The Russian Interior Ministry has broken up a money-laundering scheme worth more than $1.1 billion, and has arrested seven individuals in relation to the plot. Over 400 people were involved in the scheme, according to the statement obtained by The Moscow Times.
$1.1 billion is a large amount of money, and this news should represent an achievement of the Russian criminal-justice system, Perhaps the most interesting aspect of the article from the Times, then, is the conclusion:
Pavel Usanov, head of the Hayek Institute for Economy and Law in St. Petersburg, said high-ranking officials were pressured to seek further sources of income for the government’s coffers, and putting Russia’s shadow economy into the light was seen to be one of the obvious options to do that.
“There are two interests here — one is internal fighting within higher echelons of the Russian elite, and another is the desire to get more tax revenue,” Usanov said.
Usanov also raised several questions about the Interior Ministry’s large-scale detention.
“It seems they just want to show how much they worked and thus improve their statistical results: that they’ve conducted 85 searches and uncovered the involvement of 400 people,” he said.
While The Moscow Times is often critical of the Putin government, these observations are telling. Russia is losing large amounts of money to dubious transactions offshore. According to an article published yesterday by RT (an agency rarely accused of being hyper-critical of the Russian government), “over $45 billion in ‘suspicious transactions’ left Russia in 2013.” The reality is that money laundering is leeching large amounts of capital from the Russian system, but more often than not only those opposed to the government are being stopped.
To more fully understand how this process plays out, look no further than the work of The Interpreter’s Andrew Bowen, who analyzed the mechanisms used to turn money laundering, and its prosecution, into a part of the political engine:
Because of the fractious nature of the banking sector in Russia and the amount of information that is readily available to the presidential administration, charges of money laundering, embezzlement and fraud are today the chief legal means of coercion in the country. The late billionaire and oligarch responsible for Vladimir Putin’s rise, Boris Berezovsky; opposition leader Alexei Navalny; hedge-fund manager William Browder; and the late lawyer Sergei Magnitsky, who uncovered a $230 million dollar fraud; have all become victims to Russia’s capricious and politicized financial laws. Under the current systems, banks are easily transformed into state informants and mechanisms for enforcing not the law but one oligarch or official’s personal goals and vendetta’s. Rosfinmonitoring in effect has become a kind of kompromat clearinghouse, creating a large information database from which the authorities can use to prosecute opponents of the regime. Due to the runaway corruption inherent in Russia’s financial and business spheres – as the Kremlin itself has lately conceded – almost anyone is thus open for prosecution due to the likelihood of some flagged piece of malfeasance being in his or her background.
So is this process once again in play in this newest incident? The names of the seven individuals arrested in the indictment have not yet been released. It’s also unclear what banks have been named in the allegations, or what will happen to the more than 400 individuals caught up in the investigation. Until then, observers are understandably pessimistic that this is a sign of positive reform.