Deutsche Bank was involved in the “Moldovan scheme”, through which $46 billion was withdrawn. The investigation suspects that “mirror transactions” of Deutsche Bank took place with the participation of clients and owners of a small Promsberbank.

Victim of Promsberbank

A source close to Deutsche Bank told RBC that law enforcement agencies are investigating the withdrawal of assets from Promsberbank and linking the actions of its clients and owners with transactions in the Russian subsidiary of Deutsche Bank AG. This information was confirmed by a representative of one of Deutsche Bank's counterparties. “There is information that Promsberbank somehow involved Deutsche Bank in its schemes to illegally withdraw funds from the country,” he said. A source close to Deutsche Bank says that the investigation has a suspicion that the same people were behind the “mirror transactions” of Deutsche Bank as those behind the transactions at Promsberbank. An RBC source close to the Central Bank also points to a connection between the Promsberbank criminal case and transactions at Deutsche Bank.

An official representative of Deutsche Bank in Russia declined to comment on this information. RBC is awaiting a response from the Ministry of Internal Affairs.

On Monday, December 14, Bloomberg, citing its sources, reported that the Bank of Russia fined Deutsche Bank AG in the amount of 300 thousand rubles. The fine is related to a violation of the rules of internal control over the Russian office - according to the Central Bank, Deutsche Bank became a victim of an illegal scheme, writes Bloomberg. The regulator also found that the bank had already taken action regarding technical violations and also punished the employees involved, thereby avoiding a large fine. The agency's sources did not say what kind of violations we are talking about.

Serial banker

The Central Bank revoked the license of Promsberbank in April this year. It was a small regional bank operating in Podolsk. After the license was revoked, the bank was declared bankrupt, and the provisional administration of the Central Bank discovered a scheme there to withdraw assets through the Oranta insurance company, which had been purchased shortly before the license was revoked.

Promsberbank is known for the fact that its shareholder in 2012 was Alexander Grigoriev, and the Russian president’s cousin Igor Putin was on the board of directors. As the Kommersant newspaper wrote, in November law enforcement officers detained Grigoriev. The investigation suspects the banker of organizing the “Moldavian scheme”, through which a criminal group, in which more than 500 people and about 60 Russian banks participated, withdrew $46 billion from Russia.

Grigoriev bought a 4.16% stake in Promsberbank in 2012, but actually controlled this bank, an acquaintance of one of the top managers of Promsberbank told RBC. According to him, Promsberbank was the first bank that Grigoriev bought. Around the same time, he bought a 16.35% stake in the Russian Land Bank, the former bank of Elena Baturina. In 2013, Grigoriev withdrew from the capital of these banks and bought almost 20% of the Zapadny bank; he also controlled the Rostov bank Doninvest. All these banks lost their Bank of Russia licenses.

Grigoriev’s banks were included in the list of banks that the Ministry of Internal Affairs considers participants in the Moldovan scheme. Its essence was that foreign companies entered into loan agreements, according to which Russian companies allegedly received loans for hundreds of millions of dollars (from $100 million to $875 million) or acted as guarantors for them. Obligations on these debts were not fulfilled, and creditors turned to the courts of Moldova - this was possible since citizens of this country acted as guarantors for the loans. These guarantors, as it turned out later, belonged to socially vulnerable groups and, according to them, did not know about their participation in the case - their signatures were falsified.

Clients from the sanctions list

Reports that Deutsche Bank has launched an internal investigation into its Moscow representative office appeared in the media this spring. According to the German publication Manager Magazin, Deutsche Bank employees did not properly check the origin of the money of Russian clients, which were used to carry out over-the-counter derivatives transactions in London. We may be talking about withdrawing about $6 billion in 2011–2015.
Deutsche Bank informed Western regulators about the identified violations, and also involved experts from London and New York in the investigation. German, British and American regulators are involved in the investigation.

Due to the scandal, Deutsche Bank fired Russian office trader Tim Wiswell and other employees. Now Wiswell is suing the bank, demanding his reinstatement and payment of moral damages. Wiswell's lawyer Ekaterina Dukhina, who represents the interests of the financier in court, told RBC that a possible reason for Wiswell's dismissal could be work with clients from the US and EU sanctions list. Other employees later filed claims for wrongful dismissal.

As Bloomberg reported in mid-October, people close to Russian President Vladimir Putin could benefit from Deutsche Bank's trade deals. The agency's sources indicated that, according to their information, in a number of cases, funds in the accounts that appeared in suspicious transactions belonged to people from the president's entourage. We are talking about his relative, whose name was not mentioned, as well as Arkady and Boris Rotenberg, who are under US sanctions. Representatives of businessmen denied their involvement in “mirror” transactions.

In October, Deutsche Bank said its own review had found violations of internal rules and insufficient controls over transactions. This was stated in the financial institution's quarterly report. The German bank increased its provisions for legal costs by €1.21 billion due to probable payments due to the activities of the Russian office. Deutsche Bank's losses in the third quarter amounted to a record €6 billion.

Tatiana ALESHKINA

FT learned about Danske Bank’s “mirror transactions” with Russians worth €8.5 billion ... In 2013, Denmark’s largest bank helped non-resident Russians conduct “ mirror deals"in the amount of €6 to €8.5 billion. The bank did not... The Financial Time newspaper found out that the bank spent " mirror deals"of its Russian clients in the amount of €6 to €8.5... in the year the organization earned €10 million from " mirror transactions”, in which Russian government bonds were used. Exactly what deals were carried out with government bonds, allowing clients... The media learned about transactions at Deutsche Bank in the interests of “well-connected Chechens” ... the brothers' involvement in mirrored transactions or the withdrawal of capital from Russia through a German bank. The Russian banker who helped organize the scheme with mirrored transactions, reported that a significant portion of the money passing through mirror deals, “belonged to people from Chechnya with connections... Deutsche Bank calls $10 billion worth of dubious transactions in Russia a failure ...withdraw $10 billion. London bank managers ignored signals about dubious transactions, Bloomberg Deutsche Bank learned during an internal investigation into questionable transactions... customer integrity checks. In addition, in the Moscow office they discovered alleged “ mirror» deals, which were carried out by a small Russian broker in Moscow and a company registered...

Finance, 14 March 2016, 15:45

A person involved in the case of “mirror” transactions in the Russian Deutsche Bank was arrested ... arrested the former owner of the bankrupt Promsberbank. The investigation links this bank with “ mirrored» transactions in the Russian “daughter” of Deutsche Bank AG Tverskoy District Court of Moscow... with transactions at Deutsche Bank. The investigation has a suspicion that for “ mirrored» transactions transactions in..., under US sanctions. Representatives of businessmen denied their involvement in “ mirrored» transactions. Deutsche Bank informed Western regulators about the identified violations, as well as...

Finance, 09 Mar 2016, 16:14

The German regulator will check the Russian subsidiary of Deutsche Bank ... connected with an investigation into the work of a Moscow representative office, whose clients ​carried out questionable deals, says a source ​German financial markets regulator BaFin on Wednesday, 9 ... with an investigation into the Moscow representative office, whose clients ​carried out dubious deals“says a banker familiar with the situation. Before you start checking... Investigators linked Deutsche Bank's "mirror" transactions with the "Moldovan scheme" ... scheme" through which $46 billion was withdrawn. The investigation suspects that " mirror» deals Deutsche Bank took place with the participation of clients and owners of a small Promsberbank... the investigation has a suspicion that for “ mirrored» transactions Deutsche Bank were the same people behind transactions at Promsberbank. RBC source, close... to “ mirrored» transactions. In October, Deutsche Bank said its own audit had found violations of internal rules and insufficient controls over transactions. About...

"On March 10, Congresswoman Maxine Waters, the ranking Democratic member of the House Financial Services Committee, wrote a letter, along with four other Democrats, to Republican Congressman Jeb Hensarling, the committee chairman; in a less chaotic and hectic political atmosphere, the contents of this letter would have been considered incredible." - writes journalist Ed Caesar in the American magazine The New Yorker.

According to the author, in the letter, Democratic congressmen asked that the Financial Services Committee "conduct a formal assessment of the [US Department of Justice] investigation into the Russian money laundering scheme through Deutsche Bank." They also called on the committee to initiate its own investigation into the scheme to determine whether "violations of American law may have occurred."

Waters and her colleagues expressed concern "about the integrity of this criminal investigation<...>, given the existing conflict of interests of the president with Deutsche Bank" (as the author explains, "Trump's businesses owe hundreds of millions of dollars to Deutsche Bank"), as well as the fact that "suspicious connections between President Trump's inner circle and the Russian government<...>raises concerns that [the Justice Department] will not prosecute those who benefited from the trading scheme involving Deutsche Bank."

"This $10 billion Russian money laundering scheme - so-called 'mirror trades' through Deutsche Bank" - was previously described in Caesar's investigation for . The author believes Waters' letter hints that the Justice Department's investigation into the scheme is "stalled."

“Whatever the Justice Department ultimately reaches as to whether the mirror trades were “violations of U.S. law,” there is a clear lead that the investigation leads to at least one member of Deutsche Bank's Russian subsidiary, Tim Wiswell. a US citizen,” says Caesar. “Between 2011 and 2015, he ran a trading desk in Moscow where suspicious transactions were made.” The author writes that according to information from money laundering professionals with whom the journalist spoke in Moscow, as well as a report from the New York State Department of Financial Services, which appears to be referring to Wiswell, “he took millions in bribes to facilitate the scheme.” Caesar adds that "according to recent information, Wiswell may be in Indonesia with his family, participating in the activities of a surf school run by Russians" in Bali. "Coincidence or not, Indonesia does not have an extradition treaty with the United States," the article says.

"Recent developments in other financial matters, however, suggest that there are two different strands of investigation that are not mentioned in either the Waters letter or the financial watchdog reports that should be investigated by the Department of Justice in the case. “mirror transactions,” writes Caesar.

“The first thread is a question of scale,” the article says. The author recalls that last week the international journalistic consortium "Center for the Study of Corruption and Organized Crime" (OCCRP), together with its media partners in 32 countries, including Novaya Gazeta and the British newspaper, published an information dossier. It includes bank documents that detail a capital siphoning and money laundering operation known by names such as the Russian Laundromat, the Global Laundromat and the Moldavian Scheme.

“However, the admirable OCCRP materials do not mention the connection between the “Moldova Scheme” and the Deutsche Bank mirror trade case,” writes Caesar. “Alexander Grigoriev, a “shadow banker” who, according to OCCRP, is “linked to the FSB.”<...>and who was behind the Moldova Scheme, was a shareholder in the little-known Promsberbank bank in Podolsk, on the outskirts of Moscow, the article says. - Promsberbank also used “mirror transactions” of Deutsche Bank. Moreover, one of his shareholders, a company called Financial Bridge, was an integral part of the scheme."

“The legal trail also suggests that the two schemes overlapped,” the author continues. “One of the counterparties in the “mirror transactions” was the British shell company Chadborg Trade, LLP, whose legal address was located on the third floor of an office in Potters Bar, an unremarkable bedroom suburb London in the English county of Hertfordshire. One of the companies that OCCRP mentioned this week in the Moldovan story, Tronlux Ventures, LLP, has the same mailing address as Chadborg. Moreover, the journalist adds, both companies list two identical companies as its directors: Kenmark, Inc and Ostberg, Ltd, both of which are registered in the Commonwealth of Dominica."

“So the first new line of inquiry suggested by these observations should be: Was Deutsche Bank's mirror trading scheme linked to a larger money laundering operation - one that appears to have been initiated by people close to the Russian intelligence services? " - the author summarizes.

“The second question, related to the first, is this: did Deutsche Bank launder money from the Magnitsky investigation?” - Caesar continues. The author further explains what he means.

In the UK, the article says, “they are still awaiting the start of a long-delayed coroner’s inquest into the death of Russian citizen Alexander Perepilichny, who lost consciousness while jogging near his home in the English county of Surrey in November 2012. Initial information indicated that Perepilichny had died a natural death, but then information emerged that gelsemium, the so-called “heart rupture herb,” was found in his circulatory system.The author clarifies that, according to popular belief, gelsemium “is used as a lethal substance by Russian and Chinese killers.”

“Perepilichny had a difficult professional life in Russia,” the article says. In particular, in 2010, Interpol wrote to the British Serious Organized Crime Agency that the Russian was suspected of “fraud, money laundering and abuse of power.” “Be that as it may,” Caesar continues, “in 2012, he became an informant and handed over information and documents to people conducting an investigation at Hermitage, the foundation of the American Bill Browder. At that time, Hermitage was studying the suspicious circumstances surrounding the death of its lawyer Sergei Magnitsky, whom killed after he uncovered a massive $230 million tax fraud scheme and a scheme to launder that stolen money. According to Browder, Perepilichnyy helped launder the stolen funds in the scheme uncovered by Magnitsky - which is why he spoke to such authority after he betrayed his fellow conspirators."

According to the author, both Congresswoman Waters and investigators at the Department of Justice should be interested in the fact that "the name of Alexander Perepilichny is listed as the main shareholder in the official Russian documents of Financial Bridge, a brokerage house that was one of the key Russian counterparties to Deutsche Bank in the case "mirror transactions." Caesar writes: "We do not know what lies behind this. But we know enough about the work that Perepilichny did, and about the money he moved, as well as his connection with the Magnitsky case. Just the sight of his name on the documents made the hairs on my arms stand on end. I wonder if this will have the same effect on investigators at the Justice Department? In a less chaotic and febrile political atmosphere such a detail would be considered incredible."

The US Department of Justice will check a German bank due to suspicious transactions worth billions of dollars. American authorities suspect that this is how Russian clients of Deutsche Bank engaged in money laundering for several years.

American authorities will check transactions of Russian clients of Deutsche Bank. Suspicious transactions “worth billions of dollars” were carried out over several years, reports Bloomberg, citing sources in the US Department of Justice. One of the agency’s interlocutors clarified that the agency was interested in “mirror transactions” that could be used for money laundering. As part of such transactions, the bank's Russian clients purchased shares in rubles and, through simultaneous transactions in London, purchased the same shares in dollars, thus withdrawing money from Russia without notifying the authorities.

Russian transactions quickly became a headache for the bank, Bloomberg writes. In early June, the agency became aware of an internal investigation by Deutsche Bank; transactions of Russian clients of the bank's Moscow and London offices worth $6 billion were checked. The transactions took place between 2011 and 2015 and could have been used for money laundering. On June 7, a new CEO was unexpectedly appointed, and no reasons were given for the removal of the two previous co-CEOs. In mid-July, the New York State Department of Financial Services sent a request to Deutsche Bank for information about the activities of the bank's Moscow office. The regulator demanded from the bank electronic correspondence, documents, client lists and other materials on the case. As The Financial Times found out, the request for information could relate to an unsuccessful attempt to bribe an employee of the Moscow office of Deutsche Bank. According to the publication, a bank employee was offered a bribe to renew cooperation with a client whose accounts were closed during the bank’s internal investigation into money laundering.

Deutsche Bank management refused to comment to Reuters on the actions of the US Department of Justice, citing its internal investigation. Amid allegations of financial fraud, the bank sent a “small number” of its employees in Moscow on forced leave and also informed German authorities about the incident.

Sergei Eremin, senior lawyer at Herbert Smith Freehills, explained to Business FM why a German bank has to answer for the transactions of its Russian clients to the US authorities.

Sergey Eremin Senior Associate at Herbert Smith Freehills“There are several reasons for this. Firstly, those banks that have a presence in America in the form of their own subsidiaries or branches are required to comply with American legislation in their activities around the world. The second point is that if there is any company in the Deutsche Bank structure that is listed on American stock exchanges, this also obliges all bank structures to comply with American legislation. But if this is a bank that does not have a business or any presence in America, then, in principle, America, rather, cannot put pressure on them. There is another problem here: those American banks that work with our hypothetical bank that has problems may refuse to work with it so as not to have problems with the American justice themselves. Therefore, in this indirect way, America can put pressure on any bank that does not pay in the currency of its country, because most conversion transactions, for example, from rubles to euros, do not go directly, but through the dollar.”

The new investigation is the third in the pending US proceedings against Deutsche Bank. Previously, the bank was accused of violating the law on sanctions and falsifying exchange rates. In April, Deutsche Bank paid a record amount of two and a half billion dollars to settle a case of manipulation of interbank rates.

One of the largest financial corporations in the world for $629 million for withdrawing $10 billion from Russia through mirror transactions. The case will now be closed, but the scheme for the illegal export of capital from the country continues to live, and the budget continues to lose money.

Under the weight of fraud

Deutsche Bank, once the leader in investment banking in Europe, is now going through a truly dark period. Regulators and supervisors have issued the financial corporation its fourth major fine in the past two years.

In April 2015, the bank pledged to pay $2.5 billion for its role in rigging the London interbank LIBOR rate. Six months later, other troubles followed: a 250 million fine for violating the US sanctions regime.

In addition, last year the bank faced $14 billion in claims for manipulation of the US mortgage bond market in the run-up to the 2008 financial crisis. As a result, the amount was reduced to $7.5 billion - almost twice, but the amount turned out to be significantly more than all the money Deutsche Bank set aside for legal costs.

During all the upheavals, the financial organization is rapidly losing ground. Its market capitalization has grown slightly since the beginning of 2017, but remains prohibitively low compared to pre-crisis indicators, even lagging behind the level of early 2016 by 15 percent. The bank has regular losses without penalties; last year the question of a possible rescue by the German government was even raised, just as Britain saved the Royal Bank of Scotland and Barclays.

And here is another blow from the regulatory authorities. Expected, but no less painful for that.

Bought, sold, withdrawn

The topic of withdrawing funds from Russia is relevant on both sides of the border. In Russia - in the light of the fight against offshorization and capital flight. Abroad - due to sanctions against the financial sector of the Russian Federation (illegal withdrawal of funds can be used to circumvent the sanctions regime).

In fact, the scheme for withdrawing funds through mirror transactions is quite simple and does not require the use of advanced financial instruments. In itself, it is one hundred percent legal - provided that the money involved is legal.

Mirror transactions were used back in the 2000s by Russian importers to circumvent duties and taxes on products that were sensitive to them. As a rule, a Russian company paid “extra” for a much smaller list of goods supplied than was actually the case: the difference was reimbursed to the foreign counterparty through mirror transactions.

The essence of the scheme used by Deutsche Bank is as follows: a bank authorized by a certain Russian company buys a certain package of securities on the domestic market for rubles. And at the same time, let’s say, in London an office registered offshore, with the help of the same bank, sells exactly the same package, but for dollars.

Naturally, this is not a coincidence: both companies have the same ultimate beneficiary. Formally, this pair of transactions is meaningless - there is no profit, and during periods of sharp fluctuations in the exchange rate, you can even suffer losses due to the lack of absolute synchronicity in the transaction. But everything falls into place if we assume that the purpose of the operation is not to earn money, but to transfer it abroad. You can’t just carry out a transaction from account to account - “anti-money laundering” laws and sanctions interfere. And through the purchase and sale of shares with the participation of traders - you can: bought for rubles here, they sold for dollars there, and these dollars themselves went into your account. The bank does not lose money by receiving a commission for intermediary services.

As Deutsche Bank has already admitted, the total volume of such transactions in its execution amounted to $10 billion. Moreover, the average daily size of transactions reached $10 million, which on some days was equal to one fifth of the investment bank’s total turnover on the Russian market. We can safely assume that for a German credit institution in the Russian Federation, mirror transactions were one of the main activities. It is no coincidence that in September 2015 the corporation decided to curtail its business in Russia - this could well have been influenced by the revelation of fraud: why stay in the country if there is no truly profitable work?

Magic trader

The main organizer of mirror transactions is the former head of the Russian securities department, American Tim Wiswell. Due to the consonance with his last name, he received the nickname Wiz, which can be translated as “magician” or “sorcerer”. Meanwhile, his former colleagues admit that they did not see anything magical or outstanding in his personality and were quite surprised to learn that he had been making dubious deals for years.

Wiswell's career was typical of many expats who came to Russia at the turn of the century for the long ruble. The earnings of foreigners on the Russian stock market were often two or three times higher than the level of payment in their own countries. Initially, he went to work for the UFG company, while simultaneously developing a program for the development of the oil industry of the Russian Federation (which involved, for example, investments of top managers in the shares of their companies). The plan was rejected, but Wiswell made a good impression, so they willingly accepted him.

The company was then acquired by Deutsche Bank. Wiswell was promoted, and that's when his involvement in the mirror trade story began. As he writes, Wiswell worked, in particular, with firms affiliated with the head of the Russian company Rye, Man and Gor Securities. These offices closed one after another, but new ones appeared in their place, and everything went on as before.

It wasn't until 2014 that Deutsche Bank finally took notice and launched an internal investigation. But it had no consequences - exactly until the moment when the British and American supervisory authorities became interested in dubious transactions.

Wiswell was fired from his job and his attempt to recover was unsuccessful. Deutsche Bank took action: it sent Wiz’s immediate subordinates on vacation, presenting the matter in such a way that they were the only ones involved in mirror fraud.

But, as in other similar cases (starting with the story that almost bankrupted the French bank Societe Generale in 2008), there are doubts about the sincerity of the big bosses.

“It is possible that the management turned a blind eye to the fraud, since these operations bring significant income. And then they made the performer a “switchman”. But, of course, there could also be a completely conscientious “blindness,” the head of the analytical department (BKF) suggested in a conversation with him.

Wiswell himself fled to Indonesia, where he still lives with his wife Natalya, a Russian artist. Apparently, he does not intend to return to Russia or the USA. And in January 2016, he shut down Rye, Man and Gor Securities for conducting dubious transactions and repeated violations of anti-money laundering legislation.

Without end

The trader was fired, Deutsche Bank stopped working in Russia - does this mean that the scheme of mirror transactions, like other methods of withdrawing capital from the country, is becoming a thing of the past? Unfortunately no. True, after the start of the deoffshorization process and the simultaneous introduction of sanctions by the West, brokerage services became significantly more expensive. According to the New Yorker, until 2015, banks took 0.2 percent of each such transaction, but now it will cost five percent for someone who wants to transfer money to London. The risk has increased, and so has the fee.

According to Osadchy, there is a kind of arms race going on: in response to tightening requirements from regulators, more and more new ways to withdraw capital are being invented, methods are changing and improving.

“Let us remember, for example, the “Moldavian scheme”, within the framework of which billions of dollars were withdrawn from Russia. Debt was created to non-residents under unfulfilled fictitious contracts, one of the parties to which was a Russian enterprise, and the other was a Moldovan shell company, the director of which was, say, a Moldovan shepherd. After this, the money was transferred by order of the Moldovan bailiff. The fictitiousness of these transactions was obvious, but for a certain bribe, judges and bailiffs in Moldova turned a blind eye to this. Millions of similar schemes can be invented - for example, exporting goods at an artificially low price,” says the expert.

The main breeding ground for such transactions is corruption and tax evasion. As a result, Russia loses tens of billions of dollars every year; they are simply stolen from the country. Cutting off illegal flows could easily solve the accumulated budget problems.

Unfortunately, it will not be easy to overcome this phenomenon in the near future, despite the crusade against offshore companies. “Such schemes are a common problem; they also exist in developed countries. Offshore companies were not created for Russia. This entire industry in the Virgin and Cayman Islands, Cyprus and many other places existed long before the collapse of the USSR. This is a worldwide problem. As long as there are taxes and corruption, there will be dirty money that is legalized and diverted from taxes. It is possible and necessary to fight this phenomenon, but it cannot be destroyed,” Osadchy concluded.