Exclusive: Billions of dollars were moved out of Russia in Global Laundromat operation, with anonymously owned UK companies playing major role
Britains high street banks processed nearly $740 m from a vast money-laundering operation run by Russian offenders with links to the Russian government and the KGB, the Guardian can reveal.
HSBC, the Royal Bank of Scotland, Lloyds, Barclays and Coutts are among 17 banks based in the UK, or with branches here, that are facing questions over what they knew about the international strategy and why they did not turn away suspicious fund transfers.
Documents insured by the Guardian show that at least $20 bn appears to have been moved out of Russia during a four-year period between 2010 and 2014. The true figure could be $80 bn, detectives believe.
One senior figure involved in the inquiry said the money from Russia was plainly either stolen or with criminal origin.
Investigators are still trying to identify some of the wealthy and politically influential Russians behind the operation, known as the Global Laundromat.
They estimate a group of about 500 people were involved. These include oligarchs, Moscow bankers, and figures working for or connected to the FSB, the successor snoop bureau to the KGB.
Igor Putin, the cousin of Russias president, Vladimir, sat on the board of a Moscow bank which held accounts involved in the fraud .~ ATAGEND
British-registered companies played a prominent role in this extensive money-laundering network. The real owners of most of the firms used in the strategy remain secret, however, because of the anonymity provided by controversial offshore laws.
The Global Laundromat banking records were obtained by the Organized Crime and Corruption Reporting Project( OCCRP ) and Novaya Gazeta from sources who wish to remain anonymous. OCCRP shared the data with the Guardian and media partners in 32 countries.
The documents include details of about 70,000 banking transactions, including 1,920 that went through UK banks and 373 via US banks.
The data is understood to be part of the evidence gathered in a three-year money-laundering investigation led by police in Latvia and Moldova.
Detectives have unravelled a conspiracy that involved billions of dollars being sent from suspected criminals in Russia via accounts in Latvia and Moldova held at banks notorious for their exposure to money-laundering scams.
The trail resulted examiners to 96 countries and to a network of anonymously owned firms, most of them registered at Companies House in London. Most of the 21 core companies under scrutiny have been dissolved.
The scale of the operation has staggered law enforcement officials. The records demonstrate British banks and foreign banks with offices in London processed $738.1 m in transactions apparently involving criminal fund from Moscow.
Banks say they have sophisticated divisions dedicated to rooting out financial crime. But they say the volume of payments billions a year attains such work difficult.
If you are on the back end you are kind of playing whack-a-mole, are seeking to pick this up, one source said.
HSBC processed $545.3 m in Laundromat cash, mostly routed through its Hong Kong branch. The troubled Royal Bank of Scotland which is 71% owned by the UK government managed $113.1 m. Coutts used by the Queen and owned by RBS accepted $32.8 m worth of payments via its office in Zurich, Switzerland. Coutts is gale down its Swiss operating and was last month penalty by regulators for fund laundering in a different example.
Other high street banks that appear in the Laundromat data include Barclays, NatWest and Lloyds. NatWest also owned by RBS permitted through $1.1 m.
In the US, big banks processed more than $63.7 m. They include Citibank ($ 37 m) and Bank of America ($ 14 m ).
The Guardian contacted all these banks. None of them challenged the authenticity of the data, but they all insisted they had strict anti-money-laundering policies.
The response from RBS was typical. The bank said: We are committed to combatting financial crime and fund laundering in line with our regulations and have controls and safeguards in place to identify, assess, monitor and mitigate these risks. The statement encompassed Coutts and NatWest.
HSBC said: This occurrence highlights the need for greater information sharing between both public and private sectors, each of whom holds important information the other does not.
However, the Guardians revealings raise awkward questions for UK banks. The Financial Conduct Authority demands that banks consider the money-laundering hazard presented by customers, taking into account country risk; the customers reputation and the source of their wealth and funds.
In many of the cases looked at by the Guardian, money faded into offshore shell firms, whose beneficial owneds remain anonymous, and whose source of wealth is a mystery. The OCCRP discoveredthat the official proprietors of many of the firms were fake or nominee directors based in Ukraine.
The Guardian depicted details of the transfers to L Burke Files, an international fiscal researcher. He said compliance checks at many western banks were desultory, and often little more than boxes ticking.
Typically the conformity and investigations department is treated like an unwanted step-child. The directors of a bank assure conformity as an expenditure without any return. The compliance professionals are underpaid, underskilled and receive little or no effective training in spotting criminal patterns.
Files added: Most of the transactions Im seeing here would have necessitated substantial enhanced due diligence. It isnt simply individual transactions. Its the repeated pattern.
Police in eastern Europe have focused on a number of British shell companies, including Seabon Limited, which was run by a company management firm in Tooley Street, London, only around the corner from the mayor of Londons office and City Hall.
In 2013, Seabon filed accounts to Companies House saying its income was just 1. The firm was wound up in February 2016. According to an analysis of the records, Seabon was involved in transactions worth$ 9bn. Another firm Ronida Invest LLP, registered in Newhall Street, Birmingham processed $6.4 bn.
Prosecutors in eastern Europe claim both firms were set up for the purposes of fraud.
The records also give an insight into Russian shopping habits, although the customers in many cases are unknown. They bought diamonds from a jewellers in Bond Street, furs from brokers in north London, and chandeliers from a Chelsea boutique.
The scheme was also used for a wealthy Russian to pay for his sons boarding fees at Millfield, a prestigious school in Somerset.
Often, the information in the notes section of wire transfers was misinforming. One bank payment of $500,000 was marked down in records as notebooks. Actually, it was spent on fur.
The scheme that allowed the transfer of money from east to west was unravelled by police following the launch of the inquiry in 2014. The OCCRP which first reported the tale originally called it the Russian Laundromat.
Typically, two firms would pretend to give fund to one another, with the sums underwritten by Russian business. One company would then default on the loan. Judges would certify its external debt as authentic, allowing the Russian businesses to send money to an account in Moldova. From there it went to Latvia, inside the EU.
Accounts held at 19 Russian banks were involved in the scheme. In 2014, it was reported that one financing institution was the Russian Land Bank( RZB ). A bank board member at the time was Igor Putin.
Detectives say accounts at RZB transferred about $9.7 bn to accounts at Moldovas Moldindconbank. The money was then moved to Trasta Komercbanka in Riga.
RZBs director Alexander Grigoriev was arrested in Moscow in 2015, a year after his bank was shut down for money-laundering offences.
Sources told the OCCRP that Grigoriev had links to the FSB, Russias main spy agency.
He has denied wrongdoing and says he is a respectable citizen. He remains in custody, accused of stealing assets in a different case.
Igor Putin declined to comment. In a letter written in 2014, he said: My personal experience, gained in recent years, demonstrates the truth of the thesis that the Russian banking institutions should be radically rehabilitated and cleaned of troubled banks headed by people with doubtful reputations.
Trasta, the Latvian bank at the centre of the scandal, was closed in 2016. Maija Treija, deputy director of Latvias finance ministry, said it lost something licence due to fund laundering. Of the billions sent from Russia, she said: Obviously it was fund either stolen or with criminal origin. The fight against fund laundering was a never-ending story, she told the Finnish broadcaster YLE.
The involvement of Moldovas banks in the scandal led to a political crisis that has assured five prime ministers come and go in the last two years.
Former and current officials working at Moldovas central bank were detained by attorneys last August suspected of turning a blind eye to information on money laundering carried out through Moldindconbank.
The fraud has also triggered a row with Moscow. This month, Moldovas parliament said Russias FSB had abusively treated Moldovan officials arriving in the Russian Federation. It linked their harassment to Moldovas Laundromat investigation and said some of the money had been used to try to bribe Moldovan MPs.
The FSB run by Vladimir Putin before he became prime minister and chairwoman had used part of the Laundromat money to further Russian country interests, Moldovan officials said.
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