Page 76 - bne Magazine February 2023

76 I Eurasia bne February 2023
Another suspect, Bank Melli chairman Mahmoud Reza Khavari, fled to Canada, where, now 70, he remains a fugitive to this day, denying all wrongdoing.
Mostafa Pour Mohammadi, the then head of a judicial investigations unit, described the case as "the most unprec- edented financial corruption case in the history of Iran".
Some defendants argued that while prosecutors focused on pursuing small fry involved in the fraud, senior regime officials, without whom it could not have taken place, walked away. To this day, many Iranians remain convinced that was the case.
Danske's Estonian money-laundering scandal
Even banks in EU countries are not immune from scandal. In the late 2010s, Denmark’s Danske Bank was revealed to be involved in a huge money-laundering scandal in Estonia in which around $160bn was processed on behalf of customers deemed high risk by the US Department of Justice (DoJ).
Danske defrauded US lenders over its anti-money-laundering measures at its Estonia branch, allowing “high-risk
According to a bne IntelliNews investiga- tion in 2019, Danske even laundered money for the Ukrainian arms mafia’s sanctions-busting activities in North Korea and Iran.
Now the bank will pay a $2bn penalty
in relation to the scandal, the Financial Times reported on December 13. US authorities said that while the bank knew by at least February 2014 that some of these customers were involved in potentially criminal behaviour, it lied to US banks about the Estonia branch’s anti-money-laundering programme.
The $2bn penalty is the largest forfeiture imposed by the US Department of Jus- tice on a financial institution compared to its market capitalisation, Kenneth Polite, assistant attorney-general for
the DoJ’s criminal division, told the
Financial Times.
Danske withdrew from Estonia when the scandal broke in 2018, selling its operations to local player LHV Pank. Danske Bank has also withdrawn from Russia and Latvia.
The former head of Danske's Estonian branch, Aivar Rehe, was found dead in September 2019, two days after being
2020s
Mongolia's 'coal mafia'
The latest massive scandal to break in the region is the “coal mafia” scandal in Mongolia. Officials and company executives allegedly stole billions of dollars of export proceeds for coal clandestinely hauled to China.
The fact that huge volumes of coal have allegedly been pilfered in the past decade at least was discovered after officials compared Mongolian export data with import data reported by China, which buys almost all of Mongolia’s coal exports.
Coal accounted for more than half of Mongolia's export revenue in the first 10 months of this year, according to central bank data.
The authorities said that part of the coal mafia investigation was focused on 7,373 trucks that repeatedly carried coal to the Chinese border between 2013 and 2017 but appeared to have arrived “empty”.
Reports of the alleged embezzlement sparked mass protests. Among protesters braving sub-zero winter cold to maintain protests were some who set up tradi- tional tents, gers, to allow them to stay in the capital’s central square overnight.
On December 13, the Independent Authority Against Corruption (IAAC) announced the arrest of 17 people for coal theft. Former President Battulga Khaltmaa, two of his former staff and seven MPs were named, along with four South Gobi Province lawmakers, both current and former, and former ETT directors.
However, some protesters told bne IntelliNews that names of suspects provided by the authorities in the affair so far were “just scraps” and that the government was protecting some of the criminals.
In a lament often heard after similar scandals broke in other parts of Emerging Europe and Central Asia, protesters are slamming those who “stole prosperity from the people”.
“Prosecutors focused on pursuing small fry involved in the fraud, senior regime officials, without whom it could not have taken place, walked away”
customers”, including many from Rus- sia, to access the US financial system, according to the DoJ.
Court documents cited by the DoJ show Danske’s Estonia branch attracted for- eign customers between 2008 and 2016 by allowing them to transfer large sums of money through it “with little, if any, oversight”. The DoJ says the branch pro- cessed $160bn through US institutions on behalf of these clients, and conspired with these individuals to mask the real nature of the transactions, sometimes via shell companies.
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reported missing. The Estonian police determined he had committed suicide.
The lender still faces several civil lawsuits from shareholders, and on December 13 it said it would defend itself “vigorously” against them.
All three Baltic states have struggled
to control the influx of dubious money from the East into their banking systems, but have been forced to improve their supervision following pressure from the European Union and, in particular, from US prosecutors and regulators.