Kazakhstan’s Financial Elite Embroiled in Massive Embezzlement Scandal with US Bank Help

A staggering hundreds of millions of dollars of suspicious origin have transited in and out of Kazakhstan, facilitated by top US banks, according to a massive investigation into thousands of leaked documents. The International Consortium of Investigative Journalists (ICIJ) and BuzzFeed News unveiled the collated data of the so-called FinCEN Files, revealing how US banks served as intermediaries for thousands of suspicious international transactions over an 18-year period.

Background

The Financial Crimes Enforcement Network (FinCEN), established by the US Treasury Department in 1990 to combat domestic and international money laundering, collected millions of suspicious activity reports (SARs) but had no power to stop the transactions. The leaked documents show that top US banks such as Bank of America, Citibank, JPMorgan Chase, American Express, and others processed “millions of dollars in transactions for Kazakhstan’s former oligarchs, including Viktor Khrapunov and Mukhtar Ablyazov”, even after Interpol issued a Red Notice for their arrest.

Key Players

• Viktor Khrapunov: Once close to Kazakhstan’s former ruler Nursultan Nazarbayev, served as the mayor of Almaty before falling out with Nazarbayev and allegedly defrauding the city through opaque public tenders. He fled to Switzerland.
• Mukhtar Ablyazov: Became a major political opposition figure in Kazakhstan after being accused of embezzling funds from BTA Bank.

Transactions

• Khrapunov’s transactions: The suspicious $89 million that passed through Khrapunov’s hands pales in comparison to the $666 million attached to Ablyazov’s name, which was flagged with SARs.
• Ablyazov’s transactions: In 2018, a UK High Court fined Viktor Khrapunov’s son Iliyas $500 million for allegedly helping Ablyazov embezzle funds from BTA Bank.

Other Names Involved

The FinCEN Files have not yet disclosed other names of Kazakhs potentially exposed in the scandal, despite rumors that the country’s richest could be involved. ICIJ did not respond to a request regarding other Kazakhs potentially exposed in the files.

Financial Institutions Involved

• The Bank of New York Mellon: Most transactions to or from Kazakhstan were processed through this bank, which is also responsible for the custody of Kazakhstan’s national fund, currently threatened by a long-lasting lawsuit.
• Deutsche Bank: Figures as an ironic character in the FinCEN Files, having already emerged as a catalyst of money laundering transactions in past scandals. The bank knew of the potential risks associated with the money it processed but failed to stop the flow.

Statistics

• $2 trillion flagged: Between 1999 and 2017, around $2 trillion was flagged in SARs leaked in the FinCEN Files.
• Western banks’ role: As BuzzFeed put it, “Western banks could have blocked almost any of them, but in most cases they kept the money moving and kept collecting their fees.”