2019. gada 1. jūnijā starptautiski atzītais un Apvienotāja Karalistē bāzētais pētnieciski – analītiskais ziņu portāls Tortoise Media publicēja rakstu “Netīrā nauda, asiņainā slepkavība”. Rakstā atspoguļotie notikumi noris Latvijā un ir attiecināmi uz pēdējā gada Latvijas finanšu sektora krīzi. Rakstā ir atspoguļota, iespējamā, ABLV Bank iesaiste noziedzīgi iegūtu naudas atmazgāšanā un pret Ziemeļkoreju vērsto sankciju neievērošanā, kā arī skaidrota zvērināta advokāta Mārtiņa Bunkus, iespējamā, loma 2018. gada notikušajos finanšu sektora procesos.

Ņemot vērā, ka Latvijas publisko telpu iepriekš minētā informācija nav sasniegusi – pārpublicējam minēto rakstu tā oriģinālvalodā.

Dirty money, bloody murder

By Paul Caruana Galizia, Tortoise Media. Original article here.

• The killing of a Latvian bankruptcy lawyer one year ago remains unsolved
• He was due to look into financial details about a bank linked to money-laundering and North Korea
• The assassination casts a shadow of corruption over Europe, where waves of illicit money are crashing on its eastern borders

At 8.40am, almost exactly a year ago, Martins Bunkus was driving to work in his white Range Rover down a leafy road that runs through Riga’s military cemetery. He wasn’t far from Latvia’s police headquarters when he came alongside an orange Volkswagen van with fake plates. Mounted under its tarpaulin cargo box was a 7.62mm-calibre Kalashnikov machine gun that fired eight shots into his car.

Four bullets went right through his windscreen. Bunkus swerved into a road sign, then crashed into a cemetery fence where another commuter found him, still breathing and covered in blood, a minute later. Within the next five minutes, the Volkswagen was found burning next to a crematorium. By that point, Bunkus, aged 38, was dead.

A year on the case remains unsolved, but Latvia’s chief of criminal police, Andrejs Grisins, says he has “a range of suspects from organised criminal groups” that operate in Latvia and its neighbours. His “most probable” theory is that Bunkus’ murder is “related to his professional activity.”

Bunkus was a bankruptcy lawyer. Ordinarily his line of work would not have brought him within range of professional hit-men, but Latvia’s bankruptcy business is unusual. It’s lucrative, dangerous and corrupt. The details can be complex but the reason is simple: despite efforts to clean up its financial services industry this tiny

Baltic state has acquired a role as a funnel to the outside world for assets from across the former Soviet empire – a vast area still largely untouched by the rule of law.

In a competitive world, Bunkus was ambitious. It was in his nature to go after the big prizes, and at the time of his death the biggest was a bank, ABLV, formerly and more quaintly known as Aizkraukles Banka.

ABLV went bust early last year with €2.4bn in assets. Its story is the story of how illicit flows of cash and contraband from across Eurasia – from North Korea, allegedly, to Hezbollah hideouts in the Middle East, and from Azerbaijani to Maltese cronies – are eating away at the EU’s defences and putting lives at risk when people stand in their way.

The run on ABLV began three months before Bunkus’ last drive to work. The bank came to international attention on 13 February 2018, when America’s financial intelligence unit, the Financial Crimes Enforcement Network (FinCEN), issued a notice that alleged

ABLV was a “bank of primary money laundering concern”.

What precipitated the FinCEN notice is unclear, but it may be that the bank announced a “zero tolerance Policy on North Korea” in summer 2017 and then, as FinCEN alleges, proceeded to violate that policy by facilitating transactions for sanctioned entities “which are involved in North Korea’s procurement or export of ballistic missiles”.

Being linked by US officials to North Korea’s nuclear weapons programme is not ideal from a reputational point of view, and the bank called a press conference within a week.

“We don’t participate in any illegal activities,” ABLV’s former deputy chief executive, Vadims Reinfelds, said. “There are no violations of sanctions.”

A lawyer by trade, Reinfelds now heads a Riga financial advisory firm. In his LinkedIn profile he says that “in practising law we all know we get close to the line sometimes”. He continues: “We try to stay on the right side of the law. But if you want to be a good lawyer, you need to get close to that line.”

Hugh Griffiths, a former senior North Korean sanctions expert at the UN, declined to comment on specific companies for this article. However, he recalls that in 2014 he wrote to three banks based in Baltic countries that were later hit by money-laundering scandals. Griffiths wanted to know about the banking operations of an Eastern European air cargo operator and its aircraft, which had been seized “with North Korean weaponry on board”.

These allegations about North Korean weaponry and money-laundering related to the country’s missile programme appear to be separate but related: one place they intersect is at ABLV.

A source with knowledge says that the ABLV allegations about North Korea involve, but aren’t limited to, a notorious case that hit Danske Bank in Estonia in 2009. The Danish bank was later reported to have facilitated transactions for a shell company named SP Trading Ltd registered in, of all places, New Zealand. Its nominee director was a 28-year-old Chinese cook at a Burger King outlet in Auckland.

The case centred on the interception of a cargo plane full of arms which flew out of North Korea and was intercepted in Bangkok in 2009. According to a 2013 UN report, SP Trading’s real owners “contributed to structuring the shipment in such a way as to avoid detection confirming their awareness of the illicit nature of the transfer”.

SP Trading’s owners described a cargo of 145 crates of “mechanical parts”, but the UN’s “inspection revealed that the cargo consisted of some 35 tons of conventional arms and munitions, including 240-mm rockets, rocket-propelled grenades and man-portable air defence systems, valued at over US$16m… one of the largest seizures ever made in connection with the sanctions regime against the Democratic People’s Republic of Korea”.

The weapons run, destined for Hezbollah was organised by a Ukrainian trafficker through his Georgian company Air West. Four Kazakhs and a Belarusian pilot planned to fly the cargo via Azerbaijan, Ukraine, and Iran in a Soviet-era Ilyushin Il-76 aeroplane.

ABLV commissioned a compliance report that indicates the bank had dealings with a company connected to a military equipment-carrying Il-76 aeroplane. The heavily-redacted report suggests that the bank could not have known about the nature of the cargo.

New Zealand Police and FinCEN could neither confirm nor deny the involvement of specific companies in their inquiries. ABLV did not respond to a question about SP Trading.

Last year David Cohen, a Washington-based lawyer and former deputy director of the CIA, acting for ABLV, wrote to FinCEN to reject its notice. He said it was made up of “thinly sourced, often dated, and largely conclusory factual assertions”. The bank continues to deny any wrongdoing.

Even so, the damage was done.

Although not a formal sanction, the notice started a run on ABLV, which is now suing the European Central Bank for not providing liquidity support. Its German lawyer, Okko Behrends, says he has acted for three other banks that have collapsed amid money laundering scandals: Trasta Komercbanka in Riga and the Maltese banks Pilatus and Nemea. In declining to provide support, the ECB had said that ABLV was “failing or likely to fail”.

And so it came to pass: the largest Latvian-owned bank, the third largest bank in the country, collapsed.

A decade earlier, the crash hit Latvia hard. Easy financial conditions had seen the economy grow rapidly until it experienced one of the world’s worst economic collapses. Latvia’s GDP fell by 14 per cent in 2009, compared with a 3 per cent fall in the US. The country was left with a pile of indebted businesses.

Liquidators take a cut of the assets they recover from those businesses. Ivars Grunte, a hard-nosed litigator who competed with Martins Bunkus in bar council tennis tournaments, says that until recent government-imposed caps the business was “really, really profitable”.

Bunkus had gained his first experience of bank liquidation work in 2016, when Trasta Komercbanka, one of Latvia’s oldest private banks, lost its licence after it broke anti-money laundering and terror-financing rules. The bank’s first administrator was charged with extorting €1.2m during its liquidation. The police say he threatened to mark creditors’ assets as illicit unless they “shared” their money. The courts approved a new team of liquidators, which included Bunkus.

Threatened by a motorbike rider with a machine-gun that year, Bunkus soon set his sights on what was once one of Latvia’s largest and most prestigious banks. “It was no secret,” his brother Kristaps says. “Martins wanted to be appointed liquidator of ABLV.”

Aizkraukles Banka was founded in 1993, headquartered in what had been the Bank of Latvia’s regional branch in Aizkraukles, a small, drab town 80 kilometres inland from Riga. Two eager post-Soviet entrepreneurs, Ernest Bernis and Oleg Fils, snapped it up two years later and changed its name to ABLV.

Bernis and Fils now control around 86 per cent of the bank’s shares and are two of Latvia’s richest citizens.

They did not respond to a request for comment and there are no suggestions of wrongdoing on their part.

“I started working at a time when one social order was collapsing,” Bernis said in ABLV’s 2012 annual report. Riga “has been a location where the trade routes from the East and West flow and cross since its foundation”, said Fils, whose Instagram account is replete with photographs of Dom Perignon, beef fillet, Porsches and helicopters.

The flood of money from Latvia’s ex-Soviet neighbours would help them turn Riga, they dreamt, into a global financial centre.

One of AVLB’s former competitors, Parex Bank, which Spanish prosecutors say had links to the Russian mafia, marketed itself across the ex-Soviet empire with the slogan, “We are closer than Switzerland!”

In 1998, as part of its accession to the EU, Latvia established a financial intelligence unit. It set minor fines for banks and their employees caught laundering money. Two years later the Council of Europe, whose anti-money laundering assessments are followed by the EU, inspected Latvia and found “a very comprehensive structure for the protection of the financial system”.

One year later ABLV helped a Colombian cocaine baron transfer $697,000, according to US prosecutors. The bank says it couldn’t have known the transfer was connected to criminal proceeds. Another US inquiry that year found a child pornography website used an ABLV account to receive credit card payments. The bank said it cooperated with law enforcement.

The bank grew into a major force in Latvian society. It funded a think tank, headed by a former leading politician. It funded Latvia’s contemporary art scene and public sculptures. It set up a charity. It made donations to politicians and political parties.

Foreigners could freely open accounts in Latvia without ever being in the country, provided they did so through a Latvian bank’s overseas branch. By 2013, ABLV had representative offices in Moscow, St. Petersburg, Yekaterinburg, Vladivostok, Kiev, Odessa, Minsk, Almaty, Dushanbe, Baku, and Tashkent.

By 2017, 84 per cent of ABLV’s deposits came from across the post-Soviet world. Almost all of them used shell companies.

Even by Latvia’s exceptional standards, where total non-residential deposits stood at 40 per cent in 2017, this was high.

Liene Gatere, director of Transparency International in Latvia, says the country’s regulators “never carried out on-the-ground checks on accounts opened in Russia and other post-soviet countries.” In any case, Gatere asks, “how can you determine the source of money from post-Soviet states, especially with shell companies?”

As Reinfelds himself had said in February 2018, “We know when Russians are lying”.

There are meaningful efforts to clean up Latvia’s financial sector in the wake of ABLV.

Four days after the FinCEN notice, Latvia’s anti-corruption bureau arrested the governor of the country’s central bank, Ilmars Rimsevics. The notice alleged that ABLV had bribed Latvian officials, but Jekabs Straume, who heads the bureau, told me that Rimsevics’ arrest was on charges related to another bank. The evidence against Rimsevics includes a recording of him discussing bribes in a sauna in 2013.

The country’s financial intelligence unit froze €83.2m in the first four months of this year, compared with €101.5m in all of last year. Since its 1998 founding until June 2018, the unit was headed by a man named Viesturs Burkāns, whose surname means carrot in Latvian. The unit was derisively known as the “carrot office” until Ilze Znotina, a lawyer with extensive private sector experience, took over.

On a bookshelf in Znotina’s office there’s a copy of Red Notice, Bill Browder’s account of his time as one of Russia’s biggest investors and as a human rights campaigner after one of his lawyers, Sergei Magnitsky, was tortured to death in a Russian jail.

Browder’s fund, Hermitage Capital Management, filed a criminal complaint to the financial intelligence unit the month Znotina took over. The complaint calls for an investigation into unidentified ABLV employees for allegedly laundering proceeds from the $230m Russian fraud uncovered by Magnitsky.

The document claims 85 ABLV accounts were used to launder $102.3m. It argues that the sheer scale of the monies, the involvement of sanctioned individuals and the use of shell companies with no real business purpose and well-known Latvian proxies as nominee directors, are all clear signs of crime and criminal intent at ABLV.

Banks servicing shell companies and not complying with US sanctions are two issues that Latvia’s finance association has addressed.

“The industry began a process of self-regulation,” says Sanda Liepina, who has headed the association since 2017. Guidelines on anti-money laundering and sanctions compliance were issued. Training was provided. The public sector is now catching up.

In April, 2018 Latvia’s parliament passed a law that banned banks from dealing with shell companies that can’t prove they are legitimate businesses. The vote was 57 in favour and 17 against, with all the “no” votes by members of the pro-Russian opposition Harmony party.

Liepina’s “major piece of work”, she says, “is changing the culture around anti-money laundering compliance”. There is some way to go.

One former ABLV employee in Riga, who worked in the bank’s compliance team for over a decade and before that was a Latvian police officer covering economic crime, replied to my request for information on the bank’s liquidation by saying: “It [is] very interesting. But why should I tell you something? What is your offer?” Another, four years in compliance at ABLV in Riga, said: “Thanks for the offer. Any royalties involved?”

I leave Finance Latvia Association with a pile of documents. One booklet, ‘Latvia Banking Developments and Compliance Status Review’, published in September 2017 contains sections on anti-money laundering developments at each Latvian bank. Page 51 jumps to page 61: the section on ABLV is missing.

On 12 June 2018, ABLV had its request for “self-liquidation” approved by the banking regulator, and many feared a cover-up.

Critics of the plan – which puts the bank in charge of paying out allegedly illicit funds from its €2.4bn assets – say it puts evidence of crime at risk. Only a team of external liquidators can ensure allegations are properly investigated, they say.

ABLV says the plan is carefully vetted and supervised by the banking regulator.

The plan’s anti-money laundering checks were initially set to consider depositors on the date of the FinCEN notice only, although allegations of criminality go back years. Following an intervention from the financial intelligence unit, as of 6 March 2019 Znotina can now request historical deposits but warns that the methodology is “still not perfect”.

Floris Alexander, a financial crime lawyer who represents ABLV’s small depositors, says that “self-liquidation is fast and beneficial for depositors, but makes it difficult to scrutinise them”.

The methodology was designed by EY, one of the world’s big four accountancy firms, which audited ABLV and its charitable foundation for years. EY, which declined requests for comment, will now work with the banking regulator and the bank’s internal liquidation team. In Denmark, the police are investigating EY over its Danske Bank audit.

The firm’s associate partner in charge of forensic and integrity services in the Baltics, based in Riga, went from being a senior auditor at EY to head of ABLV’s financial control department, before going back to EY.

The banking regulator chose EY over financial investigators at Kroll, who uncovered multi-million flows of illicit money between Russia, Moldova and Latvia.

“Large-scale financial fraud involves multiple jurisdictions – we’re good at this,” says Kevin Braine, who leads the firm’s compliance work in Europe.

Znotina hired Kroll to help sift through the “hundreds to thousands” of suspicious activity reports she expects from ABLV. In general, she says, it’s difficult to find professionals in Latvia who don’t have some conflict of interest with ABLV, a view shared by a Riga diplomat.

Bunkus, who hadn’t worked for ABLV, had already been nominated by the bar council as a potential liquidator in March 2018. In the final list submitted to the banking regulator, he was ranked second out of 10 potential candidates.

He put together a prospective team, including senior partners at PwC and another Riga law firm. He also hired an American lobbyist, David Merkel, to help him get the ABLV job.

Their argument was that only a team of external liquidators like themselves could ensure that allegations of money laundering at the bank were properly investigated. ABLV liquidating itself, they claimed, would put evidence at risk.

On 27 February 2018 Bunkus met Merkel, a former director for Europe and Eurasia at the US National Security Council, at the Jefferson Hotel in Washington. There they discussed how best to ensure that first ABLV wasn’t allowed to liquidate itself and, second, that Bunkus was appointed as external liquidator.

Merkel has extensive State and Treasury department experience in Latvia and Russia, and Bunkus paid him $62,500 for this work. Unbeknownst to Bunkus, Merkel was also in line to work for Latvia’s pro-Russian party for the 2018 parliamentary elections.

Bunkus emailed Merkel on 9 May 2018 saying that he had heard that ABLV would be allowed to self-liquidate, although the banking regulator wouldn’t make the official decision until 12 June. Merkel finally replied on May 17, 2018 proposing a meeting to discuss the issue. However, Bunkus never made that meeting. Less than two weeks later, he was murdered. There is no suggestion of any connection between their communications and subsequent events.

One year on, Grisins, Latvia’s criminal police chief, is confident that Bunkus’s murder will be solved. “We have questioned 200 people, interrogated 150 witnesses, and are working with 20 experts,” he says. “There are five investigators on the case, and another 20 people assisting.”

The police have cast their net wide, but Kristaps, Martins’ brother, says that he and his other brother, Kaspars, “face

incredible negligence and cynicism by the state and responsible officials”.

He shows me a photo of a young police officer, not in a forensic suit, sitting on the blood-covered passenger seat of his brother’s car on the day of the murder.

Last week Kristaps and Kaspars, who describe Martins as “the core that held us three brothers together”, held a press conference in Riga. “We are determined to ensure that the rights of the victims are respected and to ensure that the investigation is effective,” Kristaps says.

The web of corruption that threatens the Baltics extends to the Mediterranean, too. The Daphne Project, a group of journalists named after my mother, the murdered Maltese journalist Daphne Caruana Galizia, has reported that ABLV sent a $1.4m payment from an Azerbaijani nominee director, a security guard, to a Dubai company called 17 Black, James Bond’s roulette number. It was my mother who uncovered this company, in February 2017. She never got to its owner – a Maltese businessman who, the Daphne Project reported, was set to transfer millions to government officials – before being assassinated eight months later. The businessman and government officials deny any wrongdoing and their connections to 17 Black are now the subject of a judicial inquiry in Malta.

We have become reminders, whatever the reasons for our relatives’ murders, that there is something sinister happening at the edges of Europe.

From the Baltics down to Cyprus and Malta, waves of illicit money are crashing on Europe’s borders, drawn in by Soviet and colonial-era institutions and willing residents.

While a European Commission spokesperson says that “improving anti-money-laundering supervision is work in progress which will have to continue”, it has so far depended on the US, which ambitiously interprets dollar transactions as its jurisdiction. It is unclear how much longer this can hold.

Soon after ABLV’s collapse, Rietumu Banka in Riga, once fined for breaching North Korea sanctions, began converting its dollar funds into euros.

Why this story?