Transparency International Czech Republic conducted an investigation of money laundering mechanisms used for transfers of illicit funds from Russia to the Czech Republic.
The result of their work is presented in the form of an analytical report. The document describes specific schemes, as well as the loopholes, legislation and enforcement issues that made money laundering possible.
This investigation was triggered by the analysis of a trade-based money laundering (TBML) scheme described in a recent TI Russia’s investigation. Several Czech companies involved in the Bottle Laundromat also participated in arbitral (commercial) proceedings in Russian courts and thus drew attention.
In one of the schemes, the organizers made fictitious contracts for the purchase of promissory notes and Eurobonds between Czech and Russian companies, subsequently entering into arbitral proceedings and influencing the decision of the public commercial arbitration court in order to effectuate a transfer of illicit funds. The arbitration awards issued by Russian and Cypriot commercial arbitration courts made it possible to launder out of Russia € 35 million in 2014-2015. This scheme stands out in its use of international arbitration (private) courts, whose decisions national courts cannot review on their merits.
In the other scheme, more than € 32 million and $ 41 million were illegally transferred out of Russia in 2014-2016 through TBML. The licenses of some of the banks involved were subsequently revoked by the Central Bank of Russia.
Both schemes often involved the same facilitators, and used the same legal entities. At least one company involved in these schemes was used for the purposes of money laundering in both this laundromat and the Bottle Laundromat, and two more Czech companies were incorporated and managed by the same individuals who participated in said Bottle Laundromat. Certain Czech notaries and translators, proxy representatives, nominee directors and shareholders reoccur across cases and entities, and some individuals involved in this scheme performed similar roles in the Bottle Laundromat.
The report is available on TI-CZ’s website here.