- - Tuesday, June 25, 2019

ANALYSIS/OPINION:

The simultaneous rise of information systems technology and the fall of communism throughout Eastern Europe and northern Asia in the early 1990s provided immense opportunities for ambitious people. Unfortunately, for some people legitimate success is not enough.

In 1992, brothers Dmitry and Alexey Ananyev founded Technoserv, which became Russia’s top information technology (IT) company servicing Ministry of Interior, FSB (intel) and Russian government. Three years later and having become billionaires, the Ananyevs teamed with Moscow Intercity and International Telephone to establish Promsvyazbank.

It was very reasonable for multi-billion-dollar corporations, especially in unstable Russia, to create their own banking institutions. In America, credit unions are formed by corporations wishing to protect finances and wisely invest in the future of their own employees.

For more than 25 years, Promsvyazbank appeared to be a success story. In time, Moscow Telephone sold off its interests, and the Ananyev brothers became leading shareholders. Along the way, Promsvyazbank acquired two more banks, Vozrozhdenie and Avtoaz. Vozrozhdenie would come to play a significant role in what is now realized to be far less than legitimate business. Promsvyazbank was turned into a personal slush fund for the Ananyev brothers’ other financial ventures with the investors picking up the tab. Cyprus and the Cayman Islands became off-shore tax havens.

Further shipping money overseas, Promsvyazbank involved American banks of Citicorp, JP Morgan and New York Mellon. There is no evidence to suspect the American banks, or even their London counterparts, of being intentionally involved in Promsvyazbank’s criminal activity. However, through complacency or ignoring potential red flags, these banks likely contributed to the scheming. The U.S. financial collapse of 2008, the failure of Freddie Mac and Fannie Mae, and the Bernie Madoff scandal, showed that during this period of time the U.S. banking system was not aggressively protecting itself from exploitation and destruction.



The Ananyevs were able to keep their illegitimate activities hidden until August 2017, when the Promsvyazbank bubble broke. Four months later, in December, the Central Bank of Russia (CBR) assumed administration of Promsvyazbank. Meanwhile, the Ananyev brothers pulled an inside-bank heist via electronically-given loans, leaving investors with little to nothing. The money was first transferred to the less-monitored Cyprus branch of Promsvyazbank. Also removed were hundreds of credit files.

By involving American and European banks in their schemes, the brothers were able to provide a perception of credibility. Russians trust Western banks more than their own. This has come back to haunt the Ananyevs as they are now subject to much stricter legal standards and investigative capabilities of Western governments.

Dmitry Ananyev, fleeing to Cyprus and Alexey to London and then to Austria, only makes it easier for Western governments to arrest them. There are currently legal actions against Promsvyazbank filed in the courts of Moscow, London and New York City. Unfortunately, these courts appear to be moving at the pace of a startled snail. Even the investigations by various authorities are incomplete, allowing for manipulation and abuse of the legal systems by the Ananyev brothers’ attorneys.

Only Russia appears to be ready for full prosecution. The motivation there is not solely because its citizens have been hurt the most. While having financially injured Russian investors, the fall of Promsvyazbank has opened an opportunity for the government. By assuming administrative control of all the Ananyevs’ banking institutions, the CBR, also known as “Putin’s Bank,” is one major step closer to consolidating the Russian financial system. It also allows the potential to avoid U.S. sanctions by using unlisted banks.

The Ananyevs have proven how easy it is to manipulate international financial systems. This lesson should also not be lost on the Trump administration and Congress. Tougher sanctions, tougher laws, a continually updated sanctions list and more thorough investigative oversight are necessary to prevent American financial institutions from being manipulated in the future. The technology is available to monitor and implement early detection of shady financial transactions. Accountability needs to be implemented on American banks that ignore both laws and red flags.

Likewise, pressure must be imposed on countries like Austria, UK and Cyprus to restrict the illegal flow of finances. Rather than providing sanctuary to the Ananyev brothers, all governments should be helping to recover the embezzled money and support their arrest. What the brothers accomplished could almost be termed financial terrorism. Like terrorism, it is not going to be resolved until government and non-government authorities take appropriate and timely action.

The latest money laundering scandals in Deutsche Bank, Nordea, Danske had shed a light on the amounts of money which were laundered by Russian intelligence service and oligarchs. The Ananyevs case, when properly investigated, will bring incredible intelligence as to how our critical infrastructure financial systems were captured by oligarchs, shady banks and groups linked to foreign intelligence services.

• Wes Martin, a retired U.S. Army colonel, served in the Army Military Police and in law enforcement positions around the world.

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