Posts Tagged ‘bailout’
UK fund boss warned Germany about Russian money in Cyprus
UK fund manager Bill Browder, one of the Kremlin’s harshest critics, briefed German officials on Russian money laundering in Cyprus just before the European Union set tough terms for the island’s bailout.
He said at least $31 million was laundered through Cyprus bank accounts, funds that were part of a $230 million fraud his lawyer Sergei Magnitsky discovered before his death in a Moscow prison in 2009.
Browder said the Mediterranean island, one of the most important conduits for Russian money transfers, opened an investigation in December into the allegations the businessman first made in 2008.
Once the largest fund manager in Russia through his $4 billion Hermitage fund, Britain-based Browder is currently on trial in absentia in Russia on fraud charges. He denies any wrongdoing and says the charges are politically motivated.
“When Cyprus started to ask the Europeans for a 17 billion euro bailout, it seemed to me absurd that we should be bailing out Cyprus if they are unwilling to investigate the most well documented money laundering cases,” Browder said.
Browder spoke with Levin Holle, director general of financial markets policy at Germany’s ministry of finance, at a meeting last month confirmed by the ministry.
“There was a German team of people at a fairly senior level that were involved in structuring the Cyprus bailout. And they were very interested in what we had to say about this,” Browder said.
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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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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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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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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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Europe’s Mounting Reluctance to Bail Out Cyprus
There is growing resistance in Europe to the planned aid program for Cyprus, because it would also benefit illegal Russian money parked in bank accounts in Cyprus. The government in Nicosia is willing to make concessions, but Brussels is demanding more reforms.
It was a long way to go to deliver a short message. German Chancellor Angela Merkel flew almost four hours last Friday to Cyprus, where she spent a few minutes campaigning for the conservative presidential candidate in the February 17 election, Nikos Anastasiades. Speaking in the city of Limassol, Merkel praised Anastasiades, saying that she had known him for a long time and valued his openness to change, and that the country urgently needed “structural reforms.”
After smiling for the cameras, Merkel returned to wintry Berlin.
Her destination in the eastern Mediterranean has a smaller population than the little German state of Saarland, but that hasn’t stopped it becoming one of the biggest trouble spots in global politics at the moment. The question of whether the government in Nicosia should be allowed to bolster its ailing banks with more than €17 billion ($22.7 billion) from Europe’s bailout funds is dividing the euro zone, causing uncertainty in international markets and adding to the woes of the coalition government of Chancellor Angela Merkel, made up of her center-right Christian Democratic Union (CDU), its Bavarian sister party, the Christian Social Union (CSU), and the business-friendly Free Democratic Party (FDP). Now that the center-left Social Democratic Party (SPD) and the Green Party have announced their opposition to the plan, Merkel’s coalition could for the first time fail to muster a parliamentary majority on an important decision relating to the euro crisis.
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Cyprus launches probe into Russian mafia money
Cyprus has opened an investigation into evidence that stolen Russian tax money linked to the murder of Sergei Magnitsky was laundered through its banks.
Mokas, its anti-money-laundering unit, in an email to EUobserver on Thursday (13 December), said: “At this point … in Cyprus there is an open investigation on this matter.” It noted: “Mokas is conducting the investigation, which functions within the office of the attorney general.”
It added that the probe already began some time ago.
But it went ahead with some reluctance.
Magnitsky, a 37-year-old Russian accountant, was killed in jail in 2009 after he exposed a huge tax embezzlement by a criminal gang – “the Klyuev group” – involving high ranking officials in the Russian interior ministry and its internal intelligence service, the FSB.
Lawyers for his former employer, the UK-based Hermitage Capital investment fund, submitted evidence to Cyprus’ attorney general in July.
Its papers, including copies of financial transfers – seen by this website – show that $31 million of the tax money was moved out of Russia using five Cypriot banks: Alpha Bank, Cyprus Popular Bank, FBME Bank, Privatbank International and Komercbanka.
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