RUSSIAN MONEY-LAUNDERING SCANDAL WIDENS.
The Russian prosecutor's office has asked federal investigators to look into allegations that billions of dollars from the Russian mob and perhaps from President Boris Yeltsin's entourage were laundered in the Bank of New York, AFP says ITAR-TASS reported yesterday. The Federal Security Agency (FSB) was asked to "carry out a verification of facts published in the Western and Russian press" about the Bank of New York scandal, the news agency said.
Meanwhile, the USA Today (p.1A) reports that US investigators, alarmed by the extent of possible money laundering by Russian crime groups in US and European banks, said Thursday that they were expanding their probe to include a wide array of US aid programs to Russia. US and British investigators told USA Today that they suspect at least 12 current or former Russian officials have diverted at least $15 billion, including several billion in IMF loans, through two New York banks.
In other news, a senior Clinton Administration official said that Attorney General Janet Reno was given a detailed briefing yesterday on the investigation and that the Justice Department did not believe, at this point, that IMF funds were involved in the suspected money laundering, reports the New York Times (p.A12).
Separately, House Majority Leader Dick Armey (R-TX), a longtime IMF critic, says he and others on Capitol Hill will ask that IMF funds to Russia be cut off until earlier disbursements are accounted for, reports the USA Today (p.2B). The story says an IMF official on Thursday cast doubt on reports of skimming and money laundering by top Russian political figures. "We don't just sign a check," IMF spokesman Graham Newman is quoted as saying. "Disbursement of money is dependent on governments attaining pretty precise and obviously targeted economic performance criteria. If there was a question of money being misused, it would show up pretty quickly, in terms of those performance criteria."
There have been growing questions about Russian money-laundering since the New York Times last week reported that billions of dollars from the Russian mob have moved through the Bank of New York in what could be the biggest money-laundering scheme ever detected in US history, says the story. USA Today also reported yesterday that Yeltsin's daughter, Tatyana Dyachenko, as well as other advisers to the president, may have handled $20 million in New York bank accounts. She and at least four government officials had access to some $20 billion the IMF loaned Russia since 1992, half of which may have been diverted, the newspaper said. The controversy around the president's family has arisen in the wake of the Bank of New York investigation, reports the Financial Times (p.1).
Further, the Wall Street Journal (p.A2) and the Wall Street Journal Europe (p.1) report that US and international officials say they are looking into whether former IMF executive director for Russia Konstantin Kagalovsky - who is married to Natasha Gurfinkel Kagalovsky, a senior vice president who headed the Eastern European division of the Bank of New York and who is currently under investigation - helped construct a byzantine network of offshore corporations that politically connected or mob-linked Russians may have used to siphon hundreds of millions of dollars out of Russia. Konstantin Kagalovsky is now vice-president of Yukos, one of Russia's largest oil companies. The Washington Post (p.A1) also reports.
Commenting on the widening scandal, the Economist (p.11) says in a leader that any remaining illusions about the efficacy of Western-backed reform in Russia have been evaporating over the past few weeks with exceptional speed. In one of history's odder alliances, American Republicans and Russian Communists are questioning the IMF's $4.8 billion emergency payout to Russia last year. This failed in its stated aim of shoring up the ruble, and probably provided windfall profits for Russia's financial oligarchs.
But if the IMF's integrity has been compromised, the cause does not lie in its own sloppy controls, says the leader; it lies in the collusion of the American and Russian governments to cover up failures and press the Fund into treating Russia with greater generosity than its economic performance would warrant.
The IMF hasn't the means to monitor the use of the funds it lends to countries, notes Le Monde (France, p.3), because it does not have a corps of inspectors who could perform such surveillance. Further, the Fund lends for balance of payments support, which does not entail specific requirements for the use of the funds. In this, says the story, the Fund's practices differ from those of the World Bank, which lends for specific projects, making it easier to monitor the use of its funds.
In other news from Russia, the Wall Street Journal Europe (p.1) and Dow Jones report that the Russian government yesterday said it would launch a World Bank-sponsored project to assign social security numbers to all Russians by the end of the year. The program would allow the government to track pension savings in the state-run pension system, said Andrei Markov, State Pension Fund official in charge of World Bank projects. The World Bank and the Russian government would contribute $100 million each to cover the costs of the project, he said.