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Addendum to the report | Doc. 14847 Add. | 09 April 2019
Laundromats: responding to new challenges in the international fight against organised crime, corruption and money laundering
Committee on Legal Affairs and Human Rights
1. Introduction
1. Since the adoption of the report
on 4 March 2019, two new matters have arisen: firstly, the publication by
the Organised Crime and Corruption Reporting Project (OCCRP) of
reports on a further large-scale money-laundering scheme, dubbed
the “Troika Laundromat”; 
and secondly, developments
in relation to corruptive activities within the Assembly to which
the Azerbaijani Laundromat had contributed. Both give rise to the
need to make certain amendments to the draft resolution, to be proposed
by the Committee on Legal Affairs and Human Rights.
and secondly, developments
in relation to corruptive activities within the Assembly to which
the Azerbaijani Laundromat had contributed. Both give rise to the
need to make certain amendments to the draft resolution, to be proposed
by the Committee on Legal Affairs and Human Rights.2. The “Troika Laundromat”
2. The Troika Laundromat is named
after Troika Dialog, Russia’s largest private investment bank, run
by Ruben Varbanyan. Details of the scheme emerged as a result of
a major leak of banking and other documents relating to some 1.3
million transactions concerning 238 000 companies. The Troika Laundromat
itself involved a web of at least 75 companies. Between 2006 and
early 2013, over US$4.5 billion passed through the system; US$8.8
billion-worth of transactions, relating to fictitious trade deals,
took place between the companies involved in order to mix and obscure
the origins of those funds. The scheme was put together and administered by
Troika Bank on behalf of its clients.
3. The Troika Laundromat makes particularly apparent the origins
of laundered money in Russian organised crime and corruption, including
the Magnitsky case, fraudulent overpricing of fuel supplies to Moscow-Sheremetyevo
airport and large-scale tax evasion. In late 2008, an Austrian lawyer,
Erich Rebasso, confessed to the Austrian police that he had been
laundering money for Russian criminals. Two years later, the Austrian
police concluded that they had no jurisdiction as any crimes had
been committed abroad by foreigners. In
2012, Mr Rebasso was kidnapped and murdered. Two former Moscow police
officers were convicted in Russia in 2014 – but for the ransom demand,
not for murder. High-level political connections feature once again:
Sergei Roldugin, a close friend of Russian President Vladimir Putin
and a cellist, who was also prominent in the Panama Papers, is said
to have received at least US$69 million through the Troika Laundromat.
In
2012, Mr Rebasso was kidnapped and murdered. Two former Moscow police
officers were convicted in Russia in 2014 – but for the ransom demand,
not for murder. High-level political connections feature once again:
Sergei Roldugin, a close friend of Russian President Vladimir Putin
and a cellist, who was also prominent in the Panama Papers, is said
to have received at least US$69 million through the Troika Laundromat. 4. The OCCRP notes that four essential elements are needed to
build a “laundromat”, including a “bank with low anti-money laundering
compliance standards” and a “maze of secretive offshore companies
to hold accounts at the bank”. On these accounts, the Troika Laundromat
has striking similarities with the Global and Azerbaijani Laundromats:
the vulnerable bank was located in a Baltic State, in this case
being Ukio Bank in Lithuania; and three shell companies based in
the British Virgin Islands played a pivotal role in establishing
the network of offshore companies.
5. The report adopted on 4 March 2019 already examines in detail
the role of Danske Bank Estonia in the Azerbaijani Laundromat (as
well as in wider money laundering) and, in less detail, that of
the Latvian ABLV bank in the Global Laundromat. With the addition
of Ukio Bank in Lithuania, it becomes even more apparent that the
Baltic States’ banking systems were and may still be peculiarly
vulnerable to exploitation by international money laundering schemes.
Latvia’s vulnerability is described in paragraph 15 of my explanatory memorandum,
but these characteristics are equally applicable to Estonia and
Lithuania: former Soviet republics, with significant Russian-speaking
populations, that soon joined the European Union, subsequently acting
as a “bridgehead” giving easier access to the EU banking system,
including through strong connections to Nordic banks such as the
aforementioned Danske Bank and Swedbank (which is now also being investigated
for involvement in the Danske Bank Estonia scandal ).
).6. Because the euro did not become Lithuania’s currency until
2015, Ukio needed correspondent accounts with foreign banks to conduct
euro-denominated transactions. Several major banks provided such
services to Ukio, including Raffeisenbank in Austria and Commerzbank
in Germany. Although the OCCRP reports that some of these banks
“did sporadically inquire about the nature of some transactions”,
questions must be asked about whether they discharged their anti-money
laundering requirements diligently. At the same time, international
banks should discharge their correspondent responsibilities sensitively
and responsibly, also avoiding generalised over-reactions to troubled
jurisdictions by withdrawing from them entirely – a practice known
as “derisking”, which may deny access to regulated financial services
to legitimate individuals and businesses. Indeed,
in April 2017, Deutsche Bank, a major provider of correspondent
banking services to banks in Estonia and Latvia, announced that
it would suspend these activities. It
has been reported that the gap has largely been filled by Russian
banks, notably State-owned VTB, which has been described as “not really
a bank but a Kremlin slush fund that is supposed to provide financing
for whatever aim the Kremlin might suggest”.
At the same time, international
banks should discharge their correspondent responsibilities sensitively
and responsibly, also avoiding generalised over-reactions to troubled
jurisdictions by withdrawing from them entirely – a practice known
as “derisking”, which may deny access to regulated financial services
to legitimate individuals and businesses. Indeed,
in April 2017, Deutsche Bank, a major provider of correspondent
banking services to banks in Estonia and Latvia, announced that
it would suspend these activities. It
has been reported that the gap has largely been filled by Russian
banks, notably State-owned VTB, which has been described as “not really
a bank but a Kremlin slush fund that is supposed to provide financing
for whatever aim the Kremlin might suggest”. 3. National parliamentary action in response to corruptive activities in the Parliamentary Assembly related to the Azerbaijani Laundromat
7. Paragraph 4 of the draft resolution
notes that “the Azerbaijani Laundromat also provided money that contributed
to corruption activities within the Parliamentary Assembly”. One
of those named as most clearly seeming to have received some of
this money is Karin Strenz. The draft resolution notes that the
German Bundestag has found
her in violation of its ethical rules. Since then, the Bundestag has imposed a fine of around
€20 000 on Ms Strenz, the highest ever applied. I welcome the fact
that the Bundestag has taken
such strong action, inflicting a penalty that makes clear its view
of the gravity of Ms Strenz’s conduct.
8. On 14 March 2019, Transparency International Germany announced
that it had filed a criminal complaint against both Ms Strenz and
Eduard Lintner with the German prosecutor, citing section 108e of
the Criminal Code, on bribery of elected officials. Transparency
International Germany believes that this is the first time that section 108e,
which was introduced following Germany’s ratification of the 2004
United Nations Convention Against Corruption, has been used and
expects this to be a test case of its adequacy as an anti-corruption measure.
Mr Lintner, no longer being a parliamentarian, is not subject to
sanction by the Bundestag,
so I welcome the prosecutor’s investigation of the allegations against
him and Ms Strenz and hope that all appropriate measures will be
taken as a result.
9. The trial of Luca Volontè for bribery and corruption in relation
to money received via the Azerbaijani Laundromat continues before
the Milan tribunal. The latest hearing took place on 11 March 2019.
4. Other matters
10. Since adoption of the report,
I have been led to understand that the implication in paragraph 5.3.3
of the draft resolution that the OECD’s Financial Action Task Force
and MONEYVAL were “relatively inattentive” to the effectiveness
and implementation of national anti-money laundering regimes is
inaccurate and unfair. I therefore suggest an alternative wording
for this paragraph.
11. Finally, I have been contacted by Mr Alexander Hristov, Chief
Executive Officer of Doverie–United Holding AD, a Bulgarian company
that recently bought a 64% stake in Moldindconbank, the Moldovan
bank at the heart of the Global Laundromat. Mr Hristov disputes
two points that appear in paragraph 12 of my introductory memorandum.
First, he denies that Moldindconbank has been bought by two Bulgarian businessmen,
Ognian Donev and Radosvet Radev. I note, however, that Mr Donev
controls a company called Sopharma, which is the largest single
shareholder (33%) in Doverie–United Holding, and is Vice-Chairperson of
its Supervisory Board; and that Mr Radev founded Doverie–United
Holding and is Chairperson of its Supervisory Board. In these circumstances,
I am prepared to stand by my original statement, with the above qualifications.
As to Mr Hristov’s other assertion – that Mr Donev has been acquitted
of tax evasion – I am prepared to accept that in February 2019,
Sofia City Court did indeed take such action, whilst noting reports that
the prosecution intended to appeal against the court’s decision, which Mr Hristov himself recognises is not
final.
which Mr Hristov himself recognises is not
final.5. Proposed amendments
Amendment A (to the draft resolution)
In paragraph 1, after the words “moved out of Azerbaijan”, insert the words “, and the “Troika Laundromat”, which transferred another US$4.6 billion out of Russia,”.
Amendment B (to the draft resolution)
In paragraph 4, after the words “violated its ethical rules”, add the words “and fined her a record €20 000. Transparency International Germany has filed criminal complaints against both Ms Strenz and Eduard Lintner for the offence of bribery of a public official”.
Amendment C (to the draft resolution)
In paragraph 4, replace the words “two others, Eduard Lintner of Germany and” by the words “last of the five,”.
Amendment D (to the draft resolution)
After paragraph 4, insert the following paragraph:
“The Troika Laundromat again involved numerous shell companies, with three based in the British Virgin Islands playing a pivotal role, and the central involvement of a Baltic bank, in this case Ukio Bank in Lithuania. Persons close to the heart of State power were again implicated, this time including a close friend of President Putin. The Troika Laundromat is particularly revealing of the origins of laundered funds in organised crime and corruption. It also illustrates the importance of effective AML procedures within banks that provide correspondent banking services to foreign partners as an additional safeguard against international money laundering.”
Amendment E (to the draft resolution)
After paragraph 5.2.9, add the following paragraph:
“particular vulnerabilities in the banking systems and AML systems in the Baltic States;”.
Amendment F (to the draft resolution)
Replace paragraph 5.3.3 by the following:
“the Financial Action Task Force (FATF) and the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (Moneyval) only recently increasing their focus on the effectiveness and implementation of national AML regimes, following a change to the methodology by the FATF in 2013.”
Amendment G (to the draft resolution)
After paragraph 6.6, insert the following paragraph:
“the Baltic States to address the particular features of their banking systems, including the prevalence of non-resident accounts, that may make them peculiarly vulnerable to international money laundering;”.
Amendment H (to the draft resolution)
After paragraph 6.7.5, insert the following paragraph:
“ensure that banks providing correspondent banking services fully and appropriately implement relevant AML requirements;”.