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Raiffeisen’s Ties to Murder and Corruption in Russia

Yesterday I read with great interest the news of the Austrian Prosecutor’s investigation into transactions made between Diskont Bank in Russia and Raiffeisen Zentralbank (RZB) of Austria. Given both the timing of this disclosure and the fact that a Raiffeisen subsidiary is responsible for the management of half of RosUkrEnergo, the notoriously shady joint venture with Gazprom that brought an end to the Ukraine-Russia gas dispute and is alleged to facilitate corruption in the gas trade from Turkmenistan, it seems that there are some new urgent questions regarding RZB’s role in Russia.

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Like the well known adage, follow the money

Diskont Bank, which had its license revoked by the controversial reformer Andrei Kozlov two weeks before his tragic assassination last year, had made a transfer of $4 million that was flagged for suspicion of money laundering. The Austrian authorities froze that amount, and are investigating “a much larger amount” that has passed through Raiffeisen Zentralbank from Diskont but has already been diverted out of the country. Although the Russian prosecutors say that the Kozlov case is closed, and seem to have settled upon banker Alexei Frenkel as the prime suspect (indeed, with fortuitous timing, just yesterday the court announced the rejection of Frenkel’s appeal against the charges), the report from the Financial Times on this Austrian money laundering probe shows that there is some disagreement as to whether the case could have involved official corruption:

In an official report on money laundering in Austria, the Austrian interior ministry questioned the Russian findings and said it could not rule out “official corruption” as being behind the killing of Kozlov. “There are many more signs implying such a link,” it said in a report focusing on the probe it launched. The ministry said the Russian authorities had failed to provide information on the transfers through Raiffeisenbank that it had cracked down on with the help of Kozlov, despite requests, after his death. The interior ministry report said it had tracked more than $112m from three offshore companies going through the Moscow bank’s correspondent account in Austria to another 50 offshore companies in the space of just four days preceding the account freeze. It said more than $44m had entered Diskont Bank’s dollar account and in one day were transferred in 34 transactions to a series of offshore companies when it received the suspicious transaction report. The investigator in charge of the case, Ernst Mahr, declined to comment further. A spokesman for the Austrian prosecutors’ office said they were continuing their investigations, together with their counterparts in Latvia where some of the cash was transferred, but added: “We don’t have everything we need yet from Moscow.”

kozlov.jpg Does the Austria connection reveal a government link to murder of Andrei Kozlov and the trial of Alexei Frenkel? Once again it seems that Russia is reluctant to cooperate with an international investigation, and, as usual, this reluctance is encouraging suspicion. With the ink still drying on a dozens of business deals between Austria and Russia signed during Putin’s official state visit last week (including a major agreement between OMV and Gazprom), it is reasonable for the Austrian prosecutor to demand all the information that Russia can provide them with on this case. While there are still far too many unknowns to put forward theories on RZB’s involvement in Russia, we will be following this story very closely, and posting up new information as it becomes available. Stay tuned for more background.