President Petro Poroshenko’s offshore financial affairs may be casting a longer shadow than previously thought.
The Austrian Financial Market Authority is investigating whether Raiffeisen Bank International complied with anti-money laundering controls. The review was prompted by leaked documents from Panamanian law firm Mossack Fonseca that revealed a series of loans going from the bank to Poroshenko-affiliated companies, with a British Virgin Islands offshore company used as collateral.
“There have been some concerns about financing by Raiffeisen Bank International going to companies whose ultimate beneficial owner is Petro Poroshenko, so we ordered an on-site inspection,” Klaus Grubelnik, a representative of the Austrian Financial Protection Authority, told the Kyiv Post in a telephone interview.
“It’s all due to concerns under the law against money laundering,” he added, declining to comment further, citing secrecy requirements due to the ongoing investigation.
For Raiffeisen, however, the Poroshenko-related transactions are only the latest in a series of transactions over decades involving prominent Ukrainians.
Industrialist Dmytro Firtash had a Raiffeisen account frozen by the U.S. Justice Department as part of his indictment on bribery charges, allegations that he is denying from his exile in Vienna.
Poroshenko Bloc lawmaker Ihor Kononenko, meanwhile, was found to be linked to an account at the bank through a British Virgin Islands-registered offshore company called Intraco Management.
Raiffeisen International spokesman Christof Danz told the Kyiv Post that the bank does not comment on ongoing investigations or individual clients but complies with all laws.
Links to the top
In early April, Austrian magazine Falter published an article implying that Raiffeisen had laundered money on behalf of Poroshenko and gave a $115 million loan to his confectionary company, Roshen, in 2010.
According to Falter journalist Josef Redl, the Roshen loan was one in a decade-long series of lending arrangements. For all of the loans, a British Virgin Islands-registered offshore company called Linquist Services Limited was held up as collateral. The journalist discovered it in the leaked Panamanian documents.
According to Redl, the documents show a series of loans going back to 2003, many of which appear to be linked to companies close to Poroshenko.
For example, in February 2003 Raiffeisen extended a €191,625 loan to a Liechtenstein pesticide manufacturer called DDE Farm AG.
According to Ukraine’s customs registry, DDE Farm exports pesticides to two Ukrainian companies: Zorya Podillya, a sugar production firm owned by Poroshenko, and Margo.
Margo is owned by a firm called Shtefes, according to the company’s website. Shtefes is an agriculture company owned by a man named Johannes Herbert Stefes, an 88-year-old German who moved to Ukraine in the 1990s to start a business.
In a 2010 interview with Ukrainian agriculture magazine Zerno, Stefes said that his business’s first main client was Oleksiy Ivanovych Poroshenko, the president’s father. In the interview, Stefes said that his fledgling company was owed money by local farmers, but that after meeting the elder Poroshenko in the nineties, “we bid farewell to all the debts and started on a new page.”
Stefes does not keep his business confined to Ukraine. The Liechtenstein company DDE Farm that received the initial loan that was collateralized by Linquist Services, is owned by both Stefes and Valentyna Potapova, another Ukrainian Shtefes executive.
The Kyiv Post was told “not to call back” after telephoning the Liechtenstein address at which DDE Farm is listed. In a phone call with the Kyiv Post, Stefes said that “Poroshenko’s business is a customer for me. Raiffeisen Bank was helping me when I was in Ukraine the first time. There was a very corrupt situation, it was helping me to get the first financing for my business here in Ukraine. And Poroshenko is no longer in the business.”
The firm at the center of the Panama Papers controversy – Linquist Services – also appeared in the 2013 sale of Ukrainian Media Holdings by Presidential Administration chief of staff Borys Lozhkin to now-exiled oligarch Serhiy Kurchenko, suspected to be the front man for ex-President Viktor Yanukovych.
According to a 2015 investigation by news website Expres.ua, Poroshenko held shares in UMH through Linquist Services. Expres claimed that Linquist’s shares in UMH disappeared days before Lozhkin sold the company to Kurchenko.
Longstanding ties
Raiffeisen appears to have maintained links with top Ukrainian businessmen and politicians since the early 2000s.
In 2006, U.S. diplomatic cables leaked by Wikileaks showed that top U.S. officials pressured Raiffeisen to back out of an arrangement that would have seen it finance gas trading by the murky RosUkrEnergo energy trading company partly owned by the Kremlin’s Gazprom and Firtash.
Though Raiffeisen officials relented to U.S. pressure, prosecutors still attempted to freeze a Raiffeisen account held by Firtash in a 2011 bribery indictment.
Raiffeisen’s Ukrainian subsidiary, Raiffeisen Bank Aval, has received state support since it came under control of its Austrian parent in 2006. Raiffeisen Aval is Ukraine’s seventh-largest bank. Across Eastern Europe, Raiffeisen Group constitutes the region’s second-largest lender.
In 2009, Ukrainian banks were foundering in the wake of the global financial crisis. In March of that year, the National Bank of Ukraine provided Raiffeisen Aval with Hr 1 billion in refinancing.
The refinancing occurred under a “program to stimulate the crediting of farming enterprises,” Interfax-Ukraine quoted Poroshenko – then the head of the Council of the National Bank of Ukraine – as saying at the time.
The ongoing Austrian investigation is not Raiffeisen’s first brush with controversy. Herbert Stepic, the bank’s former chief, resigned in 2013 after a document leak revealed that he had used offshore companies to purchase property in Asia.
“Raiffeisen had a very look-the-other-way, wink-wink attitude towards how it operated in the CIS, which is why it’s been such a favored bank,” international lawyer Jamison Firestone told the Kyiv Post.
Firestone represented Firtash in the April 2015 Vienna proceedings in which a judged denied a U.S. government extradition requiest. Firestone said Raiffeisen conducted proper due diligence in Firtash’s case.
