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. Last Updated: 07/27/2016

Congress Dives Into Bank of N.Y. Probe




WASHINGTON -- The House Banking Committee will hold hearings next month on an alleged money-laundering scheme at the Bank of New York that U.S. federal investigators say involves Russian organized crime.


"Russian banks appear to be more platforms for insiders seeking to spirit money out of the country than intermediaries for domestic growth," the committee chairman, Representative Jim Leach, said in a statement Wednesday.


"At issue is whether foreign theft has been facilitated by self-serving banking practices in the Western world, including the United States," he said. "With regard to the Bank of New York, the question is whether they were unwittingly duped or were willing facilitators in what may be the greatest example of kleptocratic governance in modern history."


Russia's finance minister said his government is not linked to the alleged scheme.


U.S. authorities are investigating the bank, where $4.2 billion passed through a single account in more than 10,000 transactions between October and March, The New York Times reported last week. It has been described as potentially one of the biggest money-laundering schemes ever uncovered in the United States.


"I have no information indicating that Russia has anything to do with this problem, so there is no need for the government to interfere in this situation," Finance Minister Mikhail Kasyanov told reporters Wednesday.


Under U.S. law, if a bank is found to have knowingly laundered money for criminals, federal regulators can revoke its charter, effectively putting it out of business. Even if just one employee acted without the knowledge of bank management, the institution could still face strict penalties.


Regulators are questioning if the bank ever properly supervised one of its fastest-growing businesses.


"If the bank conducted transactions with money that came from criminal activity, and it did so knowingly or through willful blindness, it can be prosecuted for money laundering whether or not it filed suspicious-activity reports," said Charles Intriago, publisher of Money Laundering Alert, a newsletter.


Neither the Bank of New York nor any of its employees has been accused of any wrongdoing. Two senior employees were suspended last week pending the investigation's outcome. The bank has declined to comment.


It's possible the bank was compromised by employees secretly undertaking crimes. Even if that were the case, it could still be in legal trouble.


Attorney General Janet Reno is said by a person close to her to have a "personal interest" in the case, The New York Times reported Wednesday. In addition, in the past few days, two British investigators arrived in the United States to bolster the FBI's effort, and Switzerland's banking commission said Tuesday that it is also cooperating with the investigation, the Times reported.


Swiss authorities said this year that Russian organized crime had been laundering money through Swiss banks, and Swiss prosecutors have been probing allegations of money laundering involving members of President Boris Yeltsin's administration.


One key account through which money is suspected of being laundered belongs to Benex, a firm investigators believe filtered money for Semyon Mogilevich, an alleged kingpin of Russian organized crime.


The bank has suspended Russian-born executives Natasha Gurfinkel Kagalovsky, who supervised its East European division, and Lucy Edwards, who answered to Kagalovsky. Her husband, Konstantin Kagalovsky, was Russia's representative to the IMF in 1992-95 and is now vice president of oil giant Yukos. Edwards' husband, Peter Berlin, had authority over one of the accounts in question.