(This accompanies a Special Report, Comrade Capitalism. See here)
By Stephen Grey and Douglas Busvine
May 23 Patterns of bank transactions relating to
Russian Railways described in a Reuters investigation show signs
of so-called suspicious banking activity, according to Russian
and U.S. financial investigators and consultants. But some
cautioned that the unusual activities, while meriting further
attention, don't necessarily constitute illegal behaviour.
Courtney Linn, a former U.S. federal prosecutor, said the
payments to Russian Railways contractors and complex subsequent
transactions - described in a Reuters Special Report
- contain signals of possible money laundering
which, if they occurred in the United States, would likely
trigger an investigation.
"If, as it appears here, the money is moving in a gigantic
swirl, the purpose of the transactions is unclear and the
beneficiaries are not obvious, and behind this is government
money: These would together push all the buttons," Linn said.
"It would make for a really high priority for law enforcement."
Sergei Lesnichiy, of Moscow's state-backed Centre for
Financial Investigation, said the contract bidding identified by
Reuters was unusual - but not necessarily illegal in Russia. "It
isn't a crime in Russia for two related companies to compete
against each other in a tender," he said. "It isn't a crime for
them to have nominee owners. Nor is the lack of a real business
a crime in itself - although it may be an indication of a
He added: "If the cost of work is inflated to a level not
justified under market conditions it would be an abuse of office
by the railway officials involved. If those officials and those
who benefited were affiliated, then it would meet the Russian
legal definition of fraud."
Adam Kaufman, former chief of investigations for the
Manhattan district attorney and now a partner with the law firm
Lewis Baach, cautioned that there was a large gap between
identifying suspicious transactions and proving any illegality.
"I am wary of any allegation of money laundering based
solely on bank records. With some countries, including Russia,
you can never get the evidence you need, unless there is a
political will to provide it," Kaufman said.
(Editing By Richard Woods and Simon Robinson)