Laundromat is a story about the European banking system facilitating Russian corruption and making billions in the process.
What is the Laundromat scandal
The $20bn Laundromat scandal was uncovered by a three-year investigation conducted by the Organized Crime and Corruption Reporting Project (OCCP). Investigators have looked into 70,000 banking transactions, with a paper trail leading to 96 countries. British police authorities believe that the sum of money leaving Russia from 2010 to 2014 is most probably four times bigger, The Guardian reports.
At the heart of the investigation is the Russian newspaper Novaya Gazeta, aided by The Guardian, Suddeutsche Zeitung, Dossier, Berlingske, and others.
Most of Europe’s big and powerful banks were involved. This story is less about Russian corruption and more about the power of money to undermine legal systems, public trust, and any claim of moral high ground.
The Washing Machine
As described by The Guardian, the washing machine worked as follows.
First, a Russian shell company takes out a loan from another Russian shell company; the company then “defaults” on its loan. In reality, no money changes hands. Secondly, a Moldovan “guarantor” of the loan is taken to court by the Russian creditor shell company. Thirdly, the company that “defaults” is forced by a Court to settle the loans by depositing the amount due to Moldindconbank.
The money is now clean, transferred, and outside Russia. And from Moldova, the journey begins.
The first stop for the cash after Moldova is more often than not Latvia’s Trasta Komercbanka. Thereon, the money disperses to hundreds of shell companies around the world and makes its way to approximately 500 Russian oligarchs, DW reports.
These individuals do business in all sorts of sectors, from construction to banking and information technology. In one way or another, most of them do business with the state. According to The Guardian, some of the individuals involved are members of organised crime syndicates, the Russian government, and the FSB.
It is noteworthy that in 2014 alone, the Russian Land Bank (RZB) transferred about $9.7bn at Moldindconbank. To put this into context, the Moldovan GDP in 2014 was just under $8bn.
Between the Latvian Trasta bank and the Russian oligarchs, there are approximately 21 “hub companies” registered in the UK and Cyprus. Some of the names of these companies are Seabon Ltd. ($9bn in transactions) and Ronida Invest LLP ($6,4bn).
The cash from one “debtor” to the “creditor” was channelled through 17 banks, including global corporate behemoths such as HSBC, Barclays, the Royal Bank of Scotland, Lloyds, NatWest, Coutts, and Standard Chartered. According to the Danish Berlingske, the list continues with Swedish banks, most prominently Nordea, but also Handelsbanken, Swedbank, and SEB.
Part of the problem with these banks is that they allowed money transfers of billions of dollars into bank accounts of anonymous “beneficial owners.” The European financial system takes pride in bespoke customer service and discretion. But with a “see no evil, hear no evil” ethos, the moral high ground of institutional, political, and economic transparency is somehow lost.
First published with New Europe: https://www.neweurope.eu/article/laundromat-russian-money-laundering-european-quality/