US banks move billions for fugitives, corrupt foreign officials and criminal groups

During his rise as one of Russia’s rich­est oli­garchs, Roman Abramovich poured much of his wealth into the west, amass­ing lux­u­ry homes, mul­ti­mil­lion-dol­lar paint­ings, pri­vate jets and thoroughbreds. 

Among his high-pro­file trea­sures: a sprawl­ing Colorado man­sion, a $700 mil­lion supery­acht, a recent­ly seized French Riviera estate — even London’s ven­er­a­ble Chelsea foot­ball club. 

The 55-year-old pow­er bro­ker is among a cadre of bil­lion­aires who have been accused by U.S. experts of prop­ping up the pres­i­den­cy of Vladimir Putin as the Russian leader wages a war in Ukraine now in its fourth month. 

For years, the oli­garch moved his mon­ey qui­et­ly through the U.S. finan­cial sys­tem, even while bank fraud experts detect­ed the hall­marks of mon­ey laun­der­ing: mil­lions flow­ing from high-risk coun­tries in large round dol­lar amounts and no obvi­ous pur­pose for many of the payments. 

The move­ment of those funds into the United States illus­trates how easy it is for sus­pi­cious mon­ey to enter the coun­try — bil­lions belong­ing to crim­i­nal groups, Russian elites and cor­rupt for­eign offi­cials — despite inter­nal warn­ings raised by the banks.

Secret gov­ern­ment records reviewed by the Pittsburgh Post-Gazette showed that year after year U.S. banks shift­ed mas­sive amounts of dol­lars with­out first tak­ing basic steps such as deter­min­ing where the sus­pi­cious funds were com­ing from. 

As the Biden admin­is­tra­tion cracks down on oli­garchs to pun­ish Russia for its inva­sion of Ukraine, the fail­ure by banks to shut out shad­owy mon­ey threat­ens to under­mine one of the pres­i­den­t’s most pub­lic efforts to strike back at Russia for a bru­tal, unpro­voked attack that has spread the fear of nuclear war across the globe. 

In a unique posi­tion to fight mon­ey laun­der­ing and oth­er crimes, banks are sup­posed to stay on alert and at times refuse to trans­fer mon­ey or even drop cus­tomers who they sus­pect may be break­ing the law. 

But the records show the banks — reap­ing fees from the enor­mous flow of mon­ey — not only trans­ferred dol­lars for crim­i­nal groups and cor­rupt for­eign offi­cials but also for oli­garchs who are sup­posed to be banned from the finan­cial sys­tem from pri­or sanc­tions by the government. 

In one case, Wells Fargo moved mon­ey for a Kazakhstan fugi­tive in 2015 even after an Interpol alert was issued for his arrest for alleged­ly help­ing to laun­der mil­lions in pub­lic funds from his country.

In anoth­er, Standard Chartered took in hun­dreds of mil­lions on behalf of a noto­ri­ous Chinese gang­ster start­ing in 2013 despite the funds com­ing from a shell com­pa­ny with offices in Africa that did not appear to have any legit­i­mate busi­ness purpose. 

The trans­fers of mon­ey under­score the risks tak­en by banks in an era when crim­i­nal orga­ni­za­tions are depen­dent on finan­cial insti­tu­tions to move their mon­ey and hide it. 

Known as sus­pi­cious activ­i­ty reports or SARs, the records — which are nev­er dis­closed to the pub­lic — are part of a Post-Gazette series into mon­ey laun­der­ing that began with an inves­ti­ga­tion into mil­lions of dol­lars in the U.S. steel industry. 

The news­pa­per reviewed rough­ly 2,000 such reports filed by the banks under a law that requires the insti­tu­tions to report sus­pi­cious dol­lars to the government. 

By them­selves, the records — shared with the Post-Gazette by BuzzFeed News reporter Jason Leopold — are not evi­dence of a crime, and not every­one in the reports has been charged with offenses. 

But the infor­ma­tion turned up by the banks raised enough alarms that reports were sent to the U.S. Treasury’s Financial Crimes Enforcement Network, which inves­ti­gates mon­ey laun­der­ing and oth­er finan­cial crimes. 

With the recent push by the Biden admin­is­tra­tion to clamp down on peo­ple in Putin’s inner cir­cle — includ­ing efforts to seize their yachts and man­sions — the U.S. gov­ern­ment sent an alert two months ago to banks to stay vig­i­lant and stop oli­garchs from mov­ing their wealth into the country. 

Despite a ban imposed on oli­garch Arkady Rotenberg and his broth­er after the first inva­sion of Ukraine in 2014, banks still moved mil­lions into the U.S. through shell com­pa­nies on behalf of the pair, a Senate inves­ti­ga­tion found. 

Since 2010, at least 15 major banks have been hit with reg­u­la­to­ry fines and crim­i­nal inves­ti­ga­tions over mon­ey laun­der­ing and sanc­tions vio­la­tions, rais­ing ques­tions about the banks’ abil­i­ty to shut out the very peo­ple tar­get­ed by the Biden admin­is­tra­tion based on their past records. 

One for­mer reg­u­la­tor who spent decades inves­ti­gat­ing banks said he was con­cerned that too many finan­cial insti­tu­tions in their quest for prof­its show a “will­ful blind­ness” that per­mits sus­pi­cious dol­lars to flow. 

“Bankers are mak­ing lots and lots of mon­ey off of this,” said Thomas Nollner, who spent 30 years with the Office of the Comptroller of the Currency. “…(I)t just hap­pens year after year after year.” 

Nearly 12 years ago, the Justice Department launched a high-pro­file cam­paign that cre­at­ed the first anti-klep­toc­ra­cy unit in the agency to fight the rise of cor­rupt for­eign­ers exploit­ing their nations and mov­ing their ill-got­ten gains into the U.S.

The goal at the time was to “deter cor­rup­tion, hold offend­ers account­able and pro­tect pub­lic resources,” said then Attorney General Eric Holder. 

In the ensu­ing years, records show, hun­dreds of mil­lions of dol­lars were steered through the banks by some of the very peo­ple who were sup­posed to be tar­get­ed by the new unit. 

For years, banks moved mon­ey for Ilyas Khrapunov, then a Kazakhstan fugi­tive, even after he was accused in his coun­try of help­ing his father, Viktor Khrapunov, to laun­der mil­lions that gov­ern­ment inves­ti­ga­tors said was stolen from the pub­lic trea­sury. In all, the elder Khrapunov was charged in a scheme to loot more than $300 mil­lion and was found guilty in absentia. 

Bank inves­ti­ga­tors at Wells Fargo described a “sus­pi­cious and inex­plic­a­ble” move­ment of mon­ey in 2013 and 2014; wire trans­fers for large round dol­lar amounts; and no clear source of funds, pur­pose of trans­ac­tions or rela­tion­ship between some of the par­ties. But the funds were moved anyway. 

The son of Kazakhstan’s for­mer ener­gy min­is­ter, he and mem­bers of his fam­i­ly were accused by the gov­ern­ment of buy­ing mul­ti­mil­lion-dol­lar Beverly Hills homes, leas­ing Rolls-Royces and Bentleys, and invest­ing in a lux­u­ry hotel in New York City along with pur­chas­ing three units in Manhattan’s Trump SoHo with the mon­ey alleged­ly fleeced from their country. 

Reports on the younger Khrapunov and oth­ers con­nect­ed to him filed by Bank of New York Mellon in 2017 show a decade dur­ing which the bank moved more than $20 mil­lion on his behalf and oth­ers even after an Interpol notice was issued for his arrest in 2014 and a civ­il rack­e­teer­ing law­suit was brought by the city of Almaty in Kazakhstan in fed­er­al court in California. 

The Almaty gov­ern­ment suit said the Khrapunovs found the United States to be ripe for mon­ey laun­der­ing, more so than anoth­er coun­try they lived in —Switzerland.

Almaty lost the California case in 2015 before a fed­er­al appeals court on tech­ni­cal and juris­dic­tion­al grounds. 

Ilyas Khrapunov denied the charges, say­ing he and his fam­i­ly were the vic­tims of pol­i­tics in their native country. 

“Kazakh and Russian regimes use fal­si­fied evi­dence to ini­ti­ate civ­il and crim­i­nal cas­es to pur­sue their polit­i­cal oppo­nents,” the younger Khrapunov said in an email to the Post-Gazette. “I do think bank­ing com­pli­ance is extreme­ly impor­tant, but it is not always easy to dis­tin­guish between real and ‘polit­i­cal­ly moti­vat­ed’ cases.”

And then there’s the case of Liu Han, a Chinese bil­lion­aire and a mod­ern-day war­lord who made a for­tune in min­ing as well as may­hem and was fond of mink coats and lux­u­ry cars, accord­ing to pub­lished reports. 

Again and again, Standard Chartered moved mas­sive amounts of mon­ey for com­pa­nies linked to him, lat­er dis­cov­er­ing some of the funds came in high­ly sus­pi­cious pat­terns from a shell com­pa­ny that list­ed an office in an apart­ment build­ing in Tanzania. 

In 2013, he was charged by the gov­ern­ment with run­ning an orga­nized crime gang likened to the Mafia that mur­dered his polit­i­cal ene­mies, extort­ed, ran guns and oper­at­ed an ille­gal gam­bling ring. 

By the time the Chinese gov­ern­ment exe­cut­ed the 49-year-old Liu in 2015 along with his broth­er and oth­er asso­ciates, Standard Chartered Bank had already car­ried out most of the trans­fers for com­pa­nies linked to the gang leader, records show. The total amount moved: more than $620 million. 

In more than a dozen cas­es, the Post-Gazette found that banks filed mul­ti­ple sus­pi­cious activ­i­ty reports on the same sub­jects, but they nev­er stopped mov­ing their mon­ey even after sus­pect­ing laun­der­ing and oth­er finan­cial misconduct. 

Martin Woods, a for­mer finan­cial watch­dog for Wachovia Bank, said the repeat­ed fil­ing of reports with­out refus­ing the mon­ey or drop­ping the cus­tomer is a dan­ger­ous prac­tice for finan­cial insti­tu­tions at a time when mon­ey laun­der­ing and fraud run rampant. 

“If you have the abil­i­ty to stop it, why would you not stop it?” said Mr. Woods, who exposed his bank more than a decade ago for tak­ing in mon­ey for the Mexican drug cartels. 

In response to ques­tions from the Post-Gazette, Bank of New York Mellon and Wells Fargo declined comment. 

Standard Chartered said it was unable by law to com­ment on sus­pi­cious activ­i­ty reports. 

Even after he was indict­ed by a U.S. grand jury in 2013 on charges of bribery, mon­ey laun­der­ing and rack­e­teer­ing, Dimytro Firtash, a Ukraine oli­garch with close ties to the Russian gov­ern­ment, was able to move mil­lions for his com­pa­ny through Standard Chartered. 

While trans­fer­ring the mon­ey, the bank cit­ed a host of con­cerns, includ­ing mil­lions pour­ing in from high-risk coun­tries and pay­ments with no known pur­pose for the transactions. 

Now a fugi­tive liv­ing in Vienna, the 57-year-old Mr. Firtash, who is accused of a scheme to bribe offi­cials in India to land major min­ing con­tracts, has been fight­ing extra­di­tion to the United States. He has main­tained in pri­or inter­views that the charges are moti­vat­ed by Ukrainian pol­i­tics and that he nev­er bribed anyone. 

Although the rash of sanc­tions on oli­garchs has forced banks to ban Kremlin insid­ers from the U.S. finan­cial sys­tem, oth­ers close to Putin have remained free to move their wealth to America. 

Three times, Bank of New York Mellon raised con­cerns and filed reports start­ing in 2009 on com­pa­nies owned by Russian oli­garch Vladimir Potanin, a 61-year-old bil­lion­aire who runs one of the largest nick­el com­pa­nies in the world. 

The bank not­ed that mil­lions of dol­lars were com­ing into the coun­try from high-risk juris­dic­tions like the British Virgin Islands and from anony­mous shell com­pa­nies, but the bank kept mov­ing the mon­ey for his businesses. 

One of the rich­est men in Russia, Mr. Potanin, who has not been sanc­tioned by the United States, has long been close to the Russian president. 

Another pow­er bro­ker whose ties run deep to the Kremlin is Abramovich, who fre­quent­ly turned to U.S. banks to move his mon­ey — while the trans­fers raised red flags. 

Once close enough to Putin that he report­ed­ly influ­enced the Russian pres­i­den­t’s ear­li­est cab­i­net picks, Abramovich, who has not been sanc­tioned by the U.S., made his rich­es by snap­ping up lucra­tive oil assets in the wild years after the for­mer Soviet Union broke apart, an era when cor­rup­tion ran amok and for­tunes were made through often opaque means. 

At least three times start­ing in 2016, Deutsche Bank inves­ti­ga­tors filed reports after they were unable to find infor­ma­tion to sup­port the pur­pose of pay­ments that flowed from com­pa­nies con­trolled by the bil­lion­aire, with mon­ey that came from high-risk coun­tries and in pat­terns that they said appeared to try to hide the source of the funds. 

By ear­ly 2017, the bank had moved more than $500 mil­lion in less than a year for com­pa­nies that he owned. 

Abramovich, who has denied any crim­i­nal activ­i­ty, has been hit with sanc­tions by the European Union, which recent­ly seized his sprawl­ing estate in the French Riviera, Chateau de la Croe, once the home of the Duke of Windsor. 

Deutsche Bank did not address spe­cif­ic ques­tions about Abramovich’s trans­ac­tions, say­ing that it is legal­ly barred from commenting. 

Dylan Riddle, a Deutsche spokesman, said, “We con­demn the Russian inva­sion of Ukraine in the strongest pos­si­ble terms and sup­port Western gov­ern­ments in defend­ing our democ­ra­cy and free­dom —includ­ing of course, abid­ing by all sanctions.” 

Government offi­cials in the U.S. and Europe say the seizure of oli­garch prop­er­ties and ban­ning them from the American bank­ing sys­tem may force them to pres­sure Putin to change his tactics. 

But sev­er­al experts inter­viewed by the Post-Gazette doubt whether the U.S. finan­cial insti­tu­tions would ever com­plete­ly sev­er their ties with bil­lion­aires despite alarms over the source of their wealth. The rea­sons: the fees and new busi­ness that comes with mov­ing money. 

“Some banks file SAR after SAR on the same account, sus­pect­ing mon­ey laun­der­ing, cor­rup­tion or worse, but nev­er close it down,” said Elise Bean, who spent years with the Senate Permanent Subcommittee on Investigations and direct­ed probes into mon­ey laun­der­ing, off­shore tax havens and shell companies. 

“I don’t know if it’s greed or indif­fer­ence, but the neg­a­tive impact on the U.S. finan­cial sys­tem is the same. Bank reg­u­la­tors could require finan­cial insti­tu­tions to close accounts with mul­ti­ple SARs but have yet to take that step.” 

But with­out the buy-in by the banks, there is lit­tle to stop the next gen­er­a­tion of oli­garchs, klep­to­crats, nar­co-traf­fick­ers and oth­ers from exploit­ing the U.S. finan­cial system. 

While mon­ey is moved through real estate, ultra-lux­u­ry goods like supery­achts, art­work and cryp­tocur­ren­cy, banks are still at the cen­ter of the mon­ey-laun­der­ing universe. 

In order to dis­rupt the flow of dirty dol­lars, said Raymond Baker, a finan­cial crimes schol­ar, the gov­ern­ment has to rely on U.S. finan­cial insti­tu­tions to make hard decisions. 

“So the bank­ing sys­tem is in the mid­dle of all of this and needs to do a far, far bet­ter job of cur­tail­ing illic­it mon­ey and could do so if the atti­tude was, ‘We don’t want the dirty mon­ey.’ ” said Mr. Baker, who found­ed Global Financial Integrity, a Washington, D.C., think tank that tracks and writes about polit­i­cal corruption. 

The esti­mat­ed amount that is laun­dered each year: up to $300 bil­lion in the U.S. alone, accord­ing to the Treasury Department. 

Congress has turned to two poten­tial weapons to take on the flood of sus­pi­cious dol­lars in the U.S., but even those reforms will not be enough, say experts. 

One of them is the Corporate Transparency Act, which is meant to crack down on anony­mous­ly owned shell com­pa­nies by man­dat­ing that ben­e­fi­cial own­ers be iden­ti­fied, a key cog in the mon­ey-laun­der­ing machine. 

But even that reform passed last year has its lim­its, includ­ing exemp­tions for com­pa­nies that apply with more than $5 mil­lion in sales and 20 employ­ees —a loop­hole that would allow shell com­pa­nies owned by oli­garchs to run rampant. 

Another pro­posed reform, the Enablers Act, tar­gets the mid­dle­men who help mon­ey laun­der­ers —the lawyers, pub­lic rela­tions firms, accoun­tants, art deal­ers, real estate and invest­ment advis­ers, and oth­ers. But that pro­posed plan has yet to pass. 

In cas­es where banks are caught bla­tant­ly vio­lat­ing the law, experts say the gov­ern­ment needs to get tougher. 

Some sup­port stiff penal­ties and even jail time for bank exec­u­tives who move dirty mon­ey and view any fines as mere­ly a cost of doing business. 

“The only way you can change that is to increase the penal­ties and to put peo­ple in prison,” Mr. Baker, the finan­cial crimes schol­ar, said. 

Robert Mazur, a for­mer fed­er­al agent and mon­ey laun­der­ing expert who infil­trat­ed the Medellin and Cali drug car­tels as a mon­ey laun­der­er for five years, said with­out the gov­ern­ment impos­ing harsh crim­i­nal penal­ties, it will nev­er be able to force banks to change their behavior. 

“The prob­lem that you face is you’re hold­ing back the biggest bomb you have in this war, and that biggest bomb is an aggres­sive law enforce­ment com­mu­ni­ty going after the bad guys,” said Mr. Mazur. 

“Believe me,” he said, “if you put enough bankers behind bars, it will start to reg­is­ter for them.”

Original source of arti­cle: www.kansascity.com