Russian Investigative Committee Raids Bank of Russia; Likely Related to Missing $92 Million from MAB

Last Friday, September 9, agents of Russia’s Investigative Committee accompanied by the OMON riot police confiscated documents at the Bank of Russia, known in Russia as the Central Bank, Vedomosti reported.

An officer of the bank told Vedomosti the raid may be connected to the collapse of the International Shareholders’ Bank (MAB), where 6 billion rubles ($92 million) have gone missing. He said it was the first time he had ever seen investigators and riot police come to the management offices. A second unnamed source familiar with the events said that papers confiscated were also related to MAB, and commented (translation by The Interpreter):

It’s strange that the direct involvement of Investigative Committee agents was required to seize the documents. As a rule, the Central Bank provides the agencies such things on demand.

A representative of the Central Bank’s press office said the confiscation was related to “individual officers” and the outcome of the investigation was not known yet. The representative commented:

The Central Bank is entirely interested to have exposed and prosecuted those persons who have committed unlawful actions regarding credit organizations, their depositors and creditors, even if such persons are officers of the Bank of Russia.

A source in the financial industry familiar with the case told Vedomosti that the target of the investigation was indeed officers of the Bank of Russia. 

The Bank of Russia revoked MAB’s license in February, then discovered the 6 billion rubles missing. Investigators say from 2007-2011, Viktor Afonin and his brother Boris embezzled deposits placed in the Bank of Russia by Almazyuvelireksport, a federal government unitary enterprise or state-owned company that exported diamonds. The brothers allegedly stole loans given to “one-day companies,” i.e. shortlived companies used to launder money.

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Nicholas Nicholaides wrote of the Bank:

Its high interest rates reduce the will and opportunities of Russian industrialists to invest in Russian industry and the economy, thus rendering the country more dependent on foreign banks and foreign credit for development. Continually buying American state bonds strengthens the US economy, not Russia’s. This lack of state control over the Bank of Russia is dangerous and counterproductive. Even most of the Russian oligarchs should understand this fact. The bank’s separation from the state was achieved during the catastrophic Yeltsin years, when liberal traitors sold out the whole country. This was done for the benefit of the USA and foreign banks, not for the benefit of Russia. It was done to keep Russia down as a Third World country, as a mere exporter of natural resources without its own industrial production. 

Bloomberg news published a story today about the Bank of Russia’s tight money policy, without mentioning the raid.

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Says Bloomberg:

A stance described as “moderately tight” by the central bank has already left Russia with the world’s second-highest real rates, even before annual inflation in August eased to the slowest in more than two years. In the absence of reforms that could help the recession-hit economy break out of its malaise, Nabiullina is presenting restrictive policy as the Swiss knife of economic solutions: encouraging savings and their transformation into investment, keeping borrowers from an excessive debt load and pushing companies to streamline their businesses instead of counting on price increases.

Every month there is news of yet another Russian bank losing its license. Russia has been in the grip of an economic crisis that preceded the blows of Western sanctions and the expenses of the wars in Ukraine and Syria, related to President Vladimir Putin’s demand to governors to fulfill his campaign promises that the provinces have been unable to pay for. With the worldwide fall in the price of oil, Russia’s currency has tumbled as well and does not show signs of serious recovery.

In July, the Russia media reported that Russian banks had nevertheless turned a profit this past year, increased by a factor of seven from 51 billion rubles ($768 million) to 360 billion rubles ($5.5 billion). But earlier this year, the Barents Observer reported that the Experts’ Economic Group, an independent Russian advisory organization, estimated that Russia had lost about $600 billion in oil and gas revenues due to sanctions.

— Catherine A. Fitzpatrick