Pulling back the curtains on massive money laundering in Russia
With a headline worthy of a Hollywood-thriller script, Bloomberg last week published a long-form feature on the extraordinary scale and scope of money laundering in Russia.
Titled “The Russian Banker Who Knew too Much,” the Bloomberg story traces step by step how the arrest and subsequent trial of Alexei Kulikov in March of 2016 provides a fascinating and fraught view into state-related money laundering and the de facto looting of a nation.
Kulikov was initially arrested for allegedly stealing 3.3 billion rubles from Promsberbank, a sleepy little Russian bank that was acquired and quickly turned into a main conduit for the gargantuan mirror-trading money laundering debacle that transferred funds valued at tens of billions worth of U.S. dollars out of Russia and into the global financial system.
The push of kleptocrats and the ultra-wealthy to move money out of Russia surged in recent years due to stiffening sanctions related to Russia’s military operations in Ukraine and the region and due also to falling oil prices and a weakened economy. Those characteristics simultaneously motivated Russian leaders to attempt to slow the outflow of Russian wealth as a matter of economic defense, according to Bloomberg reporters.
VTB Group, a large state bank, asserts that the nation’s wealthy keep three-fourths of their wealth outside of the country and that as much as $100 billion leaves Russia each year.
While mirror trades were a favored money-laundering tactic in recent years, other methods have gained favor as crackdowns slowed the mirror trades. Examples of favored money-laundering strategies include “illicit reinsurance contracts and fraudulent court orders,” according to the Bloomberg story.
The report goes on to detail the involvement of banks and bankers in Russian money laundering and the intricate connections to government officials, Vladimir Putin, and law enforcement officials. It also details the role of Deutsche Bank in the mirror-trading scheme and the unsuccessful attempts to drag the German banking giant deeper into the morass.
Kulikov, who was sentenced to nine years in prison, is considered by many to be a small fry in the larger picture—as are most of the individuals held to account for Russian money laundering, according to Bloomberg. At trial, Kulikov and his defense attorney attempted to move the case toward higher-ups, but that line of defense was quickly squashed by the judge, according to this report.
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