Hundreds of millions of dollars, three oligarchs, one illicit deal.
“The philosophy of money launderers is to create a situation where the money has moved through so many different companies and so many different countries, in so many different accounts thereby effectively laundering it because nobody has the resources to figure it out.”
- Bill Browder, Investment fund manager
As president of Ukraine from 2010 - 2014 Viktor Yanukovich presided over a global money laundering network.
Billions of dollars flowed from Ukraine’s treasury into a complex web of offshore accounts and companies linked to the president and his inner circle of oligarchs.
Al Jazeera’s Investigative Unit has obtained a cache of leaked documents that shed light on how that network operated: a pipeline, pumping dirty money out of Ukraine into Yanukovich’s pocket.
February 22, 2014 The oligarch is ousted
In Kiev’s Independence Square, crowds braved bitter cold for a third month. Seeing no way to stop them, Viktor Yanukovich gave up on the presidency of Ukraine. More than 100 people had died for the revolution. - Kiev’s Independence Square
On the outskirts of the Ukrainian capital, the president prepared to leave his hidden palace. A vast log cabin stuffed with luxuries. - Yanukovich's hidden palace
He ordered his men to take as much as they could and pack it into trucks. They drove east while their boss took a helicopter. Russian special forces escorted them to a new life in exile. It is believed that Yanukovich is now living in the Black Sea resort of Sochi.
While the news media obsessed over the luxuries, local investigative journalists and activists spotted something; thousands of papers floating in the nearby river.
Besides packing up his house, Yanukovich’s staff had hastily tried to cover their boss’s financial tracks. They failed.
Investigators and activists dried the documents they fished from the river in the presidential sauna. They revealed a corporate network that had pumped stolen money offshore, through dozens of shell companies in Cyprus, Belize, British Virgin Islands and other money-laundering hotspots, including the UK. - Documents recovered from a nearby river are dried in one of Yanukovich’s many saunas.
Eventually, the money emerged at the other end, looking clean.
Moving the money offshore
The Yanukovich network used vast numbers of offshore shell companies to syphon money out of the Ukraine. Many were Cypriot.
Cyprus is a regional financial hub with all the legal, accounting and other professional services that go with it. The government’s financial incentives for Russians and Ukrainians has led to a boom.
The same infrastructure that makes Cyprus appealing as a place to do business, is also attractive to money launderers.
Cyprus is home to a company called Quickpace Ltd - a key part of Yanukovich’s network. Bank statements from it’s accounts with PrivatBank Latvia show that between 2011 and 2013 it was primarily moving large sums of money between its own accounts in various countries.
A 2014 loan agreement for $4.4million between Quickpace and another Cyprus based company, Foxtron Networks Ltd also shows how money moved via complex paths.
Money from a Quickpace account with Meinl Bank in Vienna went to Foxtron’s account at Baltic International Bank in Latvia.
Because the transfer is in US dollars, the money has to move via approved agents in the United States. So two more banks were used in the transfer. Commerzbank in Frankfurt and Deutsche Bank in New York acted as intermediaries, or correspondent banks to move the money.
This was simply to move money between two Cyprus companies, but the transfer involved four different banks in four different countries. None appear to have flagged the activity as suspicious.
The Magnitsky Affair
The connection to Foxtron Networks in turn links Quickpace to one of world’s most high-profile money laundering scandals.
In 2007, an investment firm Hermitage Capital fell victim to a $230m fraud and money-laundering scheme in Russia.
Discovered by accountant Sergei Magnitsky, who later died in a Russian jail, it has triggered major new anti-corruption laws in five different countries. - Sergei Magnitsky
A Cyprus-based company Fynel Limited was at the heart of the web uncovered by Magnitsky. Fynel also turns out to own Foxtron.
Armour plating for corrupt money
The registered address for Fincorp Resources LLP is a ramshackle red brick office in the North London suburb of Elstree. Its nominee directors, two Latvians Stan Gorin and Yuri Vitman, appear on the paperwork Magnitsky uncovered.
Documents submitted to UK Companies House say Fincorp Resources had an income of just over £6,000 in 2013, Yanukovich’s final full year in power.
However, a bank statement we have obtained shows that in the same year over $328m flowed to its account in Latvia.
Fincorp’s inconspicuous address has also been the registered home for more than 1,500 other UK companies, set up by Quick Access Formations.
For a small fee, Quick Access Formations will set you up with a mailbox company, complete with proxy directors and a proxy secretary. It can even be offshore, registered to a proxy address somewhere like the British Virgin Islands.
The company’s real owner and controller stays in the shadows. By itself, this is not illegal, but privacy helps if you want to commit fraud.
Is Yanukovich’s dirty money fuelling a conflict?
Finding out Quickpace’s real owners is similarly difficult. With another Cypriot shell company, Prontoservus Ltd, listed as the nominee director, the trail goes cold.
But documents we obtained reveal that Quickpace Ltd had been used as collateral in a 2013 loan to a company called Vetek Media invest. This belongs to Serhiy Kurchenko, a young gas tycoon integral to Yanukovich’s looting machine.
Today, Yanukovich and Kurchenko are both in hiding in Russia, subject to US and EU sanctions. A judge has frozen $1.5billion across companies that include Quickpace Ltd. But our evidence suggests the network is still operating.
Evidence indicates the illegal sale of Quickpace Ltd has, potentially helped Kurchenko to raise $30 million.
He is now widely reported to be working with the Russians in annexed Crimea and according to Ukraine’s spy agency, secretly fueling conflict in the East of the country.