People following Russian events have been watching and reading about Alexei Navalny’s new YouTube video about outrageous crimes involving the family of Vladimir Putin’s General Prosecutor Yuri Chaika. Chaika is connected with a gang of rapists and murderers and family members have become very rich from corruption. As usual, the money was laundered by the Latvian Proxy Network. We continue to wonder when the West will wake up to the global threat of the Putin Regime. Currently, the European Bank for Reconstruction and Development and Eurostat are using our taxes to fraudulently fund and protect the Latvian Proxy Network thus strengthening Putin.
It happened again. Yet another massive money laundering scandal in Latvia. Of course, this should be no surprise since Latvia never prosecutes anyone even when foreign governments hand completed investigations to Latvian officials. Latvia’s only efforts have been directed at whistleblowers – terrorizing them to make them shut up. Since there are only a tiny number of people who benefit (the Oligarchs and their cronies) and millions of people who are hurt (Latvians, Russians, Europeans, Americans) it is really amazing that the Western governments allow this racket to continue.
The OCCRP won recognition from the European Press Prize for exposing part of the “Latvian Proxy Network” racket by which government-protected banks launder billions of dollars for organized crime groups.
This was the article:
The OCCRP also released a video about the assassination network used by the “Latvian Proxy Network” identifying Alexander Antonov as the big boss. Antonov was shot in 2009 when he was trying to buy AP Bank (Swiss) from Parex oligarch Valery Kargin. The fact that this bank is currently owned by the EBRD following a fraudulent bailout using our tax money was unfortunately omitted from the article and video and therefore the “Latvian Proxy Network” continues to operate with impunity.
Anyway, it’s great that some brave journalists are educating the public about some of the crime in Latvia.
Neighboring Russia, and Under Its Sanctions’ Shadow Too
November 13, 2014 By Kira Zalan
Whatever the effectiveness of sanctions meant to sway Russia’s involvement in Ukraine, one thing is certain: they’ve worsened the country’s capital flight problem. By year’s end, approximately $128 billion will have moved abroad, up from $63 billion in 2013, according to Russia’s central bank. The European Central Bank in May cited a figure four times Moscow’s numbers.
But tracing where those funds are winding up and how they got there is difficult, according to financial crime experts. For countries with long-held financial and political ties to Russia, such opacity is only deepening suspicions that their financial institutions may be conduits for sanctions dodgers and money launderers.
Take Latvia, a former Soviet republic that earlier this year became the latest nation to adopt the euro. As part of an effort to align its banking sector with international standards, the Baltic country in 2008 passed an anti-money laundering law and established a financial intelligence unit—steps recognized by the Council of Europe’s Moneyval in 2012.
Latvia’s financial markets regulator hasn’t registered a subsequent increase in Russian capital deposits since March, the beginning of western sanctions over Russia’s involvement in Crimea.
Official statistics notwithstanding, “there’s a big industry in moving Russian money through Latvia,” said Josh Simmons, policy counsel at Global Financial Integrity, a Washington, D.C.-based advocacy group.
With Russian clients, “it’s difficult to know a lot of the time where the money is actually coming from,” said Simmons. “You don’t know if it’s proceeds of corruption, a state-owned entity or an individual that’s been sanctioned by the U.S.”
Under U.S. and EU sanctions, banks must freeze the assets of dozens of Russian companies and individuals and sharply limit the maturation windows on credit extended to certain businesses. The restrictions have forced banks to decipher hundreds of corporate arrangements worldwide to determine their exposure to monetary penalties.
‘Quite a temptation’
With a population of two million and a complex history with Moscow, Latvia has leaned toward the West since gaining its independence in 1991. That hasn’t stopped an influx of suspicious Russian funds, however.
An investigation by the nonprofit Organized Crime and Corruption Reporting Project in August exposed a scheme in which 19 Russian banks allegedly used fake debts and courts to transfer $20 billion through Moldova’s Moldindconbank to Latvia’s Trasta Kommercbanka AS between 2010 and 2014.
The exposure of Latvian banks to criminal exploits is exacerbated by the financial sector’s reliance on non-resident clients. Nearly half of all deposits in the country’s banks belong to foreign clients, according to national statistics.
“One of the biggest challenges in general is the presence of money of foreign origin in banks,” an official in Latvia’s Financial and Capital Markets Commission (FCMC) told ACAMS moneylaundering.com via e-mail. To better monitor foreign money, the regulator has imposed stricter anti-money laundering (AML) duties on banks with high shares of non-residential accounts, the person said.
“For so long, there’s been a boutique banking sector: customer oriented, whatever you want done, we’ll find a way to do it,” said Mark Galeotti, a professor at New York University. “It’s difficult [for regulators] to say, in effect, sometimes you’ll have to turn away business, particularly when the banking sector faces a lot of competition and livelihood depends on turnover.”
Galeotti, who has researched money flows into Latvia, said there is anecdotal evidence that Russians are willing to pay as much as double in percentage fees to have their money laundered.
“This is quite a temptation for Latvian bankers,” he said.
“Risks are increasing, but so are opportunities in the short-term.”
One day before the imposition in March of U.S. sanctions over violence in Ukraine, the chief executive officer of Latvia’s PrivatBank described plans to grow the banks non-resident deposits, particularly from clients in Russia, Ukraine, Kazakhstan and Azerbaijan—“countries in which businesses are interested in EU banks,” according to Latvian news agency LETA.
Small sector, big perks
Although the size of Latvia’s banking industry remains modest when compared with offshore hubs like Cyprus and Malta, the country is nevertheless a regional financial center, according to the country’s regulator.
That’s because Latvian banks have carved a niche by “dealing with short-term incoming cash flows,” said Kristaps Zakulis, FCMC chairman, in a statement. The specialization differentiates Latvia from historical financial sectors, such as Switzerland and London, which focus more on attracting long-term deposits from non-residents, according Zakulis.
With Scandinavian-owned Swedvank, SEC and Nordea dominating the domestic market, Latvian boutique banks have had to cater to Russian-speaking clientele, according to Galeotti and Andrew Bowen, a Boston College Ph.D. candidate working with Galeotti.
Rietumu Banka, which in August was the subject of a FCMC enforcement action for inadequate customer controls, advertises 5-year residence permits for foreign investors who deposit more than 300,000 euros in 5-year-term deposits or bonds—“the fastest and easiest way to the residence permit.”
The permits, which can also be obtained by investing 72,000 euros in real estate or 35,000 euros in a business, come with an EU national ID card and a guarantee of free movement within 25 countries of Europe’s Schengen Area.
With the exception of Hungary, Latvia’s permit thresholds are lower than any other EU country, including Spain, Greece and Portugal. But while Hungary’s permanent residence program has “reportedly attracted little interest,” over 7,000 people—75 percent of whom are Russian—had been granted permits as of 2013, according to an August 2013 story by The Wall Street Journal.
“Cyprus is still under heavy surveillance while Latvia is still an integral point for getting capital out of Russia,” said Bowen, adding that there has been talk recently of repealing the lax residency visa system. “They’re trying to be more careful,” likely as a result of pressure from other European economies, he said.
If Latvia has made progress in policing its financial sector, it has done so following decades of banking troubles.
Immediately after the fall of the Soviet Union, in the early 1990s, the Baltic nation adopted a posture on financial regulation that was “extremely liberal,” said Anders Aslund, a senior fellow at the Peterson Institute. “They simply didn’t understand what they were doing.”
Parex Banka, established in 1992, was “a money laundering bank from the outset,” that would “exchange all currencies and ask no questions,” said Aslund. Parex became the second largest bank in Latvia and was subsequently faulted for facilitating money laundering and corruption.
In 2005, the U.S. Treasury Department designated Multibanka and VEF Bank as institutions of “primary money laundering concern” under Sec. 311 of the Patriot Act.
Two years later, six Latvian banks were among the financial institutions implicated in the so-called “Magnitsky Affair,” in which attorney Sergei Magnitsky allegedly uncovered evidence of a $230 million Russian tax fraud. The perpetrators purportedly funneled $63 million through Latvia’s banking system.
Following a probe into the allegations, FCMC fined one unnamed bank approximately $200,000, the maximum monetary penalty the regulator can impose for poor internal controls. Latvian media reported that $365 million may have been laundered through an account at Trasta Komrcbanka, $6.2 million of which may have had links to fraud scheme.
The Latvian bank has denied the allegations.
Other scandals have linked Latvian banks to money laundered by Mexican drug cartels and deposed Ukrainian officials.
Following compliance troubles at home, at least one U.S. bank—JPMorgan Chase— decided earlier this year to end its dollar-clearing transfers for Latvian lenders, officials confirmed. Commerzbank and Deutsche Bank are still providing the services for Latvian banks, according to the bank Web sites.
To address concerns, Latvia intends to impose tougher AML rules on banks “to sharpen the combat of potential money laundering through the Latvian financial sector,” officials said in an e-mail.
But more rules may not be enough, according to Galeotti.
“To be honest, there is a need for people to get caught and tried and put in prison to get people to realize that the balance between risk and opportunity has shifted,” he said.
Russia scholar Karin Dawisha recently published “Putin’s Kleptocracy.” It is an excellent book, detailing Vladimir Putin’s ascent from the KGB to the St Petersburg Mafia to the Russian Presidency. Dawisha links Putin with certain organized crime bosses in St Petersburg who are linked with Parex Bank. This might cause problems for Latvian officials (general prosecutor, central bank governor, and others) who are fighting to protect Parex because the FBI (as revealed yesterday by the Financial Times and Wall Street Journal) is probing Putin’s money laundering activities.
Now in November 2014, Parex Bank successor Citadele Bank is operating with mostly the same employees and its core business is still serving offshore shell-company accounts for Russians. Even though the Latvia/EBRD bailout is publicly known to have been fraudulent, the people who signed the deal are not being prosecuted. Former Latvian Prime Minister Valdis Dombrovskis is now Vice President of the European Commission responsible for the euro. Former EBRD President Thomas Mirow was not reinstated at the EBRD even though Putin recommended him. Instead, Mirow is now Chairman of HSH Nordbank.
Here is the guilty-plea announcement from the United States Department of Justice about Hewlett-Packard bribing the Office of the Prosecutor General of Russia through banks in Austria, Latvia, Lithuania, and Switzerland. Unfortunately, the names of the banks were not included. We don’t know if they included EBRD-funded Parex of Latvia, EBRD-funded Siauliu/Ukio of Lithuania, and EBRD-funded AP Bank (Parex/Citadele subsidiary) of Switzerland. However, the case seemed related to the Daimler/Parex case since the two cases were originally revealed at the same time. As usual, Latvian officials are not prosecuting anybody.
Trasta Komercbanka, run by a former Parex banker (Igors Buimisters) and a former Saeima chairman (Alfreds Cepanis), launders billions for Putin’s family through Latvia still now in 2014:
Global Financial Integrity and the Adriatic Institute for Public Policy have posted about the apparently fraudulent EBRD bailout of Russian/Ukrainian offshore specialist Parex Bank of Latvia in 2009. The bailout empowered corrupt Oligarchs and devastated the Latvian economy. When will the EBRD explain its actions to taxpayers?
The Financial Times says Valery Belokon’s Baltic International Bank was the largest creditor of convicted Aeroflot embezzler Boris Berezovsky.
Latvians may recall Berezovsky’s visit to Latvia in 2005 when he was greeted not only by Belokon but also by Vienotiba Party founder Einars Repse. Latvians also may recall that Belokon was caught giving money to Repse by purchasing an overpriced countryside property from him.
Berezovsky and his protégé Roman Abramovich, according to themselves, installed Vladimir Putin as President of Russia starting in 2000.
Repse was one of the chief engineers of the fraudulent bailout of Parex Bank in 2009.
A former KGB agent sent an email to Parex Bank whistleblower John Christmas. While reading about connections with the “Russian mafia” and smuggling “nuclear component,” remember that Parex is fraudulently funded by the EBRD and has been “audited” for many years by Ernst & Young and PWC. Latvian taxpayers should wonder why the highest spending priority of the Latvian government in all of Latvian history was bailing out the shell-company deposits at Parex. The email below is being posted with the permission of the author.
Date: Sat, 26 Jan 2013 08:34:11 +0000
Subject: RE: Latvian State Police – referral by Luke Harding
Many thanks for your emails, which I found out to be very interesting. In relation to possible exposure of Parex: First of all, apart of yourself, I have completely different background (not financial one) and therefore, my knowledge about Parex an, particularly about its two “main gurus” – Kargin and Krasovitsky – is based on slightly different info. I was familiar with both these ‘geniuses’ since the time when Parex was not a largest bank in Latvia, but when it was a small currency exchange company. At that time, I came across to knowledge that they were heavily involved into money laundry (including ‘legalisation’ of so-called soviet communist party’s secret assets) ops conducted by both the Russian organised crime and Russian security services illegally operating in Baltic region. For instance, I am aware that Parex (Kargin and Krasovitsky) actively used for these ops certain ‘commercial’ firms which were in front of the Russian security services. In addition, I am aware about one illegal deal with participation of Parex (provided cash), when the specific amount of the nuclear component has been smuggled through the territory of Latvia to the West. Secondly, all my further intel I have received regarding Parex, due the nature of my ex-espionage work, was related to that similar “business”. For instance, I am aware they used for their illegal operations some offshore “bank” located in Republic of Nauru, as well as I am aware about one shadowy deal with issuing a fictitious bank guarantee (by Parex Bank) to the representatives of Russian mafia in the amount of 50mlns USD in 1997/98. Based on all the above, I am afraid my expertise about Parex is quiet specific and differ from your own intel. In the given circumstances, please, feel free meeting me so we can discuss the possible effective way whether and how can we work together in the future.
Boris Karpichkov from London
Here is an article about Mr. Karpichkov: