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Source Unknown in N.Y. Bank Scandal

February 24, 2000

MOSCOW (AP) _ Russian police are continuing to probe the banks that allegedly helped launder $7 billion through the Bank of New York, but have yet to determine the source of the money, a top investigator said in an interview published Thursday.

Alexander Mikhailenko, the head of the Interior Ministry’s department for combating money laundering, said there is no evidence to back allegations that some of the money funneled abroad belonged to the Russian mob or companies trying to dodge taxes.

``Tax evasion or laundering of criminal proceeds don’t figure in the case yet,″ Mikhailenko said in the interview in the daily Vremya MN.

Mikhailenko said that the probe involves the Russian banks Flamingo, DKB and Sobinbank.

``We are trying to find the sources of the money and conditions of their transfer,″ he said.

The Bank of New York case, which began to unravel in August, entered a new stage last week when a former Bank of New York executive and her husband pleaded guilty to money-laundering charges.

Lucy Edwards, the bank’s former Eastern European Division vice president, and Peter Berlin admitted helping Russian bankers wash the billions through accounts at the bank in order to avoid Russian taxes and cover up the money’s connection to crimes _ including money used as ransom for a kidnapping in Russia.

Mikhailenko said his department had cooperated with U.S. investigators who came to Russia last fall to question some people in the case, and complained that the Americans failed to provide any information about the testimony by Edwards and Berlin.

``It means that we are carrying out our own investigation, while they are carrying out theirs,″ he said.

The DKB and Flamingo banks have gone out of business, but two prominent Russian banks that were linked to them, Sobinbank and MDM, are still on the scene.

Alexander Mamut, who had close ties with former President Boris Yeltsin’s inner circle, was a Sobinbank board member who later took the helm of MDM. He has denied any wrongdoing.

MDM released a statement Thursday saying it has had no dealings with either DKB or Flamingo since 1996, when MDM briefly owned shares in both banks. Even then, MDM’s role in those banks didn’t involve any say in their financial activities, the statement read.

At the same time, MDM acknowledged that in 1996 it regularly transferred money to its account with the Bank of New York on behalf of Sobinbank. Sobinbank at the time didn’t have its own account with BONY and had to act through MDM, the statement said.

MDM said it would invite an international auditor to confirm its claims.

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