Ukraine: Bank “Alliance” is bursting at the seams. 

Last week, a high-profile event unfolded in Ukraine, potentially one of the most significant for the country’s financial market.

Oleksiy Nosov, a partner of a prominent law firm, was reportedly caught red-handed in an attempt to bribe NABU detectives and SAP prosecutors.

It was revealed that he acted in the interests of the “Alliance” bank and board chairwoman, Yulia Frolova, who is now an international fugitive due to her suspected involvement in the embezzlement of funds from “Ukrenergo”.

This event concerns corruption and a long-standing systemic issue that the National Bank has seemingly ignored: the “Alliance” Bank’s problems are pervasive. The National Bank must respond promptly and appropriately.

Embezzlement of state millions

When we first wrote about this story a month ago, it seemed like an ordinary local corporate conflict. In March 2022, United Energy, a company associated with the well-known oligarch Igor Kolomoisky and his partner Mykhailo Kiperman, received more than UAH 700 million of electricity from the state energy company “Ukrenergo”. (about EUR22 million at that time), but did not pay for it.

The “Alliance” bank, a small financial institution at the bottom of the list of Ukrainian banks, was a guarantor of the mentioned deal. However, he also refused to settle his debts. As a result of all fines, the debt increased to a staggering UAH 1.2 billion.

The National Anti-Corruption Bureau has been investigating the embezzlement of state funds for the past two years. In this case, Yulia Frolova, chairperson of the “Alliance” bank board, was declared suspicion and wanted. Now, the case has been transferred to the court.

At the same time, “Ukrenergo” is trying to recover its funds from the bank through court processes. We are talking about a billion of state funds, which Ukrainian Energy lacks to support the infrastructure during blackouts. And which would be needed to purchase new equipment or network renewal.

Bank “Alliance” stood out, especially in this story. This institution is owned by Rinat Akhmetov’s former partner Oleksandr Sosis, the bank is also often associated with Dmytro Firtash‘s group, but the latter denies this.

The problem is not only that the bank issued a guarantee for an amount that exceeds in times all regulatory limits but also that the National Bank – for some reason – did not react in any way to other problems that accumulated in the institution. This inaction by the National Bank is a glaring issue that needs to be addressed.

First, ignoring one’s obligations to cover guarantees to “Ukrenergo” is a regular practice of the “Alliance”.

We previously mentioned that, in general, the bank issued guarantees for UAH 7 billion, which is in breach of NBU ratios.

It also participates in several cases related to the refusal to satisfy the demands of creditors, particularly the Ministry of Defense, the National Health Service, the Operator of the Gas Transport System of Ukraine, “Naftogaz Trading”, and the Administration of Sea Ports of Ukraine.

Secondly, the National Bank discovered during inspections that “Alliance” submitted falsified reports to the regulator. Thirdly, the bank appears in the materials of the unclosed criminal proceedings No.42017000000000445 dated 02.17.17 that in 2017-2018, the management of the gas companies of Dmytro Firtash could illegally withdraw funds through the bank, which led to an increase in the debt to “Naftogaz”.

The National Bank did not react to all this, although there were rumours in the banking sector that the institution could be withdrawn from the market due to NBU audit.

A bribe of $200,000

And so, last week, an event raised the question of introducing a temporary administration in the bank. On June 4, NABU and SAP announced that they had exposed Miller company partner Oleksiy Nosov in an attempt to hand over $200,000 in bribes to NABU detectives and SAP prosecutors for changing the jurisdiction.

As can be seen from the published materials of the case, and, in particular, from the covert filming of NABU, Nosov met with the intermediary several times and discussed the details of bribe transfer.

Regarding information, the “Alliance” tried in every possible way to silence its involvement in this case. Initially, the blogger and media community spread a false line of accusation in the media.

For example, the alleged NABU and SAP bribes were related to Mykhailo Kiperman, a partner of Ihor Kolomoiskyi. It was an understandable and seemingly logical story for the mass media, given Kolomoisky’s reputation.

However, within a few days, when the court was hearing the motion to place Nosov on a preventive measure, it turned out that it was artificial disinformation to divert attention from the key figure – the Alliance bank. After all, according to the prosecutor, Nosov directly wrote to the intermediary representing the interests of the bank in particular.

The Alliance then tried to deny their relations with Nosov. They have a contract with Miller, but it is exclusively lawyers Artem Krykun-Trush, Anna Kalinchuk and Vyacheslav Kolomiychuk from the company’s economic and criminal practices.

And they did not instruct Nosov to hand over a bribe to NABU detectives and SAP prosecutors. After all, it would be surprising if the reaction was different.

The case is that Nosov is not just a partner of Miller but rather the head of the business and criminal practice. Precisely those in which “Alliance” is currently disputed with “Ukrenergo” and NABU.

He is the direct manager of these lawyers. It is doubtful he would take $200,000 out of his pocket on his initiative and offer it to the detectives. The initiative came from the “Alliance” bank. This, in turn, means that it was essential for the financial institution to avoid real responsibility for its involvement in the crime of embezzlement of state funds in a substantial amount – at any cost.

Why is this so important? Removing the bank and its management from the NABU’s jurisdiction will make it possible to significantly reduce the level of responsibility for crimes and reduce the length of prison terms or the amount of fines for guilty persons. Corruption offences significantly damage a bank’s reputation.

This allows the bank to continue to attract gullible customers under the umbrella of “investment attractiveness,” which is more like a Ponzi scheme.

Silence of the regulator

Unfortunately, regular audits of the National Bank, which showed how unstable and unreliable the financial institution is from the inside, had no effect. Moreover, the “Alliance” still creates the impression of a “healthy” organization.

Even though he saves his reputation in such a desperate way as, allegedly, bribes to detectives and prosecutors, this is even though the bank is not so big that the NBU would risk the entire banking system’s stability for its sake.

Instead, tolerating this situation will demonstrate to other dubious financial institutions that the regulator generally tolerates corruption and failure of its wards to fulfil its obligations to clients. The main thing is to submit the correct figures in the report, even if it turns out later that it was falsified.

Now, when the management of the bank – through their lawyer – has been exposed in an attempt to bribe at the level of NABU detectives and SAP prosecutors – this is already a red line not only for the bank itself or within the framework of the case about the debt to Ukrenergo.

This is a red line for the NBU itself. The attitude towards it should demonstrate the vector in which the entire financial system will move in the coming years: the vector of “cleaning” from fraudsters and scoundrels.

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