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. Last Updated: 07/27/2016

IMF Checks Report Its Funds Diverted




Some $200 million of loans to Russia from the International Monetary Fund could have been diverted through the Bank of New York, The Wall Street Journal reported Tuesday.


IMF officials were not aware of the Journal's source of information.


"The fund finds no basis for such allegations, it will vigorously explore the issue," an IMF spokesman said Tuesday.


The IMF added that it relies on the Russian Central Bank to look after the money the fund sends it.


However, the Central Bank says if IMF money disappeared in the Bank of New York, then the IMF should have kept a better track of what happened to its money.


"This is not our business. The IMF should know where this money went to," said Vladimir Lavrov, spokesman for the Central Bank, referring to the $200 million that reportedly disappeared in the Bank of New York.


The Bank of New York is already under investigation on suspicion that Russian organized crime used its accounts to launder money.


The Journal has also reported that a number of large commercial banks, including Credit Suisse Group, UBS, Dresdner Bank, Westdeutsche Landesbank and Banque Internacionale a Luxembourg, were involved in the movement of some $4 billion from the former Soviet bloc.


Almost all these banks have investigated and dismissed the allegations, The Associated Press reported late on Tuesday,


However, no report by Central Bank auditors PriceWaterhouseCoopers records any amount ever having been sent to the Bank of New York from the Central Bank.


The PriceWaterhouseCoopers report was produced after the Prosecutor General's Office cried foul over the Central Bank subsidiary FIMACO. FIMACO is a shell company set up on Jersey in the British Channel Islands. FIMACO handled $50 billion in Central Bank reserves over several years. At least some of that money was channeled back into Russia to buy Russian treasury bonds, or GKOs. The Central Bank has been accused of concealing the profits it made on such transactions.


Officials at the Audit Chamber f the Russian parliament's watchdog f dismissed any possibility that funds could be diverted directly while being moved from the IMF to the Central Bank or Finance Ministry. "IMF money goes either to the [U.S.] Federal Reserve Bank or to the Republic Bank of New York," said Eleonora Mitrofanova, auditor of the Audit Chamber.


Of course, knowing the vague nature of international settlements, this money could easily find its way to the accounts of commercial banks, Mitrofanova said.


If so, it would not be the first time money allocated to the Central Bank had ended up in foreign bank accounts.


A PriceWaterhouseCoopers report states that the Central Bank used its Paris-based subsidiary Eurobank to issue loans worth exactly $200 million to commercial banks, which placed MinFin bonds as collateral. The $200 million came from a 1993 tranche from the IMF.


However, when MinFins slumped, many banks failed to repay the loans. PriceWaterhouseCoopers's report says that already at the beginning of 1999 some $70 million of these loans were nonperforming.


Mitrofanova said the scheme in which commercial banks failed to repay loans and handed MinFins to the Central Bank was a likely explanation, but she had not investigated this particular area.


In fact, the Audit Chamber cannot investigate the scheme in full because loans were issued through Eurobank, which acted as the Central Bank's agent.


Using Eurobank as an intermediary allows the Central Bank to make loans from commercial banks without being subject to scrutiny by Russian authorities.


Audit Chamber officials had complained that they could not audit the Central Bank's foreign subsidiaries, because they are out of the scope of Russian legal jurisdiction.