Moldova’s Billion-Dollar Bank Heist: A Tangled Web of Political Corruption and Money Laundering

Background

In 2014, a shocking $1 billion disappeared from the accounts of three Moldovan banks - Banca de Economii, Unibank, and Banca Socială. This organized money laundering scheme, orchestrated by Moldovan businessman Ilan Shor, left a devastating trail of destruction and implicated high-profile politicians, bankers, and foreign nationals.

The Disappearing Billions

Shor, former chair of Banca de Economii’s board from November 28, 2014, until the scandal broke [1], reportedly transferred funds to United Kingdom and Hong Kong shell companies, further concealing the real owners’ identities [1][3]. The stolen funds found their way into Latvian accounts under various names. This colossal theft equated to an unprecedented 12% of Moldova’s GDP [4].

A Carousel of Deceit

The money laundering scheme involved a carousel borrowing scheme, where loans at one bank were paid off with loans from another, perpetuating the cycle of deceit [6]. The massive expansion of bank lending was fueled by heavy borrowing from Russian companies, leading to an alarming decrease in the capital reserves and a significant increase in overdue credits [6].

Important Dates:

July 2012: Moldovan authorities were warned about potential money laundering activities [5].

August 2012 to November 2014: Banks experienced significant shareholder changes [6][7].

November 24-26, 2014: Over $750 million were extracted from the three banks before they went bankrupt [1].

Warnings Ignored

Despite earlier warnings from the Moldovan authorities and audits by Grant Thornton office in Moldova between 2010, 2011, and 2013 [11][12], no irregularities were reported. A surprising connection to the audits was Olesea Bride, the partner of Moldovan Minister of Economy Stéphane Christophe Bridé and the former managing partner of Grant Thornton Romania-Moldova [11][12].

Stolen Funds and Missing Evidence

In the final days leading up to the 2014 Moldovan elections, approximately $750 million were extracted from the three banks between November 24 and 26, 26, 2014 [1]. A few days later, a van belonging to Klassica Force, a Shor-owned company, was stolen and burned, taking with it records of transactions and potentially incriminating evidence [1]. On November 26, the banks went bankrupt and were later placed under the National Bank of Moldova’s special administration [1]. The banks’ collapse created a Moldovan public finance deficit equivalent to an eighth of their GDP [1].

Reactions and Investigations

The US investigative consultancy Kroll was hired by the National Bank of Moldova in January 2015 to investigate the fraud, codenamed Project Tenor [14]. The report revealed that Ilan Shor’s group allegedly issued massive loans to affiliated companies, resulting in a minimum transfer of 13.5 billion lei between November 24 and 26 [6].

Several latvian banks have been linked to the larger Russian Laundromat case, including ABLV Bank, PrivatBank, and Latvijas Pasta Banka [15][18], and two senior Latvian politicians were summoned to the US due to concerns about money laundering in Latvia’s boutique banking sector [17].

The scandal has had significant political repercussions in Moldova and beyond, with prominent politicians, including former Prime Minister Vlad Filat and founder of the Liberal Democratic Party of Moldova, being implicated [21][23]. The scandal has eroded public trust in the pro-European government and has contributed to the declining popularity of the EU among Moldovans [20]. Several key officials, including Dorin Drăguțanu, Moldova’s central bank governor, and Valeriu Streleț, were dismissed as part of the investigation [22][23].

Response and Aftermath

In response to the scandal, a grassroots citizens’ movement called Dignity and Truth (Demnitate și Adevăr) was founded in February 2015 [24]. The movement has organized a series of street demonstrations, flash mobs, sit-ins, and pickets, demanding the conviction of corrupt oligarchs and early elections [25].