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. Last Updated: 07/27/2016

IMF Upset by Russian Loan Criticism

The International Monetary Fund has objected to an editorial from influential French daily Le Monde that accused the fund of turning a blind eye while international loans to Russia were channeled to oligarchs with organized crime connections.

In an editorial that ran last Friday, Le Monde said the recently released PricewaterhouseCoopers audit of relations between the Russian Central Bank and its pet offshore firm FIMACO helped build "mafioso fortunes, particularly in Moscow."

"In the style of garden-variety swindlers - through companies installed in distant tax havens - one of the planet's major powers ... misappropriated the international community's money to facilitate the enrichment of a few oligarchs," the editorial states.

It also expresses alarm that the use of FIMACO - the Financial Management Co., a company based in the tax haven of the British Channel island of Jersey with no premises, employees or equipment of its own - had taken place with the IMF's knowledge.

In a letter posted on its web site, John Odling-Smee, the director of the IMF's European II department, contests the French paper's conclusions, accusing it of "reading between the lines" and stating that the PricewaterhouseCoopers audit does not contain any of the allegations made by Le Monde.

As well as denying that international loan money was channeled to Russia's notorious oligarchs - a group of businessmen with strong political connections, some of whom have also been linked to crime - Odling-Smee writes that the IMF did not have any knowledge of FIMACO.

"Let me set the record straight. While IMF staff has been aware for some time that some of the reserves from the Central Bank of Russia were held in European subsidiaries, it was not told of FIMACO activities until this year," the letter continues.

State Duma Deputy Nikolai Gonchar has said an earlier Coopers & Lybrand audit of the Central Bank's operations in 1993 and 1994 that was forwarded to the IMF in 1995 had explicitly mentioned FIMACO.

Former Central Bank chief Sergei Dubinin said in an interview this week that he recalls FIMACO being thus mentioned in Central Bank audits forwarded to the IMF. The audit suggested that it might be prudent to utilize other channels than FIMACO in the future, Dubinin said.

The PricewaterhouseCoopers audit into FIMACO and its relations with the Central Bank was requested by the IMF after allegations that some $50 billion of Russia's reserves had been cycled through the Jersey company between 1992 and 1997. The audit reported that Russia misreported the size of its reserves to the IMF in 1996, an action for which Moscow has been heavily criticized by the fund.

Among its other findings, the audit also stated that the Central Bank used double-bookkeeping and granted some $300 million in credits to commercial banks from hard currency reserves.