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. Last Updated: 07/27/2016

Tax Police Case the Latvian Embassy




Moscow tax police and the Federal Security Service have seized thousands of dollars from people coming out of the Latvian Embassy, which they say is housing firms involved in a suspected scheme of capital flight and illegal cash transactions.


The agencies said Tuesday that an investigation into Moscow-based Flora Bank led to as many as 20 firms and bank branches they say are located on the territory of the embassy.


"You know how it is usually done," tax police spokesman Yury Lavrukhin said. "Two firms sign a bogus contract to paint the clouds or make the moon shine less. Then a bank gets involved and for a cut, cashes money or transfers money abroad."


Embassy officials denied the allegations, saying no commercial activities take place on the embassy grounds in central Moscow.


In an operation carried out at the end of last week, officers from both Russian agencies searched two offices and an apartment around the city and seized $7,000 and 500,000 rubles from a few people leaving the embassy, Lavrukhin said. The seizures did not involve Latvian diplomats.


Andrei Kostromin, spokes-man for the Federal Security Service, or FSB, said the activities at the embassy were monitored "for a length of time after the FSB's economic counterintelligence was tipped through its agents network."


Kostromin said large sums of money were involved in the case but gave no specifics. The tax police said up to $2.5 million went through the scheme daily but gave no total amount of money or time frame.


Vilmars Hennins, the first secretary of the Latvian Embassy, said the embassy has received no documents from Russian law enforcement agencies or the Foreign Ministry informing it of the investigation.


The FSB and police said they were not investigating the embassy itself and would not violate its territory.


Teodors Tverijons, the president of the Association of Latvian Commercial Banks, expressed doubt Tuesday that the embassy could be involved in inappropriate commercial activities.


The key to solving the problem of economic and financial crimes in Russia, he said, lies not in chasing particular cases, but changing the economic climate.


"Businesses always appear where there is a demand for specific services. If currency regulations in Russia are such that people are forced to use shady financial structures, it means that currency regulations are bad," Tverijons said.


"Look at Latvia. We can take money in and out by train loads, and there is never a problem with capital flight," he said.