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2020.09.22 17:54

FinCEN leaks. Ukraine’s powerful who shuffled money through the Baltics

Inga Springe, Aija Krūtaine, „Re:Baltica“/ICIJ2020.09.22 17:54

Ukraine's wealthy, corrupt, and powerful used a Latvian bank to shuffle their dirty money. LRT English shares an investigation by Re:Baltica, the Baltic Center for Investigative Journalism.

Soon after Ukraine’s president Viktor Yanukovych fled the country in 2014 after the anti-government protests, several countries offered their hand to help Ukraine put together the scale of corruption during his tenure.

Ukraine had suffered from systemic corruption for decades, yet the audacity of the schemes during Yanukovych’s era was surprising. Yanukovych and his associates, sometimes called the “family”, stole tens of billions of dollars between 2010 and 2014 by exploiting the country’s energy dependence on Russia and embezzling money from the state through tax fraud, state procurement and privatisation, the successor government and various NGOs estimated.

Read more: Lithuania in FinCEN dirty money trail: millions wired through now-bankrupt bank

Following Yanukovych’s ousting, the media reported that some of the allegedly plundered funds had gone through Latvia. The US has been reprimanding Latvia’s banking system for its loopholes and use in financial fraud schemes for at least 15 years.

Ukraine had suffered from systemic corruption for decades, yet the audacity of the schemes during Yanukovych’s era was surprising.

Now, FinCEN Files, that Re:Baltica was able to review, for the first time provide a glimpse how the money flowed.

FinCEN Files, an investigation of the International Consortium of Investigative Journalists (ICIJ), BuzzFeed News and 108 media organisations around the world, is based on confidential bank reports filed to the Financial Crimes Enforcement Network (FinCEN), other documents and dozens of interviews.

According to BuzzFeed News, which obtained the documents, some of the records were gathered as part of the US Congressional committee investigations into Russian interference in the 2016 US presidential election while others were gathered following requests to FinCEN from law enforcement agencies.

This article highlights some of Ukrainian politicians and oligarchs whose suspicious transactions the US banks reported to FinCEN.

Ukraine’s ousted president Viktor Yanukovych

The FinCEN Files include several documents in which the money flow of Yanukovych’s associates and their companies was traced. “Viktor Yanukovych ran the Ukrainian government like a criminal organisation, enabling grand corruption and profiting from diverse schemes,” FinCEN said in what appears to be an internal report from 2016 on Ukrainian kleptocracy. It mapped out the country’s officials and Yanukovych’s associates involved in state fund embezzlement and companies linked to them.

Mako Holding was one such company. It was controlled by Yanukovych’s son Oleksandr Yanukovych, whom the US Treasury put on a sanctions list in 2015 for allegedly plundering Ukraine’s state assets. The holding operated in energy and property development and had subsidiaries in Ukraine, the Netherlands, and Switzerland.

It’s Swiss subsidiary Mako Trading SA sent and received several payments from companies with accounts in Latvia. In December of 2012, Mako Trading sent $800,000 to an account at Aizkraukles Banka (now called ABLV Bank) for the benefit of Industrial Commodities Trade S.A. Another company, Elberg Invest LLP sent $1.8 million from its account at Baltikums Bank to a Mako Trading SA Swiss bank account between August 2013 and February 2014.

Industrial Commodities Trade S.A. and Elberg Invest LLP both resemble shell entities. Industrial Commodities Trade S.A. was registered in Panama, while Elberg Invest LLP in London. It’s directors were other Panama and Belize registered companies, and its sales didn’t exceed a few hundreds of thousands of pounds in the best years of its operation.

Read more: FinCEN leaks in Baltics. Unknown Riga bank that serviced one of the world’s richest men

BlueOrange Bank does not have a right to publicly comment on client transactions, the bank said in a statement to Re:Baltica. However, the bank was giving information about its clients’ dealings in all cases when law enforcement agencies required it. The bank also did due diligence in cases of suspicious transactions and informed the responsible government agencies, added Ingrīda Šmite, the head of corporate communication and marketing department at BlueOrange Bank.

Another company closely tied with Viktor Yanukovych himself was Fineroad Business LLP, which had an account at Latvia’s Baltic International Bank. After Yanukovych fled Kyiv, journalists uncovered a trove of documents at his Mezhyhirya residence linking Yanukovych to companies that may have held some of his assets; Fineroad Business LLP appeared in those.

BuzzFeed News previously reported that Fineroad Business LLP had strong links to entities exposed in the investigation of lawyer Sergey Magnitsky, who uncovered $230 million tax fraud in Russia and later died in prison.

After Yanukovych fled Kyiv, journalists uncovered a trove of documents at his Mezhyhirya residence linking Yanukovych to companies that may have held some of his assets.

The leaked documents reviewed by Re:Baltica show that in 2013 Fineroad Business LLP sent several wires totalling $2.3 million “for the investment in Ukraine” from its account at Baltic International Bank to its own account at a bank in Ukraine.

The law office Averlex, which represents Viktor Yanukovych and his son Oleksandr Yanukovych in Ukraine, told Re:Baltica it will not comment at this time.

Ilze Vītola, the head of marketing and communication department at Baltic International Bank, told Re:Baltica that according to the law the bank cannot provide information whether Viktor Yanukovych or Fineroad Business LLP were its clients.

Ukrainian Oligarch Dmytro Firtash

Dmytro Firtash, a Ukrainian oligarch who made his fortune trading gas and producing chemicals, may have possibly used the now closed Trasta Komercbanka to launder millions of dollars by buying jewelry and developing real estate projects.

Such a conclusion can be drawn from two FinCEN reports to the US and Spanish law enforcement authorities. They were sent after Firtash was arrested in Austria in 2014. The Kremlin-supported oligarch, who in turn was a supporter of Yanukovych, faces allegations in the US for bribing Indian officials in order to get access to titanium mining. Firtash is still contesting his extradition to the US.

FinCEN reports, based on public and confidential information, reveal transactions that indicate that Firtash may have used shell companies to launder money and disguise his ownership. Some of the transactions were executed through offshore companies with accounts at Trasta Komercbanka in Latvia and its Cyprus branch.

In a report to the FBI Chicago unit, FinCEN expresses suspicion that legitimate real estate and other investment activities were used as a cover to transfer funds through offshores to pay bribes to Ukrainian officials. One such offshore entity was Ladis Holding Ltd, which wired $68 million to “unidentified beneficiaries for real estate development projects”. The FinCEN report to Spanish authorities mentions that a company with the same name, Ladis Holding Ltd, had an account at Trasta Komercbanka and its ultimate beneficial owner was Firtash.

Two other shell companies with accounts at Trasta Komercbanka and in relation to possible corruption are mentioned in the reports. Centragas is one of them; it received at least $2.3 million from a Ukrainian bank owned by Firtash himself between 2012 and 2013. A company with the same name – Centragas – was co-owned by Firtash, and together with Russia’s Gazprom it owned gas trader RosUkrEnergo. The investigative journalist Catherine Belton in her recent book, Putin’s People, explains that “RosUkrEnergo was essentially a slush fund that could be deployed as a tool of political influence to buy off and corrupt officials (..).”

The other shell company with an account at Trasta Komercbanka, Sternako Ventures LTD, received at least $22 million in 2013. It was part of Ostchem, a chemical production holding owned by Firtash. The bank flagged these wires as they involved “underdetermined sources of funds, unusual wires, suspected foreign corruption, and transactions with no apparent lawful purpose”.

“RosUkrEnergo was essentially a slush fund that could be deployed as a tool of political influence to buy off and corrupt officials (..).”

Several banks were suspicious of another offshore linked with Firtash – DF Investments Limited (BVI). Between 2012 and 2014 this company wired $6.2 million from its account at the Cyprus branch of Trasta Komercbanka to pay for jewelry, aircrafts, shareholders’ funds and a personal donation.

According to another report, it used its account at Trasta Komercbanka Cyprus branch and two other Cypriot banks to send $5.3 million to the jewelry and precious stone distributor, Graff Diamonds. Another $44 million were sent to Boeing for aircraft purchases, without naming the specific banks involved.

Firtash’s attorney Dan K. Webb informed that Firtash or his representatives will not respond to Re:Baltica questions.

Armands Rasa, the administrator of Trasta Komercbanka in liquidation, said that he cannot provide information whether the persons mentioned were bank’s clients, nor provide any other comment about companies mentioned in the Re:Baltica article. “I can mention that as violations were detected in the bank’s previous operations, then in accordance with the existing laws and regulations cooperation with law enforcement authorities takes place,” added Rasa.

Trasta Komercbanka, which has been mentioned in several large scale money laundering scandals, lost its licence in 2016, partly due to “serious and sustained breaches of the anti-money laundering and counter-terrorist financing regulations”.

Two years before the withdrawal of the bank’s licence, a consortium of investigative journalism organisations OCCRP exposed how $20 billion were moved by organised criminals and corrupt officials in Russia through a financial fraud scheme, of which $13 billion went through Trasta Komercbanka.

OCCRP later revealed that among the bank’s shareholders was Ivan Fursin, a business partner of Dmytro Firtash, and through a proxy – Serhiy Lovochkin, an MP of Ukraine’s parliament and former chief of staff to Viktor Yanukovych, and his sister, Yulia Lovochkina, also currently a member of Ukraine’s parliament.

Wanted Entrepreneur Kurchenko

Once a self-declared billionaire and close associate of Yanukovich, Serhiy Kurchenko is accused by Ukraine of financial crimes, including stealing state funds. The name of Latvia’s ABLV Bank has been often cited when talking about Kurchenko’s business dealings. In 2015 Kurchenko’s funds worth $80 million were arrested and frozen in Latvian bank accounts.

The Latvian bank had begun servicing companies linked to Kurchenko in 2012. ABLV claims that it performed “extensive due diligence on the finances of these accounts” and scrutinized them regularly, following which the bank found “it was permissible to continue working with companies linked to Kurchenko”.

FinCEN said in its notice of proposed rulemaking to name ABLV Bank a primary money laundering concern in February 2018 that “through 2014 (..) Kurchenko funneled billions of dollars through his ABLV shell company accounts”. The Ukrainian businessman had been put on the US sanctions list in 2015, however, ABLV maintained at least nine shell company accounts linked to him.

One of Kurchenko’s companies banking with ABLV Bank was the Panamanian Prosperity Developments S.A. According to the leaked documents, Prosperity Developments S.A received as much as $5 billion from eight Kurchenko-owned Ukrainian entities in payments described as “for fuel” in Latvian, Cypriot, and Russian bank accounts from 2013 to 2014, in connection with gasoline import scheme. ABLV Bank had acknowledged to its US correspondent bank that Kurchenko was the ultimate beneficial owner of Prosperity Developments S.A.

Re:Baltica was unable to contact Kurchenko to confirm if he was the beneficial owner of Prosperity Developments S.A.

ABLV Bank is currently undergoing liquidation and within this process an independent auditing company is carrying out a thorough review of the bank’s former clients and their transactions. “We cannot comment publicly anything about particular legal or natural persons,” said Janis Bunte, the spokesman of the bank.

Convicted United States lobbyist Paul Manafort

The discredited political consultant and lobbyist Paul Manafort worked for years with Yanukovych helping him to come to power and assisting during his administration. Manafort also had been dealing with other Russian and Ukrainian oligarchs including the aluminium tycoon Oleg Deripaska (read more about Deripaska’s dealings with Latvian banks here) and aforementioned Dmytro Firtash.

In 2019, Manafort was convicted for tax and bank fraud offenses which stemmed from the US Department of Justice investigation into alleged Russian interference in the 2016 election. According to the indictment, Manafort and his partner Richard Gates had represented Ukraine’s government and president Yanukovych, his Party of Regions and its successor after Yanukovych fled to Russia. Manafort had failed to disclose his work for Ukraine, which “generated tens of millions of dollars in income”. To hide the income from US authorities, Manafort and Gates used a network of offshore companies. The leaked documents show that some money associated with Manafort’s companies went through Latvia.

One such company could have been Englestead Ltd (BVI). It was mentioned in a suspicious activity report compiled on Manafort associated entities, but Re:Baltica was unable to confirm the link. In December 2010, it received $721,878 in its bank account at Latvia’s ABLV Bank from a Belize-registered company, which, according to other court documents, allegedly was connected with another Ukrainian oligarch Igor Kolomoisky.

Meanwhile, in 2012, another Manafort-owned entity received money from Novirex Sales LLP, which had bank accounts at ABLV Bank and Baltikums Bank (now called BlueOrange Bank).

According to a testimony by Manafort’s business partner Gates, Novirex Sales LLP was linked to Andriy Klyuyev, a Ukrainian businessman and a close associate of Yanukovych.

Between April 2010 and December 2013 Novirex Sales LLP made payments worth at least $188 million mainly from its accounts at ABLV Bank and Baltikums Bank. Some of this money – $400,000 – were sent to the Manafort-owned or controlled Olivenia Trading Ltd, which appeared in the indictment of Manafort and Gates.

Ukrainian politician Yulia Tymoshenko

The former Ukraine’s prime minister Yulia Tymoshenko may have moved money out of Ukraine, and some of this money possibly flowed through Latvia, according to the leaked FinCEN documents. Tymoshenko has been on the frontstage of Ukrainian politics for 25 years. During this time she has been one of the most popular politicians as well as on various occasions – in the focus of criminal investigations. When Yanukovych came to power, she was convicted and served nearly three years in prison over a gas deal she signed with Russia.

Read more: FinCEN leaks in Baltics: Latvia exposed as ‘high-risk jurisdiction’

In 2016, one bank reported to the FinCEN about several companies with a possible connection to Tymoshenko. The bank identified the companies following leads from an article on a now closed site Sokrytoe according to which her money might have been moved to Canada through shell companies. Two of the companies identified by the bank – Ringatta Project Ltd and Woodmark Sales Inc – each had an account in Latvia’s PrivatBank. Using these accounts wires totaling almost $16.5 million were sent and received between March and December of 2014, shortly after Tymoshenko was released from prison.

Looking for information on these companies it was like they never existed. Both companies were registered in Belize registry, but currently are inactive. Re:Baltica was unable to confirm if Yulia Tymoshenko had any connection with companies Ringatta Project Ltd and Woodmark Sales Inc as the calls and emails to the press office of Tymoshenko’s party Batkivshchyna went unanswered.

PrivatBank said it was not entitled to comment and respond to Re:Baltica questions.

The story originally appeared on Re:Baltica.

Authors: Inga Spriņģe, Aija Krūtaine

Visuals: Reinis Hofmanis

Translated into English by Aleksejs Tapiņš

Editing in English Jody McPhillips

Technical assistance: Madara Eihe