“Theft of the Century”: Report Reveals How 2014 Bank Scheme Robbed Moldova of Billions

Since 2014, Moldova has been following the “Billion Case” – a banking scheme that robbed the country of 12% of its GDP.  Although the fraud was initially thought to amount to around a billion U.S. dollars, a new report made public on July 4 revealed that the total amount of fraudulent loans was actually closer to $3 billion. Now, the country’s new Prime Minister Maia Sandu is determined to get this money back and bring the perpetrators to justice. But that’s easier said than done.

The National Bank of Moldova first hired the independent American investigative company Kroll to conduct an investigation on the bank fraud on January 28, 2015. The Moldovan Parliamentary Speaker, Andrian Candu, then leaked the audit report to the public in May, revealing that on November 24-26, 2014 approximately $1 billion had been stolen through three Moldovan banks: Banca de Economii (BEM), Banca Sociala and Unibank. The money was transferred to companies connected to businessman Ilan Shor, through massive loans made to entities within the Shor Group.

Investigative journalists from the Organized Crime and Corruption Reporting Project and Rise Moldova not only conducted their own investigations into the disappeared billion but also identified the largest money laundering scheme known to Eastern Europe: the “ Russian Laundromat.” Using a similar scheme running parallel to the “Bilion Case” a fourth Moldovan bank, Moldindconbank, was able to route $20.8 billion in Russian money through its accounts and out of the country. And companies belonging to Shor appeared in both cases.

The Kroll company issued its second report to the Moldovan government on March 22, 2018. And it remained under wraps for over a year. The Democratic Party (PDM) Government was reluctant to share the second report because of who was implicated in the fraud. But after the PDM was ousted in favor of a coalition government, a parliamentary commission decided to make the incriminating document public.

READ MORE: Moldova’s PM Maia Sandu on the New Government’s Next Steps

The 154 page Kroll-2 report was released on July 4, 2019. It outlined the process of defrauding the banking system, as well as the companies involved and some of their representatives. While details such as the names of certain companies and particular people involved in the bank fraud were often omitted, it did contain a list of 77 Shor Group companies and the loans they received from the main three Moldovan banks implicated in the theft.

Information left out of the report was quickly leaked to politicians and the press. These “Kroll Leaks” were selectively detailed and primarily offered information on high profile Moldovan politicians and businessmen. Although Ilan Shor was already implicated in the theft, the new data revealed that former Democratic Party (PDM) leader, oligarch Vladimir Plahotniuc, was also involved in the bank scheme, as well as former Prime Minister of Moldova Vlad Filat.

What’s more, the second report revealed that people and companies within the Shor Group had acted jointly to increase their stakes in BEM, Banca Sociala and Unibank, and thereby took control of the banks from 2012–2013. Over time, this allowed them to increase loan amounts to Shor Group companies and as a result, the three banks had made a total of $2.9 billion in loans to these companies from January 1, 2012 to November 26, 2014.

In their analysis of the Kroll-2 report, investigative journalism outlet Ziarul de Gardă (ZDG) identified six Moldovan companies as the main beneficiaries of $1.8 billion in bank loans: Caritas, Provolirom, Voximar, Dracard, Contrade and Danmira. ZDG also highlighted a number of business ideas outlined in the report, which revealed potential plans to finance projects in sectors like retail and construction, in places including – but not limited to – Moldova, Russia and Ukraine. What’s more,  a significant number of documents relevant to the loans made to the Shor Group were destroyed in a suspicious fire at the end of November 2014.

Most of the money from the loans was then redirected to accounts abroad and laundered through banks in a number of other countries. The majority (around 2.6 billion according to Kroll) went through the Latvian banks ABVL and Privatbank Latvia. These accounts appeared to have been opened for this purpose – they did not record any other transactions. Other funds were transferred to banks in Russia and other jurisdictions abroad, while some amounts went through a coordinated money laundering process in Moldova and then disappeared into several different bank accounts.

Meanwhile, a smaller portion (approximately $220 million) remained in Moldova and was used to repay loans from BEM, Banca Sociala, Unibank and other banking institutions, to clear additional debts or was mixed with other funds to make tracking the money impossible.

Although the companies that held the Latvian bank accounts were registered in the United Kingdom, their documentation often reveals commercial addresses in Russia, or company representatives that are Russian or Ukrainian citizens. These were people whose off-shore bank accounts received many of the transfers the Kroll report identified.

According to the “Kroll Leaks” Shor, Plahotniuc and Filat can be linked to approximately $25 million each, either directly or through their companies and affiliated individuals. The disaggregated data also identified another $157 million that was “cleaned” through accounts in Moldovan banks Victoriabank and Moldindconbank.

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A number of international beneficiaries of fraudulent transfers were listed too, but the larger sums included in this data were not necessarily broken down.  For example, 80 individuals from China allegedly received several thousand dollars each, while auditors lacked access to the data needed to analyze $302 million in transfers to Latvia. A full list of foreign beneficiaries who acquired funds through off-shore accounts remains to be seen.

On June 30, 2018 Moldova’s National Bank announced that it had liquidated over $68 million in assets from the bankrupt BEM, Banca Sociala and Unibank – but these were not funds recovered from the bank fraud. Nor did they make up for the total of $870 million in emergency bailouts the Moldovan Government paid to the three banks in question, under Prime Minister Iurie Leanca in November 2014 and his successor Chiril Gaburici in early 2015.

Since then, attempts have been made to seize property and goods, or to freeze assets through criminal cases for money laundering and fraud. But the extent of the bank fraud and the number of people involved still remains unclear and the former government was less than proactive in finding the perpetrators.

For example, although Moldovan anti-corruption prosecutors had been in possession of the Kroll-2 report since March 2018, the National Anticorruption Center and the Agency for the Recovery of Criminal Goods did not seize the assets of Plahotniuc’s company Finpar Invest SRL (a part of his real estate empire) until after his government ceded power in June 2019.

For those implicated in the fraud, like Plahotniuc and Shor, the delay essentially gave them the opportunity to clean up their assets before Moldovan law enforcement sequestered the holdings named in the report. Both men have since fled abroad and have yet to be brought to justice.

For Moldova’s new government,  there’s a lot of work to be done to recover the stolen funds. But perhaps more of the money is still in the country than one might think.

“The beneficiaries of these schemes don’t have to be offshore accounts on tropical islands; the funds could be recirculated in corruption schemes inside the country, through public procurement projects, privatizations, public private partnerships, party financing, economic monopoly, and bank loans,” explains ZDG writer Daniela Bechet. “Kroll confirms that the money laundering schemes hide the distribution of funds in accounts, including their return to Moldova to pay back other credits. Such practices could be supporting the functioning of the public and private sectors in the Republic of Moldova.” 

READ MORE: Moldova’s Prime Minister Wants A Foreign Prosecutor General. The President Disagrees.

/Adapted by Eilish Hart.  Using materials by Ziarul de Gardă, courtesy of the Russian Language News Exchange.