Rogue Bank Helped Fleeing Kazakh Fugitives Launder Millions

The infamous FBME Bank Ltd., a Tanzania-based financial institution operating primarily out of Cyprus, played a major role in helping Viktor Khrapunov, the former mayor of Kazakhstan’s capital city Almaty, and his family launder hundreds of millions of dollars in stolen government funds, according to documents from federal courts in the United States.

The case has also ensnared Felix Sater, a Russian-born friend and former business partner of US President Donald Trump who, according to news reports earlier this month was interviewed by the US Senate Intelligence Committee and is of interest to the office of the Special Prosecutor, which is attempting to find links between the Russian government and the Trump campaign. Sater reportedly attempted to help fund a Trump Tower in Moscow. Sater also is said to have told investigators about Trump’s attempts to obtain funding from VTN Bank, which has been sanctioned by the US.

Sater is alleged to have been connected to a company called Telford International Ltd., which facilitated some of the money transfers into FBME from the Khrapunov family and associates. He is also believed to have worked with the Khrapunovs on US$40 million in US real estate investments including the purchase of three Trump Soho Hotel condos.

Felix and Friend

High-Risk Customers

FBME bank, which US prosecutors shut down for good last October after three years of tenacious court fights, has been described as one of the most notorious money-laundering operations in the world. Although 90 percent of its US$2.7 billion in assets were on deposit in Cyprus, the bank had almost no Cypriot customers and no retail banking operations. Instead, the bank, owned by a pair of Lebanese brothers named Fadi and and Ayoub-Farid Saab, provided services to high-net-worth – and high-risk -- individuals until the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) moved to cut it off from access to the US banking system in 2014.

The bank has been the subject of a series of Asia Sentinel articles over allegations of its role in laundering money for the sale of Indonesia’s Bank Mutiara to the Tokyo-based J Trust financial group.

Among FBME’s depositors were believed to be some of the world’s major criminal organizations, including the Russian Mafia, pornographers, phishing scams, corrupt heads of state and a long list of other wrongdoers. One source told Asia Sentinel that millions of dollars may never be claimed once the bank is finally dissolved because to do so would expose the names of the depositors, which would then alert law enforcement authorities to their actions. It could take months or even years to decide who gets jurisdiction, one source said.

Family that Steals Together Stays Together

Kazakhstan prosecutors have been chasing Viktor and his wife Leila as well as other Khrapunov family members since 2011, when they escaped for Switzerland from Almaty ahead of charges in a chartered Russian airplane that was said to be loaded with tonnes of jewelry, gold, paintings and other stolen riches. They are currently holed up in Switzerland while prosecutors pursue them in courts around the world.

How much of Kazakhstan’s money, if any, is hidden in FBME is uncertain. The governments of Cyprus and Tanzania are involved in a long-running dispute over which country has jurisdiction over winding up the bank. As a result of the Cyprus Central Bank’s freeze on FBME assets, however, it’s believed that the bank continues to hold substantial sums of what has been called the “Ablyazov-Khrapunov conspiracy.” There have been allegations that officials in Tanzania who previously had control allowed funds to trickle out to favored depositors in return for cash.

“Having been repeatedly scorned by legitimate banks, Khrapunov and his co-conspirators, including Mukhtar Ablyazov, turned to an illegitimate bank: FBME,” lawyers for Almaty and BTE Bank said in one filing.

“Indeed, FBME was an integral and knowing enabler of the Ablyazov-Khrapunov Group’s money laundering efforts, particularly when it came to moving their illicit funds into the United States. Especially when viewed in light of the “liberal standard” for the joinder of parties, FBME – which is already and unavoidably part of this lawsuit – should be joined as a party.”

In several motions filed in the US Southern District of New York through last September, lawyers for the Kazakhstan government charged that the money-laundering schemes “relied heavily on the cooperation of FBE officers.” Viktor Khrapunov’ s family and Mukhtar Ablyazov, the former head of BTA Bank and a heavyweight Kazakh politician, were aided in stealing the money by FBME, which “joined the Ablyazov-Khrapunov Group’s money laundering conspiracy by knowingly aiding the… group’s members in hiding and laundering funds and evading asset freezes and investigations,” according to an amended cross-complaint filed last September.

“Collectively, the Ablyazov-Khrapunov Group has been the subject of numerous proceedings and investigations across the globe, arising from their theft of billions of dollars from entities and municipalities in the Republic of Kazakhstan,” the complaint says.

Vast Network of Shell Companies

The group established what the plaintiffs say was a vast network of shell corporations and outwardly-legitimate investments, including in major New York real estate developments such as the Flatotel and Cabrini Medical Center condominium conversions with the aid of a well-known New York-based real estate developer named Joseph Chetrit.

With the help of Chetrit and the Chetrit Group, the Ablyazov-Khrapunov Group is said to have parked corrupt assets in New York City real estate, “hoping to avoid the scrutiny of escalating international investigations into the Ablyazov Khrapunov Group’s illicit activities.”

However, international law enforcement agencies, including criminal probes by Kazakh and Swiss authorities, were on the trail and discovered the funds were routed through an investment vehicle named Triadou without passing through legitimate banking channels.

Plan to Circumvent Law

The defendants allegedly “devised a plan to circumvent legitimate banks and transfer funds directly from the [group’s] offshore accounts with FBME to the escrow account of the Chetrit Group’s long-time attorneys,” according to the documents.

In return for facilitating money laundering scheme, the Chetrit Group allegedly got access to the stolen funds to fund its real estate projects.

In order to move the stolen money into the United States, FBME processed millions of dollars in wire transfers into the U.S. and internationally, including numerous transfers on behalf of Telford International, a shell corporation found to be an investment entity used to move Ablyazov’s funds. Emails were found by investigators indicating Sater had received SWIFT bank wire codes to be used to transfer money from FBME to individuals and companies in the United States.

Investigators are now seeking Telford’s account records, sources of funds, and due diligence and so-called “know-your-customer” materials in an effort to prove claims that FBME aided the Ablyazov-Khrapunov Group’s money laundering activities.

Activity Continued After Freeze Orders

FBME allegedly executed millions in wire transfers with obvious money laundering red flags, the complaints say, even after officers at the bank conspired with defendants to circumvent freezing and receivership orders against Ablyazov and the bank’s own compliance officials.

Through a financial consultant named Eesh Aggerwal, members of the Ablyazov-Khrapunov Group were introduced to FBME officers “who were ready, willing, and able to assist them in laundering their funds into the United States and internationally. FBME was not merely negligent in its business dealings here, but rather held itself out as an enabler of money laundering for high-risk clients exactly like the Ablyazov-Khrapunov Group,” one of the complaints charge.

FBME was not an unwitting participant in the money laundering scheme, “but rather an active co-conspirator providing a very select (and very illicit) suite of financial services to clients too radioactive for other banks to touch.”

At least US$120 million was said to have been transferred through FBME by Telford and other Ablyazov-related entities, with the likelihood that millions more were as well. and expect that discovery from FBME will reveal millions more.