to query back all the companies in which Panassuise Holding Limited owns a stake, you get no results at all, not even Genius Management Limited. Something’s broken!
Here’s the best workaround that I can do at short notice: seven of the ten companies I found in May. Of course, more may have been formed in the mean time. Top tip: fix the damn query.
Short version: it’s looking a bit like the Keystone Cops right now, down at New Zealand Companies Office, except with more Valium. But if it’s any consolation to proud Kiwis, the situation in NZ is still miles, miles better than in the UK.
More on that anon, when I have girded my loins.