A Ukrainian gas piggy bank: Money laundering made easy | Germany| News and in-depth reporting from Berlin and beyond | DW | 24.04.2016
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A Ukrainian gas piggy bank: Money laundering made easy

Germany's justice system is often powerless in the global fight against money laundering. The case against a close associate of former Ukrainian President Viktor Yanukovych has made that abundantly clear.

In 2012, the 27-year-old Serhiy Kurchenko became Ukraine's youngest oligarch. In the span of a couple of years, he had gone from being a nobody to the proud owner of a bank, an oil refinery and a media company. By the end of the year, he bought a leading football club. The Ukrainian media called him both a "wunderkind" and "Yanukovych's wallet." Many suspected that Kurchenko was just cover for the then-president - who would gain international infamy when he was run out of office and forced to flee the country early in 2014 - and that his job was to launder billions made from improper business deals.

Today Kurchenko, like Viktor Yanukovych, lives in Russia. He is being investigated in Ukraine on charges of tax evasion and fraud involving billions of dollars. According to the state prosecutor, he became rich primarily through illegal deals on liquid gas. It appears that the president had given Kurchenko carte blanche and that justice, customs and tax officials looked the other way.

Kurchenko's business deals are also under scrutiny in an investigation in Germany. Investigators have posited that in 2012 - along with Oleksiy Azarov, the son of Ukraine's prime minister at the time - Kurchenko bought a German chain of more than 100 gas stations. For over two years now, the public prosecutor in the German town of Gera has been trying to gain an insight into the workings of the company that operates the appropriately named Sparschwein Gas (Gas Piggybank) - and he has had some astonishing results.

German investigators still don't know who exactly is behind the Dutch "mailbox companies" involved in the purchase of the gas stations. Even with legal assistance from the Ukrainian, Austrian, Dutch and Swiss authorities, they have so far neither been able to determine who set them up nor who the beneficial owner is. "So far the investigation has not yielded concrete results that would provide sufficient evidence of a crime," the Gera public prosecutor told DW. After two years, it seems that the investigation will soon have to be shut down.

Austrian authorities identified a firm belonging to Kurchenko there in the summer of 2014. The assets of LPG-Trading were frozen under the EU sanctions on deposed President Yanukovych and his close associates. Kurchenko and Oleksiy Azarov were identified as co-owners. LPG-Trading is a 100 percent subsidiary of the same Dutch mailbox company that owns Sparschwein Gas in Germany.

Officials in Austria are investigating associates of Yanukovych on suspicion of money laundering, but they have also had little success. Nonetheless, authorities have managed to identify a series of firms and accounts belonging to Ukrainians on the EU sanctions list and freeze their assets.

Not '1 percent'

An estimated 100 billion euros ($112 million) a year are laundered in Germany. The Financial Intelligence Unit of the Federal Criminal Police Office receives between 10,000 and 13,000 reports a year of suspicious activity, and Central and East Europeans figure prominently among those. Alongside citizens of countries such as Poland or Romania, Ukrainians are at the head of the field, with more than 200 named in notifications per year. Russian businessmen are involved in more than 500 suspicious transactions. In more than half the cases, further investigation suggests that money laundering has indeed taken place and the cases are passed on to the financial or police authorities.

Only a handful of these go to court, and those who are prosecuted are mostly small fry. "Not even 1 percent of the sums of money laundered in Germany is frozen or leads to prosecutions," Markus Meinzer, of the Tax Justice Network, told DW.

"When a notary or a bank comes across a complicated structure of nested companies - where a Dutch foundation is used to take over a German company and behind it is another foundation with connections to Ukraine - then at the least alarm bells should start to ring," Meinzer said. He added that, according to the laws on money laundering, transactions in which the beneficial owners cannot be identified, should never go through.

Very often, suspicions of money laundering aren't even reported. In about 60 percent of cases, banks or notaries keep their suspicions to themselves for fear of losing the client, according to a 2015 study by Professor Kai Bussmann, a leading expert on economic crime. Bussmann says the Kurchenko case is characteristic of this.

Establishing beneficial owners

Banks or notaries can determine the beneficial owners of limited liability companies by looking at the founding documents, records from the commercial register or the articles of association. The problems arise when all those named on all the sources are front men or mailbox companies.

If there were a register of beneficial owners, authorities - and journalists, too - could easily find out companies' real backers. As part of an EU directive, Germany is required to create such a national register by 2017. However, Kaspar von Hauenschild of Transparency International said it must take that a step further: "Alongside the register of beneficial owners, it must also organize the automated exchange of information between tax offices. Then we really will have made progress."

The release of the Panama Papers has led German Finance Minister Wolfgang Schäuble to call for a European register, too - not just a national one. Such a database would enable German investigators to access in minutes information for which they currently have to wait months, or even years.