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. Last Updated: 07/27/2016

Report: Mafia Runs Most Russian Banks

NEW YORK -- Russian organized crime now controls between 50 percent and 80 percent of the country's banks and has turned Russia into one of the world's major money-laundering centers, New York magazine said Sunday.


The magazine, publishing results of an eight-month investigation by reporter Robert Friedman, said Russia has also become a major consumer of U.S. $100 bills, which article said were used to fuel illegal activities, including drug dealing.


"The Russians have figured out a loophole and have been able to infiltrate the international banking system," Friedman said in an interview.


Friedman said that from January 1994 to the present, more than $40 billion in new $100 bills has been shipped to Russia to meet orders from Russian banks, an amount that far exceeds the total value of all rubles in circulation.


His article added that from Monday through Friday of any given week, at least $100 million a night is flown from New York's John F. Kennedy airport to Moscow, where the money "is used to finance the Russian mob's vast and growing international crime syndicate."


The U.S. Federal Reserve Bank has sanctioned the selling of the enormous amount of $100 bills and the New York-based Republic National Bank, which specializes in selling currency, has taken a lead in providing the cash to Russian banks, Friedman said.


A spokesman for Republic National Bank said Sunday that Friedman's article with respect to the bank was "false, malicious and defamatory, a concoction of lies, misinformation and innuendoes" compounded by quotes from unidentified sources.


Friedman said the shipment of the money was legal because the banks in Russia ordering the funds from U.S. banks are chartered and officially recognized.


The money is purchased on behalf of Russian banks by U.S. banks with whom the Russian banks have accounts, a spokesman for Republic said, adding, "The money is already in the U.S. banking system."


In his article, Friedman quotes from a U.S. State Department cable the magazine obtained in which a top Russian banking official cited estimates that 50 percent to 80 percent of Russian banks were controlled by organized crime.


The official, Viktor Melnikov, the Russian Central Bank's director for foreign exchange control, also "warned that much of this [imported money] was being used for illegal purposes, including narcotics trafficking."


Friedman quotes a former New York State Banking official as saying, "Republic is guilty of willful blindness, though not in technical violation of any law."


He also quotes an official in the Federal Comptroller of the Currency office as saying, "that money is used to support organized crime; it's used to support black-market operations. In my personal opinion, this is an absolute abomination. It should not exist. Yet it appears that at least part of the federal government sees nothing wrong with it."


A Republic National Bank spokesman said, "The allegation that Republic is guilty of willful blindness is not only erroneous but also malicious.


"Republic has for over three years been providing information to the federal government and asked them specifically if they know of any reason that we should not be dealing with any bank we deal with in Russia or elsewhere and we have gotten a resounding no."