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. Last Updated: 07/27/2016

Prosecutor to Examine GMM Practices

The Central Bank on Tuesday accused the Dutch financial services company GMM of breaking Russian banking laws and passed the case to the public prosecutor.


"They broke all the laws possible," Alexei Sitnin, a Central Bank spokes-man, said in a telephone interview.


"We have passed the materials about GMM's activities to the prosecutor's office and now they will deal with the firm."


In a document released to the press, the bank said that GMM -- the Global Money Management Trust Financial Services company -- had breached Russian banking legislation by:


?carrying out unlicensed business activities in Russia through its representative office, which under Russian law should be used only to represent the interests of its head office;


?attracting investors' money directly, something that Russian law states can be done only through authorized banks;


?receiving hard currency deposits without a license.


GMM, which is based in Amsterdam but founded by Russians, launched an extensive advertising campaign a year ago for its investment savings fund, promising dividends of 24-35 percent on the condition that clients did not withdraw their deposits for at least a year.


A spokesman for GMM, Vladimir Medinsky, said Tuesday that the Central Bank's action had been "completely unexpected." GMM's president, Anton Nenakhov, said last week that the company had settled its conflict with the Central Bank.


"The Central Bank's declaration is most obviously the result of inertia," Medinsky said. "Someone fulfilled an order he got two weeks ago."


Medinsky said the company's highly publicized dispute with the Central Bank had caused about 6 percent of GMM's clients to withdraw their funds from the company, but he added that "the inflow (of new clients) was much, much more.


"We are taking away clients from big Russian banks, that's why they are trying to prosecute us," he said. "No bank can offer dividends as high as we can."


Medinsky said that GMM's Russian branch has already paid out more than $19 million in dividends to its investors.


GMM's activities have aroused concern in Holland as well as Russia.


The Dutch Central Bank wrote to GMM last year, warning it not to carry out banking services, citing a law that bans non-banks from attracting money from the market, Reuters reported.


The Economic Control Agency, the Dutch financial watchdog, launched an investigation last month into GMM's fund-raising activities. Nenakhov said at a news conference in Brussels last week that he welcomed the inquiry, Reuters reported.


"I think the investigation will clear us (of all the allegations)," Reuters quoted Nenakhov as saying.


GMM has also been accused of funding the election campaign of the Liberal Democratic Party of ultranationalist Vladimir Zhirinovsky, which made a strong showing at the elections in December. Nenakhov has flatly denied the charge.