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8380 Suspicious activity report. How does the global money laundering machine work?

how does money laundering work

A transnational investigation by Novaya Gazeta and the Organized Crime and Corruption Reporting Project (OCCRP)*

*The Organized Crime and Corruption Reporting Project unites several investigative journalists from Eastern Europe.

This investigation lasted for more than a year and involved dozens of investigative journalists from Russian, Ukraine, Romania, Latvia, the United Kingdom, Serbia and other countries. But we don’t regard it as finished. Despite hundreds of exclusive documents – bank transactions, criminal cases, court decisions from various countries – we understand that we are only at the beginning of the journey, and today’s story is only the first attempt to explain how the global money laundering system functions.

Our investigation focused on several offshore companies with turnover exceeding one billion dollars.

The bank transactions we obtained show that money was transferred to the accounts of these offshore companies from Russia, the United States, the UK, New Zealand, China and Ukraine among others. Each of these transactions probably has its own story and each of these dollars probably has a unique origin: it could have been stolen from the Russian budget or obtained from smuggling in Romania, drug trafficking in the U.S. or the sale of weapons from North Korea. We attribute these links to the fact that criminals from all over the world use the same technologies, thus it’s not surprising that the very same platforms can operate in the interests of various beneficiaries.

Yet all these individual stories have one thing in common: the operators of the laundering platforms, i.e. those who have access to bank accounts and know whose money is being laundered in these common pots and to whom it ultimately belongs. These are the people we still must find.


A Pass to Vladlen Stepanov's money

In January 2011, lawyers from Hermitage Capital Management sent a report to the Office of the Attorney General of Switzerland concerning suspicion of money laundering. The report concerned a well-known case – how millions of dollars ended up in Credit Suisse bank accounts belonging to the offshore companies of Vladlen Stepanov, the former husband of Olga Stepanova (at that time the director of the 28th Tax Inspectorate in Russia), and were then spent on real estate in Dubai and Montenegro. The same Swiss bank account was also used for real estate purchases by Olga Tsareva and Yelena Anisimova, whose names happen to coincide with the names of Stepanova’s former deputies at the 28th Tax Inspectorate.

The Hermitage Capital Management lawyers suggested in their statement that this money came from the 5.4 billion roubles that were stolen from the Russian budget in 2007 with the use of fraudulent tax reimbursement schemes. This crime was under investigation by Sergei Magnitsky, who died in a pre-trial detention facility two years ago. Vladlen Stepanov insisted that he had earned the money in his account on his own.

The money took an extremely complicated journey before finding its way into the Swiss account of Vladlen Stepanov. Most of it was transferred from accounts in the Latvian bank Trasta Komercbanka Riga LV, which are owned by the companies Nomirex (UK) и Bristoll Export (New Zealand). These companies, in turn, received the money from the account of a Moldovan firm called Bunicon-Impex SRL. All of these companies and their financial operations are currently being closely scrutinised by Swiss law enforcement agencies, which are investigating the statement filed by Hermitage Capital Management.

The UK-based Nomirex was registered in August 2006 by Meridian Companies House Limited, a company that specialises in the incorporation and management of firms and asset protection. The director of Meridian Companies House, Erez Maharal, told Novaya Gazeta and the OCCRP that his firm registers “shelf” companies that are then sold wholesale to intermediaries, who in turn sell them to someone else – “someone whom they sometimes don’t even know themselves”.

For this reason, Maharal said he doesn’t know who the beneficiary of Nomirex is, where the company had accounts or where the money went. He believes the banks should be in charge of monitoring operations, however he said not even a bank is capable of inspecting most of the information it receives from clients. “Especially if the client is a criminal and is deliberately misleading the bank with the help of well prepared documents. After all, honest people have nothing to hide. And the dishonest ones always put someone else in their place. I feel that I was framed”.

From 2007 to 2009, Nomirex filed annual reports with the UK regulatory authorities indicating that it had a balance of zero, meaning that the company did not conduct any kind of economic activities. Nomirex’s involvement, however, in the transit of money to Vladlen Stepanov’s Swiss accounts shows that the company’s annual reports were incorrect. Moreover, Novaya Gazeta and the OCCRP managed to obtain bank transactions showing that over a two-year period dozens of firms from all over the world transferred more than $365 million to the Nomirex account at Latvia’s Trasta Komercbanka Riga LV! The leaders on this list are dubious Russian companies with accounts in the Russian state-owned banks Sberbank and VTB.


Trade Construction Company LLC from St. Petersburg transferred $234 million to Nomirex’s Latvian account from its Sberbank account. On 30 January 2007, Trade Construction Company LLC made the first payment to Nomirex for $7.5 million. On the very next day, the St. Petersburg-based firm made three more transactions in favour of Nomirex for $7.5 million each. Making such transactions on a daily basis for two months, the company transferred a total of $234 million to Nomirex.

Under the Russian Law “On Combating the Legalisation (Laundering) of Proceeds from Crime and the Financing of Terrorism,” such frequent transfers to a foreign company that describes its business as inactive (and this could easily be verified) and also has a bank account in Latvia (whose jurisdiction is considered susceptible to money laundering according to international classifications) should have been thoroughly investigated by the Sberbank security service.

The press service of Northwest Sberbank told Novaya Gazeta and the OCCRP: “Sberbank conducts its activities in full compliance with the laws of the Russian Federation. The bank sends information in a timely manner to the Russian Federal Financial Monitoring Service concerning all operations as part of the implementation of the Law ‘On Combating the Legalisation (Laundering) of Proceeds from Crime and the Financing of Terrorism’”. The press service declined to comment on specific transactions, citing the law that prohibits banks from providing information on measures it takes to combat money laundering.

According to the Unified State Register of Legal Entities (USRLE), Trade Construction Company only has charter capital of 10,000 roubles and its sole founder and director is 31-year-old St. Petersburg president Vladimir Voronov. Novaya Gazeta and the OCCRP managed to get in contact with Voronov. He told us that he had been unable to find a job for a long time in 2006 until he saw an announcement stating that a certain Northern Capital Regional Law Centre was looking for people to fill the position of nominee director. The agreement signed by Voronov and the Northern Capital Centre (Novaya Gazeta and the OCCRP have a copy of the agreement) says exactly that: Voronov will “serve on multiple occasions” as the founder and director of legal entities in Russia. A total of 27 firms were registered in his name, according to the USRLE.

Voronov says he was promised he would receive his stake in the companies after each firm nominally registered in his name was sold to an end buyer. But Voronov claims he never received any stake and was only paid 100–300 roubles for signing the necessary documents in the presence of a notary as well as for trips to the tax inspectorate.

Northern Capital Regional Law Centre LLC, which signed the agreement with Voronov, was founded in September 2004. The firm was liquidated in March 2007. The sole founder and director of the company was Igor Blinnikov. Novaya Gazeta and the OCCRP managed to obtain a court

ruling from 2010 stating that Igor Blinnikov was questioned by the tax authorities as the founder and director of a firm, which the tax authorities believed was being used for tax evasion purposes. According to the court ruling, Blinnikov told the tax authorities that he had registered several legal entities in his name in exchange for payment.

In 2005, another limited liability company was founded with the exact same name – Northern Capital Regional Law Centre. This firm was liquidated in 2010.

Finally, a third company appeared in 2006 with the identical name – Northern Capital Regional Law Centre. According to the USRLE, the company still exists and is registered to one Sergei Lubnin from St. Petersburg. Novaya Gazeta and the OCCRP have a court ruling under which the tax authorities inspected the activities of several phantom companies using various tax evasion schemes, and Sergei Lubnin was listed as the director and founder of one of the firms. Attempting to question Lubnin, the tax authorities sent an inquiry to his place of registration in St. Petersburg and received a reply from the Civil Registry Office indicating that Sergei Lubnin had died on 27 March 2007. At the same time, according to the Comprehensive Information and News Disclosure System database on Russian companies, Lubnin is still listed as the general director at 97 companies.

Vladimir Voronov, the “owner” of Trade Construction Company, which transferred $234 million from Sberbank to the Latvian account of Nomirex, said he wasn’t the only person Northern Capital Regional Law Centre used as a nominee director: “They hired at least ten new people each day”. We were unable to find any real people who managed the Northern Capital Centre.

The second “leader” on the list of companies transferring a total of $365 million to the Nomirex account at Latvia’s Trasta Komercbanka Riga LV was the Moscow-based firm Style LLC, which has an account with the state-owned bank VTB-24. The first payment from the Style account at VTB-24 to the Nomirex account was made in July 2008. Then over the course of a month Style transferred $53 million to the British company! The alleged purchase of construction materials was used as the basis for the payments in each case.

It’s highly doubtful that these payments were legal since Nomirex described its business as “inactive” in reports (and this information should have been available to the VTB-24 security service) and, consequently, could not have sold any goods to Style.

VTB-24 spokesman Artem Bochkarev confirmed for Novaya Gazeta and the OCCRP that “during the specified period the bank did indeed serve a client that was a legal entity with such details. All the identification and review measures established by law were conducted in relation to this client. As a result of the measures taken by the bank, this client’s accounts were terminated”. Bochkarev said the bank was unable to provide any more information “due to the need to observe bank secrecy”.

According to the USRLE, Style was founded in January 2008. The founder of the company was Yekaterina Simchenko and the general director was Alexei Volodkin. A person with the same name as Yekaterina Simchenko was appointed to the board of directors of Magadansky Bank in July 2007, according to the minutes of the bank’s general shareholders meeting. A few months later in late 2007, the Central Bank of Russia revoked the licence of Magadansky Bank due to repeated violations of the Law on Money Laundering and Terrorist Financing that occurred specifically in July-August 2007.

In June 2011, Style LLC, which sent the $53 million to the UK-based Nomirex, ceased to exist: it was reorganised and merged along with four other firms into a company from Vladivostok called Merci LLC, according to the Federal Tax Service. We were unable to contact the people with connections to Style, Yekaterina Simchenko and Alexei Volodkin. The phone numbers are in service, but nobody answered.

In addition to the transfers from major Russian state-owned banks, Nomirex’s Latvian account was also replenished by privately owned banks.

From January-March 2007, Ziteron Ltd, a company registered in the U.S. state of Oregon, transferred approximately $10 million from its account at Moscow-based Nefteprombank to the correspondent account of VTB Bank AG (the German division of Russia’s VTB), from which the money was then sent to the Nomirex account at Latvia’s Trasta Komercbanka Riga LV. According to the Oregon Business Registry, Ziteron Ltd lists its main place of business as the Ukrainian city of Lviv, while the company president is listed as one Oscar Augusto Cedeño, a 45-year-old lawyer from Panama, who at one time worked in the Ministry of Foreign Affairs of Panama.

In a formal letter to Novaya Gazeta and the OCCRP, Cedeño said that “our law firm, which I run in Panama City as a practicing lawyer, never founded, managed or was a resident agent of the company Ziteron Ltd”.

He continued: “Our Moscow client, Oleg Vol, a former employee of Russian Legal Company, appointed me as a nominee director at this company. As the nominee director of Ziteron Ltd, I signed three letters of attorney at Oleg’s request. Thus, I declare that I was never aware of the existence of any bank accounts, I never managed them, I had no access to these accounts, and I don’t know what operations were performed by this company”.

Novaya Gazeta and the OCCRP were able to contact Oleg Vol, a Moscow lawyer who has worked at several medium-sized law firms. Vol told us that he played the role of an intermediary in the founding of the U.S. company Ziteron Ltd. He said that several years ago a person appealed to him for help in establishing an offshore company. “His name was Maxim. I didn’t ask for his surname and don’t know it to this day. Ziteron Ltd was founded for him and I don’t know for what purposes he needed this company”. Vol said he met Maxim by chance through mutual acquaintances. Later, Vol tried to contact Maxim again, but he never answered the phone. Vol provided Novaya Gazeta and the OCCRP with five mobile phone numbers that allegedly belong to Maxim, although none of them are currently in service. Other contact information for Maxim included a corporate email address at Nefteprombank, from which the transfers were made to Nomirex.

Nefteprombank President Ivan Gubenko said in a letter to Novaya Gazeta and the OCCRP that the bank “shares and fully supports the active civil position on the investigation of operations involving suspicion of the laundering of illegally obtained money”. Gubenko also stressed that the bank is taking all the measures specified by the Law on Money Laundering and Terrorist Financing and is implementing the procedures established by internal monitoring regulations. But the bank was unable to comment on specific transactions by made Ziteron Ltd to Nomirex due to the provisions of this law.


Unfortunately, our investigation into the aforementioned transactions from the Russian banks (Sberbank, VTB-24, Nefteprombank) to the UK company Nomirex does not reveal the true beneficiaries of this money or its origin: in each case we ran up against a wall consisting of several levels of nominee intermediaries who knew nothing or did not wish to disclose the true names of the company owners or information on the money passing through their accounts. We have suspicions, however, about the dubiousness of these operations and we believe that in the run-up to or during the middle of the financial crisis the withdrawal from Russia of $300 million from the accounts of firms showing features of phantom companies to an inactive British company constitutes sufficient grounds for the opening of an investigation by law enforcement authorities.

The need for such an investigation is enhanced not only by the fact that Nomirex was involved in the transit of money to the account of Vladlen Stepanov, which was then used to purchase real estate, but by the fact that Nomirex was used for the financial interests of a powerful Asian smuggling network operating in Romania.

Category: Bank

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