Financial Crime World

$1 Billion Disappears from Moldovan Banks in Coordinated Fraud Scheme: Kroll Report Reveals Details

Overview

  • Approximately $1 billion disappeared from three state-owned banks in Moldova in 2014
  • Involved all three banks: Banca de Economii, Unibank, and Banca Socială
  • Scheme involved loans without business rationale and funds transferred to shell companies and Latvian accounts

The Mastermind Behind the Fraud

  • Businessman Ilan Shor, ex-chairman of Banca de Economii
  • Functions carried out through UK and Hong Kong shell companies
  • Funds equaled 12% of Moldova’s GDP
  • Facilitated through heavy borrowing from Russian companies
  • Loans paid off with loans from another bank
  • Revealed in parliamentary hearings since 2013

Previous Investigations and Changes in Ownership

  • Previous investigations into Banca de Economii for money laundering schemes (2012-2014)
  • Significant shareholder changes during this period
  • Ilan Shor bought into Banca de Economii in 2013

Impacts on the Moldovan Economy and Population

  • Impact on State Health Insurance Company
  • Debts and medication shortages

Reports from Global Audit Firm

  • Grant Thornton audited the banks in 2010, 2011, and 2013
  • No issues found in the banks’ activities
  • Ties to politicians and businesspeople

Extraction of Funds Before the Election

  • Over $750 million extracted before the 2014 parliamentary election
  • Companies controlled by Shor received at least 13.5 billion lei in loans

Moldova’s Involvement in Money Laundering Schemes

  • Historically involved in money laundering schemes, part of Russian Laundromat
  • Several Latvian banks involved, including PrivatBank, Pasta Banka, and ABLV Bank

International Pressure and Consequences

  • Latvian banking sector faced international pressure to address money laundering
  • Harsh penalties issued: fines, dismissals, individual fines
  • Investigations ongoing for Pasta Bank and ABLV Bank

Political Implications

  • Involved prominent politicians and businesspeople
  • Tarnished pro-European government and EU popularity among Moldovans

Responses to the Scandal

  • Dismissal of corrupt politicians
  • Establishment of citizens’ movement Dignity and Truth

Current Situation and Implications

  • High-profile arrests and ongoing investigations
  • Ongoing consequences for Moldova’s banking sector and political landscape.