Russia’s dirty money

The latest revelations from the investigations into the Russian Laundromat come as a stark reminder just how ineffective and weak Europe’s current anti-money laundering measures really are.

The Russian Laundromat, that gained widespread media coverage in 2017, saw more than $21 billion moved from Russia into the world's leading financial hubs, with some estimates putting the real figure closer to $80 billion. The rate at which dirty money continues to move into Europe only seems to be increasing, with London seeming to be a particularly popular destination.

The money was moved through more than 5,000 ‘companies’ through 732 banks across 96 countries, including the UK, France, and Germany, coming through Cyprus, Latvia and Estonia.

The naming of Ruslan Rostovtsev as one of those involved in the laundromat comes as no surprise to anyone familiar with the scale of corruption in Russia.

Rostovtsev is a former Moscow City official and former mayor of Sochi, who has built up a vast wealth mainly through mining. The latest report alleges that Rostovtsev moved more than $400 million through his UK registered company, Grandwood Systems Ltd. He is currently fighting legal battles both at home and abroad, with a Cypriot court issuing a worldwide freeze on his assets to prevent any further transfer of potentially illegitimate funds.

Trasta Komercbankas

 Court reports in the UK suggest that he moved £13.3 million from Cyprus alone, while it is estimated he helped move more than $50 million through Trasta Komercebanka in Latvia, a bank so intrinsically involved with the Laundromat that the government forced its immediate closure.

The report claims that Rostovtsev moved money on behalf of several individuals and institutions, including representatives from the People’s Democratic Republic of Donetsk, the region of Crimea annexed by Russia. Those familiar with Rostovtsev know his ties to the Donetsk region go way back. Such was the extent of his work to promote the region diplomatically, going so far as to open ‘embassies’, he was reportedly given a recognition award from its Ministry of Foreign Affairs in early 2018. Following much criticism and suspicion, the Ministry has since removed the announcement of the award from its website. He is known to mix his political ambitions with his businesses and is suspected of allegedly sending coal from the region back to Russia before marketing it as Russian coal on the international market.

Such is the scale of the Laundromat, the House of Commons Select Committee on Foreign Affairs published a report in May 2018 stating that it “should be a major UK foreign Policy priority.”  The report also criticised the UK authorities for “turning a blind eye to London’s role in hiding the proceeds of Kremlin-connected corruption.”

All of the UK’s high street banks, including HSBC, Lloyds, NatWest and RBS played a significant role in moving the money around, and have been criticised for failing to undertake increased levels of scrutiny for transactions of ‘dubious’ origin.  

It seems there is much that the UK needs to do to tighten the regulatory environment about capital moving into the country, which could include stricter KYC (know your customer) rules. The introduction of the Unexplained Wealth Order (UWO) coupled with the Sanctions and Anti Money Laundering Bill, which was passed by Parliament last year, the UK has new tools in its arsenal and finds itself in a strong position to exercise leverage against Russia to combat the increasing prevalence of money laundering coming from Eastern Europe.

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Gary Cartwright

Gary Cartwright

Gary Cartwright is publishing editor of EU Today. 

An experienced journalist and published author, he specialises in environment, energy, and defence.

He also has more than 10 years experience of working as a staff member in the EU institutions, working with political groups and MEPs in various policy areas.

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