Moldova’s Billion-Dollar Banking Scandal: A Coordinated Effort of Fraud, Money Laundering, and Political Implications

This article details the shocking banking scandal that rocked the European nation of Moldova between 2012 and 2014, involving the disappearance of $1 billion from three major banks: Banca de Economii, Unibank, and Banca Socială.

Orchestration of the Fraud

The complex scheme was orchestrated by businessman Ilan Shor, who manipulated these banks into providing massive loans under questionable circumstances. The funds were then transferred to UK and Hong Kong shell companies to conceal their ownership before being deposited into Latvian bank accounts under foreign names.

Bank Instability Before the Scandal

Banca de Economii, which had already shown financial instability with significant unpaid loans prior to 2012, was under investigation for potential involvement in money laundering following the Sergei Magnitsky scandal.

Shifts in Bank Ownership

From August 2012 to November 2014, there were significant shifts in ownership of the banks. Unibank’s ownership was transferred to nominees, as well as political figures and individuals close to Ilan Shor. Shor himself purchased into the ownership of Banca de Economii. The banks also increased liquidity to facilitate lending and used state funds to cover their debts.

Failure to Identify the Fraud

Despite audits by Grant Thornton in 2010, 2011, and 2013, the fraudulent activities of the banks went unnoticed. One of the auditing company’s partners, Olesea Bride, is married to Stéphane Christophe Bridé, the Moldovan Minister of Economy and former managing partner of Grant Thornton Romania–Moldova.

Extraction and Disappearance of Funds

In the week leading up to the 2014 Moldovan parliamentary election, $750 million was extracted from the banks in just three days, leaving records of many transactions deleted from their computers. Three days later, on November 27, the banks went bankrupt and were placed under special administration by the National Bank of Moldova.

Investigation and Reveal

The US investigative consultancy Kroll was hired by the National Bank in January 2015 to investigate the fraud, known as Project Tenor. The report revealed that the three banks had transferred at least 13.5 billion lei ($625 million) to five affiliated Moldovan companies controlled by Shor during the fraud period.

Wider Implications

Moldovan banks have previously been linked to some of the largest money laundering schemes, like the Russian Laundromat, which went beyond the $1 billion theft. Latvian banks, including ABLV Bank, PrivatBank, and Latvijas Pasta Banka, were also implicated.

Political and Diplomatic Consequences

The banking scandal had severe political and diplomatic consequences for Moldova. Several high-profile politicians and judges were arrested for their roles in the Russian Laundromat scheme. The EU, the International Monetary Fund, and the World Bank all froze their financial assistance to Moldova due to the crisis.

To address the financial crisis, Moldova received emergency economic aid and a loan of $65 million from Romania. The EU and the IMF required Moldova to reform its justice system, fight corruption, sign a draft agreement for a loan from the IMF, and appoint a new central bank governor as conditions for assistance.