|FOLLOWING THE MONEY|
October 6 ,1999
MARGARET WARNER: The first criminal indictments have surfaced in the government's year-long investigation into possible money laundering of Russian funds through an American bank. Indictments announced yesterday charge three Russian-born immigrants and three companies with conspiring to take deposits and transfer funds without proper licenses-- almost $7 billion worth over three and a half years. The indictments allege the money moved through the Bank of New York, through accounts held by two related companies, BENEX International and BECS International LLC. Charged in the scheme were Peter Berlin, the President of both BENEX and BECS, and his wife, Lucy Edwards, also known as Ludmilla Pritzka, a former Vice President of the Bank of New York, who was recently fired. They live in London. Also charged was Aleksey Volkov, and the company he ran, TORFINEX Corporation, for allegedly handling the illegal money transfers. The Bank of New York has not been charged with any wrongdoing. For more, we turn to Robert O'Harrow of the "Washington Post." Robert, set aside the legalistic phrasing that's in this indictment and explain for us what are these three immigrants charged with doing? What has the government said they did and how did they do it?
ROBERT O'HARROW: Well, the government's saying that they illegally brought money into the U.S. And illegally transmitted it to countries and financial institutions around the world. And they're saying they did it without any authorization of banking authorities in the U.S..
MARGARET WARNER: And where did they operate?
ROBERT O'HARROW: Well, they operated out of an office in Queens, New York, and used PC's and contacts at the... a contact at the bank to bring in lots and lots of money every month for the past three-plus years.
MARGARET WARNER: And that was with a lot of money.
ROBERT O'HARROW: Well, in some months, they brought in as much as $250 million, and it came in on a daily basis. And they moved it out quickly to as many as 50 countries or more over that period.
MARGARET WARNER: Yet the charges are essentially what, just violating banking regulations, they're not the more serious money laundering charges?
ROBERT O'HARROW: Right. Well, the case has actually been going on for over a year now, and it became public in August. And after it became public, investigators had to take some steps that they might not have taken, and one of them is to bring charges against several of the key figures, in part to bring pressure to bear. But these are really...this is really an early stage in an investigation that could go on for years.
MARGARET WARNER: So the missing element, though, if you want to prove money laundering, since this is really a money laundering investigation, the prosecutors have to be able to say that the money came from a crime, is that the case?
ROBERT O'HARROW: Right. Proving money laundering can be very difficult when a crime occurs in the U.S.. It can be extremely difficult, if not impossible, when a crime occurs overseas in a place like Russia. Not only do they have to prove that it was a crime, they have to prove that the people moving the money electronically knew that the... it was ill-gotten money.
MARGARET WARNER: So in other words, though it looks suspicious, since most small businesses don't generate $7 billion in three years, the investigators, what are they looking at in terms of...if they are ill-gotten gains, what are they looking at?
ROBERT O'HARROW: Well, first of all, it definitely looks suspicious. You had some companies operating out of a 400 square foot office in a fairly remote part of the city far from the financial district of New York and the amounts of money were extraordinary for any size company, let alone companies that really remain very mysterious to this day, other than the fact that they moved money around the world. Federal investigators are going to be looking at... in fact are looking at a whole array of sources, potential sources for this money, and that includes Russian organized crime, it includes government, potentially government officials that may be corrupt, it includes entrepreneurs sending their money out of the country to the safe havens elsewhere in the world.
MARGARET WARNER: And then another suspicion was that it might have been diverted foreign aid somehow, though nothing's turned up on that, I gather?
ROBERT O'HARROW: Right. That obviously has tremendous public policy implications. People want to help places like Russia become stable financially, but they'll be really miffed if in fact foreign aid, say, from the International Monetary Fund was siphoned off. Now, there's no evidence of that, but I can assure you that that's going to be a strong part of the investigation until it's over.
MARGARET WARNER: All right. So go back now to the prosecutor's strategy here. Why did they unseal these indictments now and make them public?
ROBERT O'HARROW: Well, there are several reasons that we believe are at work here. One of them is that it's pretty simple, it's an old-fashioned investigative prosecutorial technique and that is to turn the screws down a little bit on the folks who might know what really happened here. Let's remember that, as diligent as the investigators are, they're going to be tracking down something like 87,000 transactions through these companies over the past several years, and it could take a long time if they don't have some inside help to guide them. And they're hoping that by, you know, sort of laying it out on the table that these folks face some consequences, and at least two of them are American citizens now, that they might decide to help. Another reason is that this information was under seal in a federal court, and in order for U.S. investigators to share it with their foreign counterparts all over the world, it really has to become unsealed for the most part. And so they... that was one of the reasons that they unsealed the indictment now.
MARGARET WARNER: So how much cooperation and coordination is there between the U.S. prosecutors and investigators and the Russians?
ROBERT O'HARROW: Well, it's fairly limited to our knowledge right now. It's... U.S. investigators have made that sort of a prime goal. We believe that they're going to be expanding their presence in the Soviet Union...or, excuse me, in the Former Soviet Union, in Russia, which would have been unimaginable a generation ago. And they're very hopeful. But to date, it's still at sort of an early stage, and so...
MARGARET WARNER: There was a raid, I read that Russian authorities did raid a bank in Moscow, Sobin Bank yesterday and seized all their records. Is that related to these charges?
ROBERT O'HARROW: Well, I'm not sure it's related to these charges. It is related to the overall sort of series of investigations now that are going on in several countries, trying to pin down just how widespread the money laundering, alleged money laundering is, and to try to find out where it leads. There are some suspicions that it leads to potentially the inner circle of... at the Kremlin, and if that's the case, at least some Russian investigators want to find that out, and that of course would fold into the Bank of New York investigation.
MARGARET WARNER: Finally, turning to the Bank of New York's role, all the stories say and we said tonight that the Bank of New York has not been charged with any wrongdoing, but given the volume of the transactions and the amount of money involved, what do investigators and prosecutors say to you about the legal responsibility of a bank, any bank to notice this kind of activity, to flag it?
ROBERT O'HARROW: Well, the banks themselves would tell you that they have a very important responsibility in keeping an eye, in knowing their customers, and it's written into regulations that they find out what their customers do for a business, sort of compare that to the kinds of money flows that they see and so on. Those are suggestions, and it's going to be something that regulators will be following up on quite vigorously, I can assure you up, the Federal Reserve, which regulates the Bank of New York, is already doing its own investigation, I understand, and this is something that will become probably one of the major public policy issues that spins out of the whole investigation, just how much attention banks are paying.
MARGARET WARNER: All right. Well, Robert, thank you very much.
ROBERT O'HARROW: Thank you.