Coal mining turns laundering: new facts on Moldovan laundromat

Russian coal mines' owner Ruslan Rostovtsev was involved in laundering over $400 million through his network of offshore and British companies, as new published documents reveal.

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Ruslan Rostovtsev, a former Russian official and coal industry entrepreneur, has reportedly turned out to be an active participant of the "Moldovan Laundromat" - an international money laundering scheme, through which billions of dollars were withdrawn from Russia. Ruslan Rostovtsev's Company - Grandwood Systems - was part of the illegal scheme, through which more than 400 million US dollars were embezzled, as newly published documents say. In addition, the scheme involved other companies owned by Mr. Rostovtsev, who laundered over $50 million through just one account at Trasta Kommercbanka. Rostovtsev could act in the interests of top managers of Russian Railways and the leaders of the People's Democratic Republic of Donetsk.

Businessman Ruslan Rostovtsev became "famous" after his "black cash register" with names and surnames of people whom he allegedly bribed, as well as names of the departments where he had "deposited" money for a long time was leaked to media and widely covered in news. The list includes such companies as Roskomnadzor (RKN), Russian Railways and the Ministry of Internal Affairs. The new facts link the "Rostovtsev file" with the money that was stolen from Russia with the help of the Moldovan money laundering scheme.

The Moldovan Laundromat

The Moldovan money laundering scheme, which cost Russia at least 1 trillion rubles ($21 billion), made an appearance for the first time in 2015. The amount of one trillion rubles was withdrawn through a network of offshore companies and international banks with the help of fictitious decisions made by Moldovan courts (this is the reason why the scheme was named so). Arrests took place in Russia, Moldova, Latvia and other countries. Experts believe that the arrest of key figures, such as banker Alexander Grigoriev in the Russian Federation and Vyacheslav Platon and Ilan Shor (husband of pop singer Jasmine) in Moldova let hundreds of other bankers and entrepreneurs involved in the "Moldovan transit" avoid responsibility. In total, the criminal scheme affected more than 700 banks in almost 100 countries of the world.

Law enforcers in Russia, Moldova and the Baltic countries cleansed the scheme thoroughly, causing dozens of banks involved in the transfer and launder of funds to collapse. However, the move did not help to return the criminal money, but made the situation even worse having caused damage to clients of the closed banks. Moldova's Moldindconbank and Latvia's Trasta Kommercbanka were said to be the key members of the laundromat. The participants of the scheme would open accounts of all "laundering" companies in one bank so that payments for them would be made within one and the same financial institution not to attract attention. The "Moldovan scheme" was operating in 2011-2014, and was exposed thanks to the Panama Papers - the largest leak of millions of offshore documents in history.

The losses, which the Russian Federation suffered as a result of the "Moldovan scheme," were estimated at 21 billion dollars, although there was another amount made - $50 billion. In the West, the rates were even higher with the overall income of the "Moldovan laundry" reaching $80 billion. The head of the Central Bank of the Russian Federation, Elvira Nabiullina, had to arrange a special meeting with President Putin to inform him about the obtained data.

Kroll's investigation led to Rostovtsev

In the midst of the money-laundering scandal in 2015, the Moldovan National Bank contacted well-known US-based investigation agency Kroll. Moldovan Parliament Speaker Andrian Candu published Kroll's confidential report on his blog. The report gives a detailed description of the movement of funds through three Moldovan banks and shows the role of some of its participants. The Kroll investigation relates directly to Moldovan participants in the illegal scheme. It also contains information about the chain of offshore and British companies, through which some of the stolen Russian funds could be laundered.

Obviously, the 80-page report did not attract attention of Russian law enforcement officers, although it contained many Russian names. It goes about the part of the Kroll investigation report that lists the companies involved in the scheme. It was Kroll that identified many nominee directors and mass registrars who were directly involved in criminal operations. Kroll also named a few beneficiaries of the scheme.

The list of companies that attracted the attention of American detectives includes, among others, Bridgepoint AG, a secretarial offshore company registered in the Marshall Islands. The goal of such companies is to represent the interests of owners and ultimate beneficiaries who wanted to keep it under the radar of international accounting. During the active period of the "Moldovan scheme", in particular, in 2014, Bridgepoint AG was representing the interests of an anonymous beneficiary of British company Grandwood Systems.

It turned out to be not just a simple company, but an active participant in the "Moldovan Laundromat." This is evidenced by transactions made through the Latvia-based Trasta Kommercbank, which was the first to collapse under the pressure of international compromising evidence. Until 2017, Grandwood Systems was controlled by a Moscow businessman with interests in the coal industry, the former head of a department of the Moscow government, former Vice Mayor of Sochi, Ruslan Rostovtsev. Forbes magazine called Rostovtsev one of the beneficiaries of the war in the People's Republic of Donetsk, having linked the coal industry entrepreneur to the illegal trafficking of the Donetsk coal.

The connection between Rostovtsev and Grandwood Systems came into light in 2017 from court materials in Cyprus, where the beneficiary of Grandwood Systems was first disclosed at the request of the court. The news attracted media attention in the UK. Former partners filed lawsuits against Rostovtsev in Russia, Cyprus and the UK, which brought the active participant of the "Moldovan scheme" to the public eye. The information was of little interest until the moment, when bank statements of Grandwood Systems accounts at Trasta Kommercbanka for 2013-2014 were made public. The bank statements clearly indicated Mr. Rostovtsev's participation in the scheme of the century - the "Moldovan Laundromat" (scroll down to find the link to bank documents scans).

PC parts instead of coal

One of the main features of the "Moldova scheme" was  the fact that the participants of the laundromat would open accounts of their companies in one and the same bank, which was ready to turn a blind eye on multiple questionable operations of its customers. Latvia-based Trasta Kommercbanka turned out to be the central transit point for Russian criminals. Several of Ruslan Rostovtsev's companies had their accounts opened in this bank with Grandwood Systems being one of those companies. Grandwood's account statements feature Wyndford Systems Ltd. - a counterparty, which also had accounts in the Latvian bank. According to experts, Rostovtsev's Grandwood Systems was transferring large amounts of money to Wyndford System, allegedly "for PC spare parts." At the same time, Rostovtsev was never engaged in computer supplies. "PC spare parts" is a clear sign of money withdrawal. Another, more popular purpose of payment tool among scammers is construction materials.

On November 14, 2018, the Commission of the Parliament of Moldova for the investigation of money laundering paid special attention to Wyndford System in its report. The paper said that Wyndford was involved in the withdrawal of $357 million in conjunction with Dunford Universal Company. As it turned out, Dunford also appears in Rostovtsev's bank statement from Trasta Kommercbanka in connection with PC spare parts supplies.

It is worthy of note that there is a significantly larger amount assigned to Wyndford System in OCCRP files - an international project for the investigation of corruption and crime. OCCRP experts found that as much as 410 million dollars passed from Russia through Wyndford System.

According to bank statements of Grandwood Systems for 2013-2014, the exposed members of the  "Moldovan scheme" - Wyndford System and Dunford Universal - were transferring and receiving tens of millions of dollars from the account of Ruslan Rostovtsev's firm. In addition, Dunford Universal, as the same information suggests, would deposit rubles into accounts of Grandwood Systems and receive dollars instead with "PC spare parts" indicated as the purpose of payment in both cases.

Grandwood Systems would receive funds from Ruslan Rostovtsev's other companies to accounts opened at Trasta Kommercbanka - Besemer Consultants and Cemwall Limited. According to the same sources, the latter transferred almost $3 million to Grandwood Systems account in May 2014, before the funds were wired via the "Moldovan route" to Wyndford and Dunford accounts for "PC spare parts", of course. In the database of the Cyprus registrar, Ruslan Rostovtsev is listed as the sole owner of Cemwall Limited.

As it was reported, all transactions were made in one and the same bank - Trasta Kommercbanka, where Grandwood Systems, Wyndford System and Dunford Universal had their accounts opened.

Interestingly, Ruslan Rostovtsev used Grandwood Systems for settlements on coal deals as well, although it is his main coal trading company - Kaproben Handels - that is normally used for this purpose. Yet, the documents indicate that all the funds, which Granwood received for coal, would be wired via the same "Moldovan route." For example, on Friday, March 15, 2013, a Panamanian offshore company, Sigma Trade, transferred 500,000 dollars to Grandwood under the contract for "Brand G coal." However, on Monday, March 18, the amount of 499,960 dollars was sent to the Wyndford System account with Trasta Kommercbanka for "PC spare parts." On April 29 of the same year, Sigma Trade paid $1 million for "Brand G coal." The next day, on April 30, $999,980 was wired to the Wyndford System account for "PC spare parts".

Editors have at their disposal a bank statement for 2013-2014 from the account of Rostovtsev's Besemer Consultants in another Latvian bank - ABLV, which was also involved in the scandal to launder Russian money. According to the bank statement of Grandwood Systems from Trasta Kommercbanka, Besemer was one of the companies that would deposit money at Grandwood for its subsequent transfer along the chain. In turn, Besemer would receive the money mainly from the accounts of Kaproben Handels AG - apparently, Rostovtsev's key company for international trade in coal. For example, in August 2013, Kaproben Handels transferred $5 million to Besemer Consultants. Rostovtsev could sell Donetsk coal through Kaproben - as Russian coal allegedly from his mines in the Kemerovo region.

According to "24", a Ukrainian television channel, Besemer could also be involved in financing European representative offices of the Donetsk People's Republic in Marseilles and Turin, albeit a little later, after the "Russian spring". Ukrainian media believe that this could be the price that Rostovtsev had to pay for the loyalty of "separatists", who in some cases would give him preference over fugitive Ukrainian oligarch Sergey Kurchenko, who was also interested in the Donetsk coal.

Ruslan Rostovtsev was literally working in the mine to be able to pay for so many spare parts of  surprisingly fragile "computers" that were obviously assembled in Moldova. For two years, Rostovtsev, could thus launder through Grandwood Systems more than 50 million dollars, and nearly all of those funds were wired to companies from the list of the "Moldovan laundromat." According to experts, Rostovtsev's coal business does not bring so much money, although it is believed that this is the main business that the former vice mayor of Sochi has. What is his main business then?

Rostovtsev's scheme: Besemer, Russian Railways, People's Republic of Donetsk

Ruslan Rostovtseves could apparently embrace not only the Moldovan route, but also the entire corruption vertical - from minor officials to top managers of state-run corporations.

In December 2018, the so-called "Rostovtsev black list" leaked on the net - an Excel file containing records of Ruslan Rostovtsev's cash expenses for the period from 2007 till 2012. It is believed that law-enforcers got the file in their disposal incidentally as they were seizing documents from Rostovtsev's Kemerovo office as part of the investigation of another case. Yet, this is a very  interesting and detailed document. The Sobesednik newspaper called the file a "mirror of corruption."

Rostovtsev's file often mentions the surname of Babayev, whom Ruslan Rostovtsev, as records indicate, paid millions of dollars in cash. Apparently, it goes about Salman Babayev, who served as the general director of Freight One Company from 2007 to 2011 - a subsidiary of Russian Railways. The board of directors of Freight One Company included Andrey Krapivin, who died in 2015 at a Swiss clinic. Andrey Krapivin was called an "old acquaintance" of Vladimir Yakunin, the head of Russian Railways. Krapivin's companies would win billion-ruble tenders of Russian Railways, while he himself had been on the boards of several companies close to Russian Railways. After his unexpected death in Switzerland, Andrei Krapivin's son, Alexey Krapiniv, took on his father's business.

In 2015, the Novaya Gazeta newspaper was the first Russian media outlet to have published the story about the laundromat investigation. The story named Andrey Krapivin, a contractor of Russian Railways, among main beneficiaries of the "Moldovan laundry". According to the newspaper, Krapivin would launder billions obtained in Russian Railways tenders via the Moldovan scheme. Three years ago, the media actively discussed the connection between Colonel Dmitry Zakharchenko, Andrey Krapivin and the Russian Railways Group. Active police officer Dmitriy Zakharchenko was arrested in 2016 after FSB found over 9 billion rubles in cash in his Moscow apartment. More than 300 million Euro were later detected on private accounts of Zakharchenko's wife and relatives. It is reported that Zakharchenko could be linked to corrupted groups of Russian Railways' top managers, and that cash was just a part of Moldovan laundering scheme. At the same time, Rostovtsev's Grandwood Systems was a notable transit unit in the Moldovan scheme. At the same time, as the investigation report indicates, Rostovtsev would use even his own coal profit in the "Moldovan scheme."

It is unlikely that Rostovtsev could expose his main international trading company Kaproben Handels in the Moldovan scheme, although this could still be possible. Rostovtsev could use the Moldovan scheme to launder his own funds. He could also act in the interest of his partners, such as  Babayev, Krapivin and Zakharchenko. Mr. Rostovtsev could also launder the money related to "partners" from the People's Republic of Donetsk. This may explain why Rostovtsev used coal trade  money for the "Moldovan scheme" as well.

In the file of Ruslan Rostovtsev, one comes across the name of Besemer company next to a person who goes by the last name of Starikov. There is no first name indicated, so it is hard to guess which Starikov it is exactly. It could be a political analytic, an employee of the Presidential Administration, or maybe Rostovtsev's colleague in the coal business. One can see from section "Besemer's non-cash expenses" that Rostovtsev was paying millions of euros under Starikov's bills, including for private jets. In July 2011, Mr. Rostovtsev spent over one million euros on Starikov through Besemer Consultants.

One will have to investigate further to find out to which extent this spending was related to the "Moldovan laundry", and what contacts Ruslan Rostovtsev, Aleksey Krapivin and Dmitry Zakharchenko had between them. This will obviously be a fascinating job that Russian and international investigative authorities will have to do in 2019.