FinCEN leaks in Baltics. Unknown Riga bank that serviced one of the world’s richest men

Russian aluminium tycoon Oleg Deripaska moved more than $3 billion of suspicious origin through a small Latvian bank.

On a sunny day in June 2007, a group of journalists gathered at the airport in Riga. They were hoping to catch a glimpse of Oleg Deripaska, at the time one of the richest men in Russia.

He was flying in on a private jet to the Latvian capital for a board meeting of RUSAL, his aluminium business holding. It was a tradition at RUSAL for the board to meet in various European capitals and that year, the honour fell on Riga.

The stakeout proved fruitless, however, as Deripaska boarded a VIP bus and left before anyone could ask him anything.

En route to Riga’s centre, Deripaska passed a construction site where a company he co-owned, Strabag, was building two skyscrapers called the Z-Towers. Although the project attracted a lot of attention in Latvia, it was a drop in the bucket compared to the global scope of his business empire.

Deripaska’s RUSAL was part of his main holding Basic Element, which included energy, manufacturing and construction companies all around the world. Forbes estimated Deripaska’s fortune in 2008 at $16.8 billion and called him the richest man in Russia and the 9th richest man in the world.

Deripaska had accumulated his startup capital in the turbulent 1990s and cemented his status by marrying into the family of Russia’s first president, Boris Yeltsin.

Deripaska has also shown loyalty to the administration of current Russian President Vladimir Putin, for example, by investing one billion dollars in buildings for the 2014 Olympic Games in Sochi.

One reason why Deripaska was included on the sanctions list in the United States was because he had allegedly helped President Putin to  launder money  . He denies the allegation and has filed a lawsuit against the US, demanding he be removed from the list.

Deripaska’s short visit to Riga in 2007 was not his only connection to Latvia. Since at least 2002, Deripaska used a little-known Latvian bank Expobank (then called LTB Bank) to transfer billions of dollars for his businesses and, through an opaque network of shell corporations, may have paid for lobbyists in Washington, private jets, office and homes in New York as well as real estate in Montenegro.

Leaked US documents, known as the FinCEN Files, show that at least $3 billion were transferred through Expobank in connection with Deripaska’s businesses between 2002 and 2016.

These transfers were reported to the Financial Crimes Enforcement Network (FinCEN), a US government agency which tracks money laundering and international crime by large international banks. They thought it was suspicious that the origin of the money was unclear, transactions frequently involved shell companies and that the money was sent through Latvia, which at the time was seen as “a high-risk jurisdiction”.

Re:Baltica was able to access these documents as part of an international journalism investigation by the International Consortium of Investigative Journalists, BuzzFeed News and 108 media partners around the world.

FinCEN regularly received information about suspicious transactions (not just Deripaska) through various Latvian banks, whose main business were to serve non-resident accounts, such as BlueOrange Bank (previously Baltikums Bank), Expobank, Regional Investment Bank, Rietumu Bank, as well as now defunct ABLV, PNB Bank (previously Norvik Banka) and Trasta Komercbanka.

Regarding Expobank alone, one of the leading banks – The Bank of New York Mellon – reported suspicious transactions totalling $29 billion between 2006 and 2016, the documents say. That is nearly three times the size of Latvia’s entire 2020 budget.

 Villas, private jets and Washington lobbyists 

Kotor, a Montenegro coastal town, is a tourist mecca on summer evenings. Before Covid-19 hit, cruise ships spilled out hordes of vacationers who came to enjoy the sun, the ancient port city and its beautiful Adriatic Sea beaches.

It seems that Deripaska also appreciated this beauty and possibly an opportunity to make more money. One shell company connected to him owns two exclusive properties near Kotor.

On one in Platamuni stands an impressive housing complex: two marble palaces, nine smaller guest houses and a 500-square-metre swimming pool. Local media has dubbed it Deripaska’s summer home. The construction of a helicopter pad is planned. It would allow clients to arrive and depart discreetly to Platamuni whose territory is surrounded by a five-meter fence and is guarded 24 hours a day.

Nearby stands another massive property possibly linked to the Russian oligarch. Right now, it is just a forest near two popular beaches, according to Montenegro’s land and company registry. The plan is to build a five-star hotel, luxury villas, a restaurant and spa center.

Both properties were indirectly owned by Tangril Equities Limited (in 2019 it changed its name to Advante Management Corp.), which used to have an account at Expobank. It is impossible to determine who owned Tangril as it is registered in the British Virgin Islands which allows ownership to remain hidden. Deripaska did not comment on Re:Baltica’s question whether he was the beneficial owner of Tangril Equities Limited nor other questions about the particular wires mentioned in this article.

Nevertheless, Tangril’s account was used to transfer money to several other companies linked to Deripaska.

It looks like almost $8 million was paid to rent two Gulfstream G550 planes, which were used by Deripaska and his companies. These aircraft, which cost $50 million brand-new, are popular because they can make long journeys without refueling.

Another $9.5 million was transferred to another account held at Expobank by a shell company for the lease of a third Gulfstream G550 plane. Its beneficial owner was a woman who shares the name of Deripaska’s mother: Valentina Deripaska, according to the  OffshoreLeaks database  .

Money from the Expobank accounts also went to hire lobbyists in Washington. Their job was to promote business ties between Russia and the United States, seek out new partners for Deripaska’s businesses and help in getting Deripaska an entry visa to the United States. The Endeavor Law Firm, a lobbying group, has represented Deripaska not only as a private individual, but also as “   an economic advisor   to the President of the Russian Federation”.

In his name, the law firm reached out to various US government officials, including the officials in the office of then-Vice President Joseph Biden, according to the US government lobbying database FARA.

Parallel to Deripaska, Endeavor also represented Sergey Lavrov, the Russian Foreign Minister. However, according to the lobbying database, Lavrov did not pay for the lobbyists’ advice. Re:Baltica was unable to find out if that meant that Deripaska was paying also for the services provided to Lavrov as its questions to the firm’s email went unanswered.

Between 2010 and 2014, at least $2.4 million was paid for Deripaska lobbying efforts, according to the FARA documents.

Deripaska’s role as a “senior official of the Government of the Russian Federation” was one of the reasons he landed, along with other Putin oligarchs, on the  sanctions list   released in 2018. The US Treasury noted that “there are also allegations that Deripaska bribed a government official, ordered the murder of a businessman, and had links to a Russian organized crime group.”

Deripaska calls these allegations “   false rumor and innuendo  ” in his lawsuit against the US Treasury over the sanctions. The stakes are high as the sanctions froze not only his personal accounts, but also the accounts of his businesses. Deripaska’s “net worth has fallen more than $7.5 billion, or approximately 81 percent, since the time of the designations—[he] has been irrevocably forced out of his controlling interests in his largest businesses,” he claims in his complaint. Deripaska’s businesses that employ 200,000 people and 1.5 million contractors were brought to “the brink of collapse” due to the sanctions, he said in his complaint.

After Deripaska cut his stake in his businesses, the companies were taken off the sanctions list. He, however, does not have access to the companies’ dividends as long as he is on the list.

Due to client confidentiality, it is not known how Expobank has handled his money since he was sanctioned. According to the leaked documents, the bank was conducting business with Deripaska as late as 2016. When the billionaire was added to the US sanctions list two years later, the bank had to suspend or at least freeze its business relationship with him.

“We are doing everything as required by law,” said the chairman of the board at Expobank Rolands Legzdiņš.

 Expobank and its powerful clients 

Surrounded by a stone fence, Expobank is located in a historic building in a prestigious district of Riga and looks more like one of the nearby embassies than a financial institution.

It was founded as Tirdzniecības banka shortly after Latvia declared its independence from the Soviet Union in 1990. The bank began attracting Russian oligarchs as clients in the early 2000s when it was bought by MDM-Bank, one of the largest banks in Russia. Deripaska served on the board of the Russian bank.

Several years after the MDM purchase, Latvia joined the European Union. That meant that Expobank, like the rest of the sizable non-resident banking sector, became attractive for pumping money out of Russia to the West. The local bankers’ knowledge of Russian business culture and the language was an additional bonus.

“If you were a bank in NY, maybe receiving money from a bank in Latvia was less of a compliance and screening headache than receiving it from Moscow,” Tom Keatinge, an expert on financial crime at the London-based think-tank RUSI, told Re:Baltica.

In 2008, following the Russian military incursion into the ex-Soviet Republic of Georgia, the United States started keeping closer track of the origin of Russian money. In the fall of 2008, the Wall Street Journal reported that the US and United Kingdom law enforcement agencies were investigating Deripaska’s connection to a $57.5 million transfer from Russia’s MDM-Bank. Through Expobank (at the time called Latvijas Tirdzniecības Banka), the money was transferred to an offshore company connected to the aluminium holding company RUSAL. One of the money recipients was a lobbying group in Washington.

According to the leaked US documents, the Latvian Financial Investigation Unit (FIU) also investigated the transfer. FIU officials had asked FinCEN for additional information about the money transfer and Deripaska. A year later, the Latvians received an answer saying that “unfortunately, FinCEN did not find any information indicating US law enforcement agencies are investigating the subjects of this request at this time.” The 10-page document lists the transfers by specific companies. The FIU refused to tell Re:Baltica whether this information resulted in any further criminal investigation in Latvia.

The bank was mentioned in a legal fight between Russian oligarchs Boris Berezovsky and Roman Abramovich in a London court about  10 years ago  . The Russian oil company Sibneft used the Latvian bank to optimize its tax burden, saving millions of dollars.

FinCEN documents also show that Expobank clients included an Egyptian billionaire, Naguib Sawiris, the head of Orascam Group as well as another Russian oligarch, Suleiman Kerimov, who was on a US sanction list too. Kerimov was accused of tax evasion by French authorities after carrying suitcases stuffed with hundreds of millions of euros into France to buy villas.

Despite these cases and frequent mentions in FinCEN reports, Expobank did not receive much press coverage in Latvia. The bank was fined twice by Latvian regulators for failing to conduct due diligence. In 2014, it got off with a warning;  a year later  , it paid 105,000 euros in fines. The regulatory action coincided with international pressure on Latvian regulators to increase oversight of the banking sector.

Expobank chairman Legzdiņš spoke to Re:Baltica reporter via video conference due to the coronavirus pandemic, with his lawyer on hand to ensure he did not reveal confidential information. Legzdiņš said the increased scrutiny “was a turning point in general, when the banking sector began to change a lot. I heard a good comparison recently. If you asked me in which car seat you were sitting when you were little, you would say: then there were no seats at all, not even seat belts. Then it seemed normal. Now those children are packed into cars. How the world is changing!”

In the last five years, the Expobank business model has changed, shifting from serving non-residents to financing local businesses. Legzdiņš says the bank saw a niche and wanted to support local businesses, adding that the change in direction had nothing to do with the stricter rules for client due diligence.

“At least Latvian Expobank is not involved in political events in the world or in Latvia,” Legzdiņš claims.

Asked whether any of the bank’s clients were sanctioned, Legzdiņš replied “neither yes nor no.” He also declined to say how many of the clients are non-residents currently.

 A Swedbank start 

Legzdiņš has worked for Expobank for eight years. Before that, he worked at Swedish-owned Swedbank, which was often cited as a shining example of good corporate governance. Despite its good reputation, prior to 2016, Swedbank  had been fined   almost 1.4 million euros for insufficient customer supervision and in 2019 Swedbank was engulfed in a  major scandal   about dubious customers in its Baltic branches.

The former Swedbank Latvia CEOs Ingrīda Blūma and Māris Avotiņš also held senior positions at Expobank.

In 2007, a year after leaving Swedbank, Blūma joined the supervisory board at Ursa Bank in Novosibirsk, Russia. Ursa Bank‘s one of the shareholders was Russian banker Igor Kim, who was also a co-owner of MDM Bank and invited Blūma to take the job. Since 2012, Kim has been the sole owner of Expobank. He bought the shares from MDM Bank and changed its name to Expobank, similar to the banks he owns in Russia, Serbia and the Czech Republic.

“He wanted to introduce Ursa Bank to the European-style banking management system, so he invited me to become a member of the supervisory board,” says Blūma. Later, for similar reasons, she also became a member of the Expobank supervisory board in Latvia. Blūma says that her responsibilities included the development of the bank’s management system, so she did not know about specific clients.

Former Swedbank Latvia CEO Māris Avotiņš, who served as CEO at Expobank in Latvia and later in the Czech Republic, echoes Blūma’s comments.

“The aim was to set up a financial group in Europe to serve trading and manufacturing companies. I found it interesting, so I joined,” says Avotiņš. He left Expobank three years later because after the Russian annexation of Crimea from Ukraine, the oversight of the financial sector became more stringent and with that, fewer opportunities for growth. “I was no longer interested,” he said.

Last year Expobank was the smallest of Latvia’s 15 banks, according to the Finance Latvia Association data. Its assets were almost six times smaller than what they had been during the golden era of Russian oligarchs. And it does not look like those days will return, at least in the near future.

 Lazar Grdinic (Montenegro/MANS) contributed to the reporting.  

 This story originally appeared on  Re:Baltica  . 

 Authors: Inga Spriņģe, Aija Krūtaine   Visuals: Reinis Hofmanis   Translated into English by Aleksejs Tapiņš   Editing in English Jody McPhillips   Technical assistance: Madara Eihe 

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