Posts Tagged ‘cyprus’
Sergei Magnitsky Uncovered Russia-To-Cyprus Money Laundering, And Look What Happened To Him
The latest eurozone crisis comes down to controversy over bailing out a Cypriot banking system that is flooded with Russian black money.
The EU-proposed “haircut” solution — with a 9.9 percent levy on large deposits in Cyprus — received zero votes in Cyprus’ parliament and Russian president Vladimir Putin called it “unjust, unprofessional and dangerous.” Attempts to find a compromise have foundered.
In any case, it is clear that powerful people in Russia want to preserve the ability to use Cyprus as a tax haven, alleged money-laundering vehicle, and backdoor into the eurozone.
Just look at what happened to Sergei Magnitsky, the Moscow-based lawyer who was imprisoned and died mysteriously in jail after calling attention to Russian corruption, including alleged money-laundering in Cyprus.
Magnitsky had been working for Hermitage Capital, a fund managed by American Bill Browder. After Hermitage’s offices were raided in 2007, Magnitsky began investigating and later testified that he had uncovered a huge scam by top police officials to embezzle $230 million in taxes from money that Hermitage Fund companies had paid in 2006.
Magnitsky alleged that the corrupt cops had used corporate seals and documents seized in the raid on Hermitage’s Moscow office and set up fake companies under the same names, which then received a full tax rebate.
Hermitage said that some $31 million of that money was then moved out of Russia using five Cypriot banks: Alpha Bank, Cyprus Popular Bank, FBME Bank, Privatbank International and Komercbanka.
The story quickly turned tragic. In November 2008, Magnitsky himself was charged with tax evasion and taken to prison. Kept in Moscow’s notorious pre-trial prisons, Magnitsky unexpectedly died in November 2009. His death was originally attributed to a an abdominal membrane rupture before officials changed that to a heart attack. Magnitsky is one of four witnesses in the case who have died in mysterious circumstances.
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Dead Russian whistleblower at forefront of Cyprus bailout crisis
Sergei Magnitsky discovered a huge Russian tax fraud — $230 million had been stolen from the Russian government, said his ex-boss, William Browder of Hermitage Capital Management, a former major investor in Russia.
In life, Sergei Magnitsky was a modest Moscow tax lawyer with a dogged determination to track financial wrongdoers.
More than four years after his death, he is part of a spiralling banking crisis that has swept up Russian money launderers, Cypriot citizens and their increasingly desperate government in a tornado that could take down the tiny island state, and suck in already wobbly countries in the eurozone.
Cyprus is struggling to stave off bankruptcy with a $13 billion (10 billion euro) bailout that lenders insist must be tied to taxes on Cypriot bank accounts — touching off fury on the island and in Russia, whose high-rollers use it as a tax haven. On Wednesday Cyprus pleaded for an alternative loan from Moscow, so far without results.
Some of Cyprus’s bailout woes may be linked with Magnitsky’s quest for justice, said his ex-boss, William Browder of Hermitage Capital Management, a former major investor in Russia, who hired him to probe murky Russian tax refunds in the mid-2000s.
“Sergei discovered a huge Russian tax fraud,” said Browder in a telephone interview. “He found that $230 million was stolen from the Russian government. But we knew there would be no accountability, so we followed the money ourselves.”
Magnitsky said he had found a “web of corruption” spun by Russian tax officials who allegedly masterminded the biggest Russian tax heist of the century.
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Cyprus deposit grab is fiscal Magnitsky bill for Russia
The decision by the Cypriot government to grab up to 9.9% of deposits in its banking system is the financial equivalent of the Magnitsky bill as far as the Kremlin is concerned.
“The decision is unfair, unprofessional and dangerous,” Russian President Vladimir Putin said of the deal struck between the German-dominated EU finance ministers meeting and Cyprus over the weekend in Berlin.
The deal has been widely condemned by commentators, as it undermines the very foundations of the European banking system. All European deposits are supposed to be protected by a deposit insurance scheme that guarantees the safety of deposits irrespective of what happens to the bank holding it.
The reason why Europe has contemplated such an unorthodox solution is the political problems that Germany has with using its taxpayer money – as the bulk of the EU money will come from Germany – to bail out Russian oligarchs and gangsters hiding money abroad.
“The driver for the latest attempt to bail-in depositors appears to be German politics, and concern therein that German tax-payers’ money was likely being used to bail-out the weight of Russian deposits in the Cypriot banking system,” Timothy Ash, a strategist at Standard Bank, wrote in an emailed note. “German politicians seem to have adopted a very moralistic approach to the Cypriot bail-out, which may well now reflect ‘bail-out’ fatigue more than anything, plus the close proximity now of Bundestag elections [due in September].
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Cyprus and Magnitsky
There’s an irony in the fact that the grudging bailout of Cyprus by other members of the European Union came at the end of the same week in which the late Sergei Magnitsky was due to go on trial in Russia.
Magnitsky was the Russian lawyer who died in prison in 2009 after pursuing Russian officials who seized companies from his client Hermitage Capital and allegedly perpetrated a $230 million tax fraud. It’s a quirk of Russian law that the dead can be put on trial, with Magnitsky charged with the same offenses as the officials he pursued (The initial hearing on the case was delayed until March 22). His treatment led to U.S. sanctions on those officials in the form of the “Magnitsky list.”
What does this have to do with Cyprus? The Mediterranean nation has become what the good-governance group Global Financial Integrity described in a recent report as a “laundry machine for dirty Russian money.” GFI’s report said $128.8 billion flowed into Russia from Cyprus in 2011, more than five times its gross domestic product.
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YLE: Eyewitness
Finland TV Documenary: Murder and blow. Money, power and violence. Russia’s largest-ever tax fraud is a hair-raising story of everyday Putinism. Implications superpower relations and the EU’s economic assistance to Cyprus. Supplier of Eero he added.
Presented: Thurs 03/14/2013 at 20:00 Yle TV2
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Russian mob money ‘bolsters Cyprus’
YOU can buy a mink coat or rent a Ferrari at the click of a finger. Many of the street signs are in Russian and so are some of the radio stations. Welcome to “Limassolgrad”, as the locals have taken to calling their town on the Mediterranean island of Cyprus.
It may be the southernmost town in the EU, but Limassol’s popularity among Russians puts it high on the agenda for finance ministers meeting in Brussels tomorrow to work out how to prop up Cyprus’s rickety banking system with the latest eurozone bailout.
With only 1m inhabitants, tiny Cyprus poses a giant dilemma for the overlords of the EU: Russian mobsters are believed to have deposited so much money in its banks that suspected money launderers might become big beneficiaries of the bailout.
Yet asking depositors to carry some of the burden, an idea being promoted by the Germans and Finns, could trigger a run on the banks and rekindle the sovereign debt crisis by undermining trust in the euro.
Underwriting a suspected money-laundering hub could prove just as disastrous for Angela Merkel, the German chancellor. The last thing she needs is accusations of rescuing the Russian mob as she prepares her campaign for re-election later this year.
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Two EU countries shut down money laundering probes
Austria and Finland have said their companies did no wrong in a case of suspected Russia-EU money laundering. But victims of the crime disagree.
The sums involved are not so big – $150,000 in Austria and $199,500 in Finland.
But according to documents obtained by the UK-based investment firm Hermitage Capital, the money is part of the largest white collar crime in Russian history, a money laundering operation involving six EU countries and a plot to murder its Russian accountant, Sergei Magnitsky.
Bank statements sent by Hermitage to Austrian authorities show that in 2008 a Moldovan firm wired $150,000 to Austrian company Colop, which makes rubber stamps.
Documents sent by Hermitage to Finland show that the same year a second Moldovan firm made a payment to Finnish fur supplier, Saga Furs.
The money originated in the embezzlement of $230 million from Russian tax authorities by an organised crime group, the so-called Kluyev group, and went through a maze of Russian and Moldovan banks before coming to the EU.
When Magnitsky exposed the fraud, he was jailed and died in suspicious circumstances while in custody.
But for his part, Christian Hubmer, a spokesman for the local prosecutor in Linz, Austria, the home of Colop, says his people can find no record of the dodgy payment.
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Moldova takes action on EU-Russia money laundering
Moldova has launched criminal proceedings in a money laundering case involving its biggest bank, the Russian mafia and six EU countries.
The move comes after a UK-based investment firm, Hermitage Capital, filed a complaint with the Moldovan prosecutor in June.
Documents obtained by Hermitage indicate that a Russian organised crime group – dubbed the Kluyev Group – in 2008 wired $53 million of stolen money from an account in Russia’s Bank Krainiy Sever to two accounts in Moldova’s Banca de Economii.
They also indicate that Banca de Economii later wired the money to multiple accounts in Austria, Cyprus, Estonia, Finland, Latvia and Lithuania, as well as Switzerland and Hong Kong.
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Russian money streams through Cyprus
A new parking scheme appeared late last year in some congested Moscow neighbourhoods. Street signs advised Muscovites either to buy a ticket at a nearby machine or text their licence plate details to a number: 7757.
Evgeny Schultz, a Moscow blogger, took a closer look. It turned out that the number 7757 had been bought by a company registered just six months previously, which itself had been founded by two Cyprus-registered companies whose ownership was unclear.
One of the names on the registration documents was the same as that of a senior adviser to the city’s department of transport and communications, which oversees the parking programme.
“This could just be a massive coincidence, of course,” Mr Schulz said, with an unmistakable note of sarcasm.
The city has defended the scheme, saying “every kopek” goes into its budget. But the episode underlines the unique, pervasive and dubious role that Cyprus plays in Russia’s economy.
In June, Cyprus became the fifth country in the eurozone to request an international bailout after lenders got caught up in the debt restructuring of Greece’s banks. Seven months later, the island is still waiting for funding amid EU fears that the island is a haven for Russian dirty money. Such fears are particularly strong in Germany and will need to be assuaged if Berlin is to back a bailout.
Estimates of the size of Russia’s deposits in Cyprus range from €8bn, according to some experts, to up to €35bn, according to a German intelligence report cited in Der Spiegel magazine.
In 2011, Cyprus was the number-one destination for Russian money being sent abroad and the number-one direct investor in Russia, with more than $13bn in investments, according to Russia’s Central Bank.
“From an economic perspective, Russia and Cyprus are so intertwined, Cyprus could almost be another region of the Russian Federation,” said Steven Dashevsky, founder of Dashevsky & Partners, a Moscow investment company.
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