Banking behind the mirror. Who is going to dethrone current ‘cash-out king’?
Three years passed since the arrest of Russian ‘cash-out king’ Aleksander Grigoriev – but the indictment against him hasn’t been submitted to the court yet. Grigoriev used to control many banks involved in money laundering and siphoning off funds abroad. But now another banker – Ivan Myazin – can be rightfully named the true ‘cash-out king’ – his operations involved dozens of banks, billions of dollars, and ‘high patrons’ in the Bank of Russia, tax authorities, and law enforcement structures. Would the operatives be able to identify and bust all participants of fraud schemes pulled off by Myazin?
Not enough truth
In August 2018, Boris Fomin, ex-Chairman of the Board of Promsberbank, was convicted under part 4 of Article 160 and part 4 of Article 159 of the Criminal Code of the Russian Federation for embezzlements from his own bank. The Podolsk District Court has sentenced him to 6 years behind bars and a fine of 800 thousand ($12.2 thousand). Interestingly, during the investigation, the banker made a plea deal and told the operatives about the embezzlement schemes and their beneficiaries. He has testified inter alia against Promsberbank shareholders Ivan Myazin and Aleksei Kulikov – according to Fomin, they were the true owners of the bank, and the suspicious transactions that had attracted the attention of law enforcement structures were made as per their orders. However, the compromising materials provided by Fomin were not sufficient to be used as mitigating circumstances. Despite the active repentance and confession, the court has imposed a pretty harsh sentence on the defendant. Therefore, the defense team for Fomin filed an appeal, while the banker promised to provide new testimonies. His statements may shatter the Central Bank of the Russian Federation – especially taking that the main goal of Fomin is to give the investigators as much information as possible to mitigate his sentence maximally.
Elvira Nabiullina, Governor of the Bank of Russia
Since the appointment of Elvira Nabiullina the Governor of the Bank of Russia, the regulatory body has been sanitating the banking sector. In five years, licenses have been revoked from more than 400 Russian banks for breaches of the legislation. The total ‘gap’ (negative difference between the actual cost of assets and liabilities to creditors and clients) on the balance sheets of collapsed banks exceeds 1.5 trillion rubles ($22.8 billion). The current ‘champion’ by this parameter is Foreign Economic Industrial Bank Limited (Vneshprombank) deprived of its license in late January 2016. The insolvency administration has identified a negative balance in its books in the amount of 210.1 billion rubles ($3.2 billion). However, a few months before the collapse, Bank of Russia specialists had audited Vneshprombank and failed to find anything suspicious in its reports. As a result, the bank became ineligible for financial restructuring – there was just nothing to rescue.
A question was asked at that time: why don’t Bank of Russia auditors identify violations in advance, and why the licenses are revoked when it is already too late to search for the missing money? Too bad, but no one has paid proper attention to this problem since then.
After the collapse of Jugra Bank a year ago, Dmitry Skobelkin, Deputy Governor of the Bank of Russia, said that the regulatory body is monitoring several banks “making transactions questionable in one way or another”. However, Jugra Bank was not monitored for its suspicious transactions. In other words, the Bank of Russia does not fulfill its primary functions – supervision and control.
Dmitry Skobelkin, Deputy Governor of the Bank of Russia
Boris Fomin shared this information with the investigators. He named Bank of Russia officers involved in cashing-out, money laundering, and siphoning off vast amounts of money abroad.
Boris Fomin was on the wanted list for two years. The law enforcement authorities thought that he was hiding abroad and issued an Interpol warrant against him. After the institution of a criminal case in relation to the embezzlement of 3.2 billion rubles ($48.8 million) from Promsberbank, Ivan Myazin suggested Fomin to relocate to Croatia for a while. Then the ex-Chairman of the Board of Promsberbank has realized that the entire blame for that embezzlement may be put solely on him and secretly relocated to another country. Then Fomin returned back to Russia and was arrested in the home of his friends located in the Moscow region.
During the meeting with members of the Association of Russian Banks in February 2018, Elvira Nabiullina has provided the following reasons behind collapses of Russian banks: understatement of credit risks, overstatement of the capital, and financing of businesses run by banks’ shareholders. “Of course, there are reasons behind the collapses of banks – odious criminal reasons, including siphoning off assets from credit organizations, falsified accounting reports, and off-balance deposits. Such cases are increasingly rare – but they still exist,” – the Governor of the Bank of Russia said.
The story of Promsberbank involves such an ‘odious’ reason. By the time of the license revocation, the ‘gap’ in its balance was 4.2 billion rubles ($63.9 million). In total, the bank had owed 5.7 billion rubles ($86.8 million) to its clients.
Tim Wiswell, a former top manager of Deutsche Bank, had played an important role in the embezzlement scheme. For several years, the brokers were making so-called matching deals – i.e. two simultaneous deals at once. In the framework of the first deal amounting to some $10 million, they were purchasing shares of Russian blue-chip companies (e.g. Lukoil) for Russian rubles. In the second deal, the brokers had acted on behalf of a different company – normally, incorporated in offshore territories, including the British Virgin Islands – and sold the same amount of the same Russian shares in London for dollars, pounds, or euros. Both the Russian and offshore companies belonged to same owners. This is how the clients had purchased shares from themselves via Deutsche Bank and siphoned off the funds from Russia abroad.
Tim Wiswell, top manager of Deutsche Bank
Generally speaking, matching deals are not prohibited by the law. At the Moscow stock market, such operations are called “conversion”; in the English-language press, this scheme is known as “mirror trading”. There may be perfectly legal reasons for matching deals. Banks have special departments checking such operations and verifying their purposes. Tim Wiswell agreed to assist in turning the blind eye to the true reasons behind the ‘mirror deals’ for a monthly reward of $100 thousand. According to Fomin, he had personally delivered the money to Wiswell several times.
The Bank of Russia has revoked the Promsberbank’s license in April 2015. Later, the Bank of Russia administration has uncovered there a scheme designed to siphon off funds via Oranta Insurance Company acquired shortly before the license revocation. According to Fomin, the ‘laundromat’ was created by several ‘shady bankers’ and other deeply conspired persons. Allegedly, they had internally called their organization Myaso (Meat).
According to the investigation, Aleksei Kulikov, the principal shareholder of Promsberbank; Zulfia Musina, Head of the Credit Department; Andrei Kibitsky, ex-Head of the Security Service; and Moscow resident Vladimir Isaichenko had granted credits secured by fictitious assets to dummy companies. In the framework of the fraud scheme, Promsberbank had assigned the right to collect the debts to its subsidiary company – Oranta. Oranta, in turn, had sold the debts to companies incorporated in Baltic states and Moldova and controlled by the suspects. These non-resident companies had claimed the loans from debtors through foreign courts – so, the funds ended up outside Russia.
The credit organization incorporated in Podolsk, Moscow region is known primarily for its shareholders. In 2012, ‘cash-out king’ Aleksander Grigoriev was one of them. Owning 4.16% of the bank’s shares, Grigoriev had, in fact, controlled Promsberbank. Igor Putin, cousin of the Russian President, was a member of its Board of Directors. At the time of the license revocation, the following person were the bank’s beneficiaries: Anna Smirnova (20.00%), Cypriot citizens Manti Effrosyni (16.99%) and Dina Dzhaparova (10.00%), Aleksander Popov and Sergei Sadomskov (9.98% each), Global Management Group (8.00%; its final beneficiaries were Igor Denisov and Ivan Myazin), Aleksander Bezruchenko (4.16%), and minor shareholders (1.83%). The Promsberbank Board of Directors included Dmitry Dubensky (Chairman), Ernest Barsegyan, Viktor Drobysh, Efim Lev, Ivan Myazin, Yulia Onishchuk, and Denis Fomin.
Podolsk Branch of Promsberbank
Ivan Myazin & Co.
Ivan Myazin is well-known to the law enforcement authorities. Back in 1999, the General Administration for the Krasnoyarsk Krai of the Ministry of Internal Affairs (MIA) wanted him for robbery (part 3 of Article 144 of the Criminal Code of the Russian Soviet Federative Socialist Republic). A year later, he was captured and sentenced to a conditional term. Then Myazin started building his banking career. Initially, he was just a broker at a stock exchange in Moscow. By the end of the decade, he was doing things in a big way. Myazin had supposedly controlled – via confidants and dummy persons – 26 credit organizations in Russia, including European Settlement Bank, Bank for Investments and Credits, Kreditimpeks Bank, Union Bank, Alliance Bank, Falcon Joint Stock Credit Bank, Siberian Bank for Economic Development, Financial Bridge Investment Company, etc. All of those have later lost their licenses on suspicion of money laundering and cashing-out dozens of billions of rubles. However, no official charges were laid against Myazin.
The ‘black cashier’ was detained only in May 2018 based on the testimonies provided by Fomin. According to Fomin, he has met the banker for the first time in 2006 – in that period, Myazin was the Chairman of the Board of Siberian Bank for Economic Development. A year later, Myazin has purchased this bank. Then he offered Fomin a job at Financial Bridge Investment Company under the supervision of Oleg Belousov. The bank was actively involved in suspicious transactions of its clients. Siberian Bank for Economic Development lost its license in 2007. According to the Bank of Russia’s web site, “in the period since December 2006 and until March 2007, over 27 billion rubles (some $1.1 billion at the exchange rate of that time), $318 million, and €70 million in cash have been given out by the bank”.
Moneyman Evgeny Dvoskin
In addition to Boris Fomin, Myazin had the following business partners: Evgeny Dvoskin (charged with financial crimes in the USA), Dmitry Kataya, Oleg Belousov, and Aleksei Kulikov. Fomin disclosed to the investigators foreign recipients of the money siphoned off via the credit institutions. According to him, Myazin has purchased the Cyprus Development Bank Public Company Ltd. using funds stolen from the Russian banking sector.
According to the information posted on the bank's web site on April 30, 2018, CDB Bank Joint Stock Company is incorporated in Krasnodar. The plenipotentiary bodies of the Republic of Cyprus are currently reviewing the transfer of 9,728,869 shares belonging to Loramina Trading Limited (Oleg Belousov and Aleksei Kulikov) and Dayarona Trading Limited (Andrei Gorbatov) to other acting shareholders of the Cyprus Development Bank Public Company Ltd. as agreed by the parties in March 2016. As soon as the Cypriot plenipotentiary bodies provide their approval for this deal, the transfer will be completed; the share of the above companies in the charter capital of the Cyprus Development Bank Public Company Ltd. is going to decrease to 11.34% and 1.26% respectively.
Kulikov, who had specialized in value-added tax returns, was the first suspect arrested in the framework of the ‘Promsberbank case’. A year ago, the Podolsk Court has sentenced him to 9 years behind bars. Then the investigators captured Fomin who, in turn, led them to Myazin.
In addition to so-called ‘high patrons’ in the Bank of Russia, Myazin & Co. also had accomplices in the tax authorities turning the blind eye to operations of the commercial organizations used to siphon off the funds.
Most importantly, the ‘black cashiers’ had a ‘cover’ in law enforcement structures. According to sources, the bankers were busted only after certain staffing changes in the MIA and Federal Security Service (FSB) of the Russian Federation.
‘Cash-out king’ Aleksander Grigoriev during the arrest
Myazin and his associates had laundered billions of dollars on an annual basis. Taking that the investigators suspect Promsberbank of siphoning off funds from Russia using the ‘Moldavian scheme’, Aleksander Grigoriev may lose his ‘cash-out king’ title.
In the near future, the Moscow City Court is going to examine the appeal filed by attorneys for Boris Fomin. The output of this legal proceeding will show whether the law enforcement authorities have a free hand to continue the inquest against ‘black cashiers’ and, most importantly, to prosecute their ‘high patrons’, or not.