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. Last Updated: 07/27/2016

MOST Raided in Capital Flight Probe




The tax police and State Customs Committee officials have raided MOST-Bank offices in a probe to find out if the bank has been funneling funds abroad, a customs committee official said Wednesday.


The search Tuesday almost escalated into armed conflict after MOST-Bank, citing client confidentiality laws, refused to grant customs officials access to import-export contracts, MOST-Bank spokesman Vasily Borisov said.


MOST-Bank is accused of failing to pay off a debt of $29.9 million in customs arrears to the State Customs Committee. Government officials say they now want to know if funds that could have been used to pay the debt were instead diverted abroad.


"If we find during the investigation that MOST has been extending soft credits to other structures and parking funds abroad instead of paying off its debts, then sanctions will be imposed against the bank," said Vladimir Yemelyanov, spokesman for the State Customs Committee. "If there is evidence of this kind of misappropriation, then we may file for bankruptcy."


MOST-Bank hit back Wednesday, saying that the raid was the latest political attack from its foes in the Kremlin and that the Prosecutor General's Office had agreed to examine the raid.


"The Kremlin is trying to put pressure on the Media-MOST group through the bank. The customs committee is just carrying out a political contract," Borisov said. "We do have accounts abroad, but all our operations are carried out within the framework of the law. The customs committee does not have the legal right to demand to see all of our export-import contracts."


By law, the officials can only examine documents connected to companies suspected of criminal activities, he said.


"We have no quarrel with the tax police, however, and are prepared to cooperate with them fully," he added.


The Media-MOST group, owned by financier Vladimir Gusinsky, has been locked in a legal wrangle with state-owned Vneshekonombank over a debt of $40 million. Media-MOST has claimed that the conflict was being used in an attempt to silence the media group's criticism of the Kremlin regime and quash what the presidential administration sees as its support of a dangerous rival to the Kremlin throne, Moscow Mayor Yury Luzhkov.


MOST-Bank denies it has overdue debt payments to the customs committee, saying it signed an agreement to reschedule repayments until Dec. 30.


Yemelyanov, however, said he was unaware of a restructuring agreement with the bank.


He said the probe Tuesday had been conducted in collaboration with the Tax Ministry to investigate money flows to the accounts of Russian banking houses abroad.


Tax Minister Alexander Pochinok had announced over the weekend that his ministry would probe all Russian banks that have worked with the Bank of New York. MOST-Bank would fall into that group.


The Tax Ministry's drive comes in response to a money-laundering scandal that has been dominating the press ever since Western law enforcers revealed they were tracking an unprecedented flood of funds washing through accounts in the Bank of New York - a flood that reportedly tops $7 billion and may include laundered funds from criminal groups.


Observers say the money flow was largely capital flight by corporations and banks parking funds abroad to avoid paying taxes to the Russian authorities. One of the most widely used ways of funneling funds abroad is through false export-import contracts.


Russian banks now owe 35 billion to 37 billion rubles ($882 million to $932 million) in tax arrears.


The customs committee is collaborating with the Tax Ministry on investigating the money flows, Yemelyanov said.


The tax police was called in because it is the only body authorized to conduct the checks, he added.


The customs committee is also conducting similar checks on other major customs debtors, Yemelyanov said.