Analytics, Banks, Financial Services, Latvia, Legislation, USA

The leaked suspicious activity reports written by the US based banks to the country’s financial crime investigators reveal that Latvia was considered a high-risk jurisdiction for years.

The FinCEN Files include several documents in which the money flow of Yanukovych’s associates and their companies was traced.

Re:Baltica reminded that Yanukovych and his associates 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 privatization, the successor government and various NGOs estimated.

“Viktor Yanukovych ran the Ukrainian government like a criminal organization, 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 USD 800,000 to an account at Aizkraukles Banka (now ABLV Bank) for the benefit of Industrial Commodities Trade S.A. Another company, Elberg Invest LLP sent USD 1.8 mln from its account at Baltikums Bank to a Mako Trading SA Swiss bank account between August 2013 and February 2014.

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.

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 USD 230 mln tax fraud in Russia and later died in prison.

Ilze Vitola, 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.

Also, 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 USD 68 mln 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 USD 2.3 mln 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 USD 22 mln 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”.

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.

Re:Baltica also found out that 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 USD 80 mln were arrested and frozen in Latvian bank accounts.

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.

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.

Also, 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.

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 USD 16.5 mln were sent and received between March and December of 2014, shortly after Tymoshenko was released from prison.

As reported, a large trove of documents has been leaked, revealing global transactions, including those flowing through Latvia, that the US based banks flagged as suspicious to its supervisor. The documents expose that the US banks eyed with suspicion transactions totalling at least USD 7.6 bns wired through Latvian banks between 2006 and 2017, Re:Baltica’s year-long investigation found.

The leaked documents include more than 2,100 suspicious activity reports written by banks and other financial firms and submitted to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) between 2000 and 2017.

Documents, known as the FinCEN Files, were obtained by BuzzFeed News which shared them with the International Consortium of Investigative Journalists (ICIJ) and 108 news organizations around the world, including Re:Baltica.