Re-launching one of the most shocking chapters of post-Soviet era, Russia has sued Bank of New York Co. for $22.5 billion for its role in a money-laundering design that was broken up by US establishment in 1999. The lawsuit, filed in Russia, is the largest complaint ever lodged by the Russian government against a foreign bank, according to a lawyer who filed it. The suit has slapped charges that Bank of New York helped deprive Russia of billions of dollars in tax revenue at a time when the government was straining to pay its bills.
Maxim Smal, a lawyer for the service, said the suit is ‘almost entirely based'’ on a US inquiry that concluded in 2005 with the bank agreeing to pay $38 million to settle two criminal probes and admitting it failed to report $7 billion in suspicious Russian transactions. The US investigation ‘uncovered very serious violations,’ Smal said, declining to give further details, saying more details will be uncovered at a news conference in Moscow.
On the other hand, Bank of New York shrugged off the Russian state money laundering lawsuit and hinted at extortion threats attached to the case. The accusations appear from a late 1990s money laundering case linking a former Bank of New York employee and her husband. Lucy Edwards, a former vice president who worked out of the bank’s London office, and her husband, Peter Berlin, declared accountable in 1999 to money laundering through the bank for several Russian firms. The couple paid a penalty and they were sentenced to six months of house arrest. According to reports, Bank of New York had agreed to pay a $26 million fine and $12 million to other institutions that might have lost money in the conspiracy.
Bank of New York said in its statement, ‘While we have not seen the complaint, based on our knowledge of the facts, we believe any such suit would be totally without merit, if not frivolous, and we would expect to defend it rigorously.’
Russian media reported that the Bank of New York case was the first ‘Russian mafia’ investigation that came under scanner of American justice in the late 1990s. Russia became aware about the case in August 1999 from publications in USA Today and The New York Times. The reports had cited anonymous FBI sources as saying the bank had helped launder up to $10 billion from Russia and Eastern Europe in 1996-99.
The Russian business daily Kommersant had reported that there was speculation that the money could have included Russian loans from the International Monetary Fund. In September last year, Russian law enforcement officials visited the US to inspect the reports. Although Russia’s chief delegate, Deputy FSB Director Viktor Ivanov, said the FBI had refused to provide evidence in the case.
Prosecutor assessment in Russian banks suspected of illegal money transfers overseas revealed no violations. Investigators had reportedly stated that $7 billion of Russian money had gone through the Bank of New York, but it later become apparent that the funds did not belong to the ‘Russian mafia,’ but were untaxed profit of Russian exporters. Prosecutors have added that Russian citizens and firms had made more than 160,000 illegal transfers overseas in the three and a half years.
