Moldova’s Battle Against Kleptocracy: The Ineffective Use of Sanctions in Pursuit of Justice and Asset Recovery

A Case Study of the Russian Laundromat and the Billion Dollar Bank Theft

Moldova, once seen as the Eastern Partnership’s model student, has been engulfed in massive corruption scandals. Among these cases, the Russian Laundromat and the Billion Dollar Bank Theft stand out as the most notable ones. Despite international and public pressure, the Moldovan authorities have shown little progress in investigating these cases, recovering stolen assets, or punishing the responsible parties.

The Russian Laundromat and the Moldovan Connection

Over $22 billion passed through Moldovan jurisdiction as part of the Russian Laundromat, a money laundering operation involving Moldovan judges and proxies (Europa Press, 2020).
None of the 16 implicated judges have been convicted; some have fled the country, while others have been freed from criminal investigations and reinstated to their positions (October 2020).
The Moldindconbank, a commercial bank suspected of serving as the hub of the operation, continues to operate without interference.

The Billion Dollar Bank Theft: Ilan Shor’s Alleged Crime

Approximately one billion dollars disappeared overnight from three banks linked to Ilan Shor.
Despite public protests and investigations, no one has been convicted for the theft.
Ilan Shor’s trial has been delayed repeatedly.
A few of his alleged accomplices and Members of the Moldovan Parliament remain free from criminal investigations.

The International Community’s Role: Sanctions as a Tool Against Corruption and Kleptocracy in Moldova

The European Parliament has called for the prompt investigation of those involved in the theft and the recovery of stolen assets.
Internal reports (Kroll-1 and Kroll-2) have named several individuals, some of whom are Members of the Moldovan Parliament and are free from criminal investigations.
The European Parliament has proposed implementing targeted international sanctions, such as the Magnitsky Act, as a tool against corruption and kleptocracy in Moldova.

The Effectiveness of International Sanctions in Moldova

While naming and shaming individuals by the European Parliament may act as a deterrent, the low probability of sanctions being imposed has had minimal impact.
The delayed application of the sanctions has weakened their effectiveness.
The visa ban imposed on Vladimir Plahotniuc, a former influential political figure linked to the theft, has had little impact due to the limited nature of the sanctions.
The asset freezing and confiscation provisions proposed in Magnitsky-style sanctions could strengthen the impact of sanctions and discourage potential kleptocrats from engaging in similar corrupt activities.

Conclusion

Moldova’s experience with international sanctions for combating corruption and asset recovery is still limited and developing. The lack of progress in the investigations and failure to prosecute perpetrators have left the country in a state of decline, with democratic standards worsening and the risk of money laundering increasing.

Implementation of Magnitsky-style sanctions with stronger international support for asset recovery mechanisms could potentially be more effective tools against kleptocracy and corruption in Moldova. It is crucial for the international community to maintain pressure on Moldovan authorities and provide assistance in the investigations and asset recovery processes.