Friday, January 11, 2019

Azerbaijan Plays A Large Role In Two Of the Top Five Money Laundering Operations of 2018

From The American Interest, January 4:

Kleptocracy Watch
The Danske Bank Money Laundering Trail
The inquiries into one scandal-ridden Estonian bank branch reveal the deep failures of post-financial crisis governance—and the serious risks that money laundering poses to the financial system.
With four separate investigations now underway, UK, U.S., EU, and Danish investigators are all peering into the murky dealings of the Estonian branch of Danske Bank, headquartered in Copenhagen. Over the course of a nine-year period beginning in 2007, the bank is suspected to have served as a key link in transferring more than $225 billion from Russia to London and other leading Western capital market centers.

The scale of the unlawful flows that passed through Danske Bank is without precedent. But the scandal rocking the bank is only a microcosm of a wider problem, and a deeper failure of post-financial crisis governance.

A central goal of European and American banking reforms following the financial crisis was to significantly improve banking risk management, through regulatory reforms and internal strengthening of compliance systems. But the unprecedented scale of malfeasance at major global banks since then demonstrates that this effort has been woefully inadequate. Across the globe, banks have faced record-high fines for corruption, money laundering, interest rate manipulation, and fraud.
In the case of Danske Bank, the names of the original individuals and organizations believed to have engineered the illicit flows of cash from Russia and Azerbaijan are still unknown. So, too, are the beneficial owners of the UK-based companies registered in various Caribbean islands that accepted the funds.

Danske Bank and other similar banks with branches in the Baltic countries are surely undertaking a full review of their compliance approaches and controls. But they need to go far beyond technical reviews to question the core culture of their institutions and the failure of their boards of directors to vigilantly ensure management oversight.

Perhaps the findings of official investigations will wake up the sleepy bankers in their board rooms. If that happens, and if it precipitates real change in how banking risk is managed and compliance ensured, we may have the British to thank.

Of all the ongoing investigations into Danske Bank, the British approach may be both the most original and productive. The British National Crime Agency (NCA) and its newly established affiliate, The National Economic Crime Centre (NECC), are now concentrating their efforts on cash coming from Azerbaijan. This appears to be a plan to go after what may be the single largest set of money laundering schemes in history.

The British were first alerted to substantial inflows of Azerbaijani cash into the United Kingdom well before the full scale of Danske Bank’s dealings became known. In 2017, a group of journalists from countries including Germany, Switzerland, Russia, France, the Czech Republic, the Baltic states, the United Kingdom, and the United States released a series of reports on what they called the “Azerbaijani Laundromat.” Working with the Organized Crime and Corruption Reporting Project (OCCRP), they uncovered “a complex money-laundering operation and slush fund that handled $2.9 billion over a two-year period through four shell companies registered in the UK.”

To combat such activities, the UK authorities are now using a new tool: Unexplained Wealth Orders (UWOs), which were created under the British Criminal Act of 2017 and have been effective since the start of 2018. In a series of court decisions, three UWOs have been brought against Mrs. Zamira Hajiyeva from Baku, Azerbaijan, who lives in London. The UWOs call on her to explain how she was able to raise the funds to own two UK properties valued at over $28 million, as well as jewelry valued at over $500,000 that the NCA impounded from Christie’s auction house.
Mrs. Hajiyeva is the wife of Jahangir Hajiyev, who from 2001 until 2015 was chair of the International Bank of Azerbaijan. For many years, he was very close to his country’s all-powerful first family: President Ilham Aliyev and his wife Mehriban Aliyeva, who also serves as Vice President. But Hajijyev must have displeased them, perhaps taking too much of their cash; he was jailed for 15 years in 2016 and is now facing further charges.

Mrs. Hajiyeva lives in a mansion a three minutes’ walk from the Harrods department store in London where, according to NCA documents, she spent around $21 million over several years. London was a logical second home for the family as the International Bank of Azerbaijan had many dealings in the United Kingdom and its affairs clearly interest the NCA.

But the British are not the only ones to be interested. In mid-October, members of the Council of Europe Assembly signed a joint motion decrying Baku’s inaction in face of the allegations. “One year since the Laundromat investigation exposed Azerbaijan’s multi-billion scheme to carry influence, pay lobbyists, and to launder cash,” they wrote, “nothing has changed in Azerbaijan. No criminal investigation has been launched; no one held accountable.”...MORE
See also:
GFI Names the #1 Money Laundering Facility of 2018