The Polish unit of the Dutch bank ING, ING Bank Slaski, for years allegedly helped Russian and Ukrainian oligarchs move huge sums of money out of ex-Soviet Union countries, according to the US Treasury's fraud investigation department, FinCen. FinCen files were leaked to and published by the International Consortium of Investigative Journalists (ICIJ), BuzzFeed, and 110 journalists from 88 countries, including Gazeta Wyborcza in Poland.
Russian money has since the break up of the Soviet Union in 1991 sought safe investment havens in the West such as in Swiss banks, London properties, and French yachts. With a deeply politicized legal process at home, and the tax office often used as a political wing of President Vladimir Putin's Kremlin, it is hardly surprising that those who made fortunes during the "wild 1990s" would not want to keep their cash in Russia. The question has always been how to get it out.
We know that Denmark's biggest bank, Danske, via its Estonian subsidiary, allegedly laundered €200 billion ($235 billion) of illicit Russian cash between 2007 and 2015. Bill Browder, CEO of Hermitage Capital and a former client of the deceased Russian lawyer Sergei Magnitsky, claimed that Danske was involved in a giant scam uncovered by Magnitsky. There would be more revelations to come, he said back in 2018, noting three other banks in the Baltic states that were very likely conduits for stolen Russian money. But at the time, in 2018, the role of banks in Poland was not on the radar.
"It is unlikely that criminals operate on a large scale only in the Baltic States, but not in Poland for some reason," Louise Shelley from George Mason University, an expert on money laundering, financing of organized crime and terrorism, told DW. "This is a problem of the whole region. The procedure is not concentrated only in a few selected countries. Criminals look for loopholes everywhere," she adds.
"Poland is not the new frontier, it simply got into the news headlines with this case," Anastasia Nesvetailova, director of the City Political Economy Research Centre in London, told DW.
Traditionally, bank structures in the Baltic states have been used to launder financial flows out of Russia, with some new territories — Abkhazia, Ossetia, Moldova, Armenia — being earmarked as the "new frontier for Russia’s use of offshore." Increasingly, crypto-currencies are being used to launder finance, and not just in Russia, Nesvetailova says.
Among the criminal organizations laundering the ING money was Altaf Khanani's network, who worked for the Colombian and Mexican cartels as well as for Al-Qaeda and Hezbollah. The United Nations Office on Drugs and Crime (UNODC) estimates that money laundering amounts to between 2-5% of global GDP annually — $800 billion (€740 billion) to $2 trillion.
"Insiders have long known that the financial system is awash with trillions of dollars in dirty money," Linda A. Lacewell, the superintendent of the New York State Department of Financial Services, wrote in an op-ed for the ICIJ, adding that solving the problem is stymied by the fact that regulating the system is based on self-reporting.
The ING story
Two Dutch securities traders, Tristane Capital and Schildershoven Finance, were allegedly key players in the movement of billions of euros out of Russia. The two companies were European counterparties of the so-called Moscow Mirror Network.
Schildershoven bought securities for two companies, Cypriot Serbenta and British Ergoinvest, which in turn laundered Russian rubles. Their bank of choice was ING Bank Slaski. Ukrainian and Russian oligarchs and people from the Kremlin's inner circle were the two Dutch traders' main clients. For example, Igor Putin, a cousin of the Russian president and a member of the authorities of several Russian banks was reportedly involved.
The scheme worked via parallel and instantaneous purchases and sales of the same number and value of securities. Purchases were paid for in eastern European currencies and sales in western currencies. But both buyers and sellers were part of the same company.
According to reports from FinCen, a UK-registered firm, Ergoinvest, played a key role, in 2014 seeing $307 million transferred into its account from Schildershoven's account at ING Bank Slaski. Ergoinvest was a shell company registered in Potters Bar in the UK. There were reportedly at least 140 other companies listed in FinCen reports registered under the same address.
In 2014 alone, Schildershoven's operations at the bank amounted to $1.2 billion. In 2018, ING reached an out-of-court settlement with the Dutch authorities totalling €775m because of its lax approach to money laundering.
FinCen documents obtained by Gazeta Wyborcza indicate that ING Bank Slaski could have been used in a similar way in 2013 and 2014. At that time, Schildershoven was its client. The FinCen warned in its reports about suspicious transactions that passed through its accounts. The last suspicious operation that Gazeta Wyborcza has a record for took place in 2016.
Big banks involved
Tristane Capital and Schildershoven Finance moved from using Deutsche Bank to ING Bank Slaski in 2013. Deutsche's role dates back to 2011, when its turnover began to drop in the aftermath of the global financial crisis.
In a 2018 interview with Reuters news agency, the officers of the New York-based regulator Department of Financial Services (DFS) said Deutsche Bank had been turning a blind eye to suspicious transactions because its management was "blinded by greed and a desire for illegal enrichment." In 2017, Deutsche Bank was forced to pay $630 million in penalties imposed by UK and US financial regulators.
"ING is one of the many big banks, including Deutsche, Danske, Raiffeissen, many private banks in the West and some subsidiaries of banking giants which had been enabling money laundering out of post-Soviet space," says Nesvetailova. "ING hit the headline this year, Danske last year, Deutsche a few years back, and we can expect more such revelations to come out."
Ukraine's missing billions
Between 2014 and 2016, after the invasion of the Crimea and the outbreak of conflict in the east of Ukraine, the country faced the largest banking crisis in its history. Almost half of its banks went bankrupt and their clients lost over $20 billion.
Kyiv turned to the International Monetary Fund (IMF) for help. Under strict conditions, the IMF agreed to allocate $17.5 billion to help over four years. It suspended the aid in 2017 after disbursing only half over worries about corruption. But by then at least $1.8 billion of this had been deposited with PrivatBank, one of Ukraine's largest banks, owned at the time by oligarch Ihor Kolomoisky, who backs the current president Volodymyr Zelenski. The money then disappeared.