Investigation: Ukrainian oligarchs, PEPs moved dirty billions across the globe

A cross-border investigation, FinCEN Files, conducted by over 400 journalists from all over the world, revealed how banks and regulators allowed $2 trillion in dirty money — including some from Ukraine — to move abroad unchecked. Crooked politicians and business people fueled drug cartels and criminal enterprises with illicit money and profited at the expense of ordinary people.

The Kyiv Post contributed to the investigative project coordinated by the International Consortium of Investigative Journalism (ICIJ) and BuzzFeed News.

Ukrainian names popped up in the investigation and include some of the country’s richest people, such as oligarchs Rinat Akhmetov, Ihor Kolomoisky and Dmytro Firtash, ex-president Petro Poroshenko, fugitive Ukraine’s ex-President Viktor Yanukovych and a businessman known as his “wallet,” Serhiy Kurchenko.

Kolomoisky and Firtash, along with businessman and politician Andriy Klyuyev, are listed among people whose money transfers were flagged as suspicious by bankers, according to FinCEN Files.

FinCEN Files is a leak of suspicious activity reports (SARs) filed by global banks to the U.S. Treasury Department’s intelligence unit, the Financial Crimes Enforcement Network, known as FinCEN. 

FinCEN was involved in searching for and retrieving money stolen from the nation by Yanukovych, Ukraine’s president ousted from power by EuroMaidan in 2014. The vast majority of the findings were handed to Ukraine’s law enforcement. Some involve Paul Manafort, an American political consultant, who worked for Yanukovych, and who led Donald Trump’s election campaign in 2016. 

Having received FinCEN’s report on Manafort, the Department of Justice later indicted him. In 2018, he was convicted on eight charges of tax fraud, bank fraud and failure to disclose foreign bank accounts.

FinCEN leaks include those banks’ reports on Manafort. 

Altogether, BuzzFeed and ICIJ got hold of over 2,100 strictly confidential SARs that exposed money transfers amounting to $2 trillion.

Ukrainians involved

Ihor Kolomoisky, a powerful Ukrainian oligarch and a former business partner of Ukraine’s President Volodymyr Zelensky.

The oligarch had a small role in the drama of the U.S. President Donald Trump’s impeachment, having been asked to help organize a meeting between Zelensky and Trump’s lawyer Rudy Giuliani, a plea Kolomoisky reportedly rejected.

The U.S. authorities are now accusing Kolomoisky of siphoning billions from PrivatBank, Ukraine’s largest bank the oligarch owned before 2016 nationalization.

Kolomoisky and his partners allegedly directed hundreds of millions from PrivatBank into the U.S., where they bought at least 22 properties, including a 31-story office tower in Cleveland and steel mill in Ohio, U.S. authorities say. 

In August, the Justice Department filed two civil forfeiture complaints that could allow it to seize $70 million worth of Kolomoisky’s real estate. 

What the FinCEN Files reveal about Kolomoisky: 

From 2012 to 2017, the Bank of New York Mellon moved more than $263 million for companies controlled by Kolomoisky. The largest portion of the amount, worth more than $202 million, was sent in December 2015 and January 2016 by Singapore-based Louis Dreyfus Commodities Asia in transfers that Ukraine law enforcement authorities are now investigating. 

The funds were sent to the PrivatBank Cyprus account of Claresholm Marketing Ltd, a British Virgin Islands shell company that allegedly was central to Kolomoisky’s money laundering scheme amounting $5.5 billion. PrivatBank Cyprus used its correspondent account at Deutsche Bank Trust Company Americas to receive the funds. The Bank of New York Mellon reported the transactions as suspicious in August 2017.

Deutsche Bank also moved more than $215 million for Kolomoisky’s Ukraine International Airlines in 2015 and 2016, the FinCEN Files show. In one of its suspicious activity reports, the bank noted that Kolomoisky was a “politically exposed person” who was suspected of financial crimes and that many of the transfers were sent in large round numbers from high-risk jurisdictions. Deutsche Bank noted in a 2016 report that it was going to end its relationship with the company.

Suspicious activity reports reflect the concerns of compliance officers and are not necessarily indicative of criminal conduct or other wrongdoing. In public comments, Kolomoisky has denied any involvement in illegal schemes and said Ukraine’s government illegally seized his bank. He has filed a multitude of lawsuits in Ukrainian courts to claim the bank back. 

Dmytro Firtash, a fugitive Ukrainian oligarch living in Vienna and fighting extradition to the U.S.

A Reuters investigation found that Firtash made his fortune by importing billions of dollars of natural gas to Ukraine from Russia at an artificially low price. In 2013, Firtash was indicted on U.S. charges that he bribed Indian officials for a lucrative titanium mining deal. Released on bail, Firtash has since fought extradition to the U.S. from his home in Austria while allegedly offering favors to U.S. President Donald Trump’s personal lawyer Rudolph Giuliani, according to media reports. Giuliani reportedly used documents provided by Firtash to further an allegation that former Vice President Joe Biden sought to fire Ukraine’s chief prosecutor to protect his son.

U.S. prosecutors have described Firtash as an “upper-echelon” associate of Russian organized crime. Firtash has denied ties to Mogilevich and allegations of wrongdoing.

What the FinCEN Files reveal about Firtash: 

Firtash and companies he controls pushed billions of dollars through the global financial system via major U.S. and U.K. banks. The banks raised suspicions about Firtash’s transactions dating back to at least 2003.

In August 2008, a Firtash entity, Bothli Trade AG, sent $78,101 to Standard Chartered Bank accounts of Periyasamy Sunderalingam, according to a FinCEN report. Sunderalingam helped facilitate Firtash bribes to Indian officials, the U.S. government alleges in its indictment.

Nadra Bank, a Ukrainian bank which Firtash owned, routed more than $1 billion through the New York branches of two global banks: Standard Chartered and the Bank of New York Mellon, according to a 2014 FinCEN report. Some of these transfers involved Firtash’s money. Mellon did not comment on its relationship with Nadra Bank. Standard Chartered also did not comment directly on its relationship with Nadra Bank. 

Andriy Klyuyev, a wealthy businessman and ex-chief of staff for ex-President Yanukovych. 

Klyuyev was sanctioned by the European Union in 2014 for the alleged embezzlement of state funds and by the U.S. the next year for aiding Yanukovych in subverting democracy in Ukraine. In March 2019, the sanctions were dropped. 

Among Klyuyev’s most prominent ventures was his family’s solar energy group, Activ Solar, which received hundreds of millions of dollars in loans from Ukrainian state banks that it never repaid. Klyuyev served as Yanukovych’s chief of staff, and he was investigated by Ukrainian prosecutors for alleged involvement in human rights abuses against protesters by Yanukovych’s security forces. The investigation was later dropped.

What the FinCEN Files reveal about Klyuyev: 

In 2017, JPMorgan Chase flagged $230 million moved by Andriy Klyuyev’s U.K.-based company, NoviRex Sales LLP, over five years (2010-2015). 

NoviRex funneled secret payments for political consulting to Manafort, who consulted Yanukovych, the bank’s report notes. Some of the transfers to Manafort-related shell companies appeared to be disguised as payments for computer hardware, the bank wrote. 

The transfers also included more than $40 million paid in 2011 to NoviRex by TH Veles, a company suspected of funneling corrupt payments to Yanukovych that was liquidated in 2013. The TH Veles transfers included payments for a book authored by Yanukovych, which was never published.

The FinCEN Files also contain a report from Ukraine law enforcement officials that examines the Klyuyev family’s alleged corruption schemes. The report details a web of offshore companies and transactions associated with Klyuyev business operations that were under criminal investigation for suspected money laundering and embezzlement.

The transactions include the Klyuyev family’s purchase of a company, Tantalit Ltd., that had bought the opulent Ukrainian presidential estate, Mezhyhirya, where Yanukovych lived.

Attorneys for Klyuyev did not respond to ICIJ’s request for comment.

The investigation also mentions Yuriy Ivanyushchenko, a politician close to ex-President Yanukovych who fled Ukraine in 2014, following the EuroMaidan Revolution that toppled Yanukovych. 

Ivanyushchenko allegedly was behind an obscure Cyprus company called Tornatore Holdings LTD. It was the vehicle for controlling Gazenergolizing, which had a monopoly to supply the country’s mines with equipment, the journalists of Nashi Groshi revealed in 2011. 

Among coal mines the company was responsible for supplying equipment to a state-owned Bazhanov coal mine based not far from Donetsk in eastern Ukraine. 

In 2011, 11 people were killed at Bazhanov when a tower collapsed onto the building where employees sorted coal from rock. An official commission identified aging equipment as a possible factor in the Bazhanov tower collapse. Employees grumbled that the collapsed tower hadn’t been replaced in 50 years.

According to Nashi Groshi, a procurement watchdog, the state-owned mine had bought replacement gear from Gazenergolizing before the collapse, but they couldn’t determine if gear had been delivered or even if the order was legitimate.

Deutsche Bank then noticed warning signs after processing two large payments on Tornatore’s behalf.

What FinCEN Files reveal about Ivanyushchenko: 

In December 2011, Tornatore received $5.5 million from a Ukrainian mine equipment subsidiary called LLC Gazenergolizing. The next day, Tornatore sent $999,994 to a large Russian leasing company, partially owned by the Kremlin, according to the investigation. 

The high-value payments, some rounded almost to the nearest thousand or million in what experts consider a “fingerprint” of fraud, capped off a year of Deutsche Bank concerns about Tornatore. The company had made suspicious payments and had no obvious home or “line of business,” bankers wrote in reports beginning in March 2011, a few months before the accident at the Bazhanov mine that summer.

Ukraine’s state auditing agency published a report in 2011 that painted a bleak picture of the mine’s operations. It found $21 million worth of damaged equipment at the Bazhanov mine’s headquarters, miles from the accident, and identified $205 million in “shortcomings in accounting, gross violations of financial and budgetary discipline.”

Ivanyushchenko is under investigation by authorities in Ukraine and Switzerland for allegedly embezzling millions of dollars earmarked for energy projects. Through Swiss lawyer Vincent Solari, Ivanyushchenko denied owning or holding shares in Tornatore or Gazenergolizing. “The alleged ‘informations’ on which you seem to refer are wrong,” Solari said.

Key findings of FinCEN Files include:

• Global banks moved more than $2 trillion between 1999 and 2017 in payments they believed were suspicious, even though there were flagged clients in more than 170 countries who were identified as being involved in potentially illicit transactions. The figures include $514 billion at JPMorgan Chase and $1.3 trillion at Deutsche Bank.
• The FinCEN Files show that five global banks — JPMorgan Chase, HSBC, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon — moved illicit cash for shadowy characters and criminal networks even after U.S. authorities fined these financial institutions for earlier failures to stem flows of dirty money.
• In half of the FinCEN Files reports, banks didn’t have information about one or more entities behind the transactions.
• JPMorgan Chase moved money for companies tied to the massive looting of public funds in Venezuela, Malaysia and Ukraine, including under-the-table payments from disgraced Ukrainian officials to Paul J. Manafort Jr., U.S. President Donald Trump’s convicted former campaign manager.
• Deutsche Bank ignored red flags for years and played an integral role in the historic $230 billion money laundering scandal now engulfing Danske Bank’s Estonian operation. The German giant’s automated systems flagged one anonymous U.K.-registered shell company — later revealed as a major laundering vehicle — a dozen times but the bank still processed $2.6 billion and didn’t file a SAR for years until a separate scandal brought the shell company to light.
• Danske Estonia bankers implicated in the scandal ran a secret side company to help set up U.K. shell companies on a wholesale basis for anonymous clients.
• Shadowy entities with ties to the Baltics, known as formation agencies, use a loophole in U.K. corporate law to mass produce anonymous U.K.-registered shell companies and help them set up accounts in corrupt Baltic banks. Nine agencies alone set up 2,447 companies found in the FinCEN Files.
• HSBC continued to transmit money for alleged money launderers and an international Ponzi scheme even while it was serving a five-year probation with U.S. courts.
• In 2014, a U.S. task force recommended that the Treasury Department designate Dubai-based gold conglomerate Kaloti Jewellery Group as a money laundering threat under the USA Patriot Act — but the government didn’t act.
• Banks reported more than $4.8 billion between 2009 and 2017 in suspicious transactions with links to Venezuela. Nearly 70% of that amount had a Venezuelan government entity, such as the Ministry of Finance or the state oil company, as a party.