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Sunday 22.09.2019 | Name days: Maigurs, Mārica, Māris

Magnitsky’s supporters accuse Latvia of inaction in fight against money laundering

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUInvestment company Hermitage Capital Management co-founder and manager Bill Browder accuses Latvia’s authorities of inaction in prevention of laundering of several million dollars by banks registered in Latvia.

In a letter addressed to Latvia’s Justice Minister Jānis Bordāns, it is stated that on 30 July 2012 Hermitage Capital turned to Latvian authorities because the company found that USD 19 million (EUR 16.84 million) of USD 230 million (EUR 203.86 million) money laundering scheme uncovered by Russian lawyer Sergey Magnitsky, who died in prison, was laundered using six Latvian banks through 16 different accounts.

The letter mentions that the criminal process involving the company’s findings was commenced in November 2012, but Hermitage Capital was not given victim status. Because of that, the company was not kept informed about the investigation process. At the same time, the company continued its own investigation with assistance from Lithuania and Estonian authorities.

In December 2012, Latvian Interior Affairs Ministry refused to give the company victim status. According to Hermitage Capital, however, this made it harder for them to investigate the case and provide assistance to Latvian authorities.

At the same time, Latvian legislation does not allow Interior Affairs Ministry to influence investigations, which makes it impossible for the ministry to apply victim status to anyone.

In 2016 and 2018 Hermitage Capital submitted several complaints to Latvian authorities. In those complaints the company revealed 430 accounts in 14 Latvian banks that may be used to launder money. In 2016, the company uncovered another USD 43 million (EUR 40.8 million) that was allegedly laundered through Latvian bank accounts by Russian businessman Dmitry Kluev, who Hermitage Capital accuses of organizing large-scale theft from Russian state budget. US Department of the Treasury has included Kluev to the list of people applied with sanctions in accordance with the so-called Magnitsky Law.

Magnitsky Law was signed by then the President of the United States of America Barack Obama in 14 December 2012. It allows US authorities to apply arrest to assets owned by Russian officials suspected to human rights violations, as well as deny those people entry to USA. European Parliament has also invited the European Union to adopt Magnitsky Law to punish human rights violators.

The company’s letter to the minister stresses that over the course of the past six and a half years bankers have provided all kinds of assistance to Latvian authorities, whereas Latvia has not performed duties in the fight against dirty money.

At the same time, bankers have uncovered dirty money worth more than USD 40 million (EUR 35.48 million) frozen on bank accounts in six countries, including USA and Switzerland. Additionally, Hermitage Capital has identified illegally acquired funds worth USD 102 million (EUR 90.48 million) in 85 accounts of Latvian ABLV Bank, including USD 19 million (EUR 16.85 million) on five accounts controlled by Kluev and his associate, lawyer Andrej Pavlov. Information regarding this find was provided to Latvian authorities in 2018.

But even after these findings Latvian authorities refused to declare Hermitage Capital a victim in the criminal case.

The letter also mentions that in 2018 bankers had uncovered a massive money laundering scheme in Estonia’s branch of Danske Bank.

After this discovery, the company turned to Estonia’s and Denmark’s authorities. As a result of joint action, criminal processes were launched against several bank officials in Estonia and Denmark.

Hermitage Capital accuses Latvian authorities of negligence with investigating aforementioned cases, inaction with measures to limit money laundering activities. The letter also claims that these conclusions are confirmed by independent US and French money laundering prevention expert groups.

The letter also details several requests, including a request for Latvia to investigate the inaction from authorities, including the Prosecutor General’s Office in relation to money laundering matters. It is also necessary to evaluate collected evidence.

News agency Reuters reported in April that Browder had submitted a complaint to Latvian authorities against Swedbank as well, claiming that the bank was involved in the Russian money laundering scandal.

Browder had previously submitted complaints against Swedbank to Swedish and Estonian authorities, claiming that Swedish bank accounts were used to launder EUR 176 million between 2006 and 2012.

Most of this amount – EUR 117 million – went through Swedbank’s branch in Estonia.

As it is mentioned in the complaint Browder submitted to Latvian authorities in April, EUR 41 million of that amount was transferred through Latvia.

Browder became well-known with his campaign to preserve the memory of his former employee lawyer Magnitsky.

Magnitsky died in November 2009 after spending 358 days in a pre-trial detention. He was detained after accusing multiple Russian officials of large-scale corruption and robbing Russia’s state budget of considerable amounts of money. Magnitsky was denied appropriate medical care and he died eight days prior to the day when he would have to be either put on trial or released.

Magnitsky revealed that officials of law enforcement institutions had embezzled state budget funds worth RUB 5.4 billion. It is believed that the criminal prosecution against him was launched as revenge.

In 2013, Russian court sentenced Browder to nine years of prison for tax avoidance in absentia.

Magnitsky was also found guilty of tax avoidance by Russian court in 2013 even though he was already dead for four years.

It is believed the illegal money from Russia was the main reason for the money laundering scandals in Danske Bank’s branch in Estonia and Swedish Swedbank.

Danske Bank has admitted that EUR 200 billion of suspicious money, including from Russia and former Soviet republics, had went through its Estonian branch. Danish bank’s operations were later halted by Estonian authorities and the bank later announced plans to leave Baltic States and Russia as a result.

The investigation against Swedbank was launched when Swedish broadcaster SVT reported that its Estonian subsidiary was being used to service billions of euros worth of transactions from high-risk clients, mainly from Russia.

Meanwhile, Latvia has increased supervision over the banking sector and Finance and Capital Market Commission’s efforts to sort the sector.

More attention was provided to Latvia’s banking sector after the closure of ABLV Bank following accusations of money laundering from US institutions. This bank also serviced many clients from Russia.

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