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. Last Updated: 07/27/2016

Russian Mob Put Billions in N.Y. Bank




Billions of dollars have been channeled through the Bank of New York in the last year in what is believed to be a major money-laundering operation by Russian organized crime, law enforcement officials say.


From October through March some $4.2 billion, in more than 10,000 transactions, passed through one account, investigators said.


The account has remained open to help a continuing investigation by federal authorities, and investigators estimate that as much as $10 billion all told may have flowed through the bank in that account and related ones since early last year.


Investigators say the transactions seem to add up to one of the largest money-laundering operations ever uncovered in the United States. But they are quick to point out that the inquiry is still in its early stages and that they do not yet know the full scale of the operation or where the money ended up.


The Bank of New York has suspended two employees whose names had surfaced in the investigation - Natasha Gurfinkel Kagalovsky of New York, and Lucy Edwards of London. Both are officers in the bank's Eastern European division and are married to Russian businessmen, one of whom is believed by investigators to have controlled one of the accounts.


In the early 1990s, Kagalovsky was put in charge of bringing in new business from Eastern Europe and the former Soviet Union. A few years ago she married Konstantin Kagalovsky, who has been an economic adviser to the Russian government and from 1992 to 1995 was Russia's representative to the International Monetary Fund.


Edwards, a vice president of the bank in London working on Eastern European accounts, was born in Russia and acquired American citizenship by marriage, an American official said. After a divorce, she married a Russian, Peter Berlin, and he subsequently became an American citizen, the official added.


"The Bank of New York has been cooperating with the office of the United States Attorney for the Southern District of New York in a confidential investigation of the use of bank facilities to transfer funds from Russia to other countries," the bank said in a statement.


Since the collapse of the Russian financial system last year, the flight of money out of the country has accelerated, and investigators have been on the lookout for activities they suspect are "laundering" operations.


The accounts under scrutiny at the Bank of New York have been linked by investigators to a man who Western law-enforcement officials say is a major figure in Russian organized crime, Semyon Yukovich Mogilevich. Mogilevich is involved in a wide range of activities from arms trafficking and extortion to prostitution, American and European law enforcement and intelligence agencies say.


An FBI report on Russian organized crime said that when the Soviet Union withdrew its forces from East Germany, many Russian generals sold their weapons to Mogilevich, who in turn sold them, at much higher prices, to countries like Iraq, Iran and Serbia.


Last year, an American journalist, Robert Friedman, wrote a long expos? of Mogilevich's criminal career in the Village Voice newspaper. Mogilevich responded by putting out a contract on the reporter's life, the Central Intelligence Agency said.


The CIA said it had picked up the threat by monitoring Mogilevich's telephone.


A European law-enforcement official said recently that the contract was for $100,000. Friedman went into hiding for a while and has since resumed writing.


British authorities, investigating the financial activities of Russian organized crime, alerted the FBI to the suspected money laundering at the Bank of New York more than a year ago. The FBI said Wednesday that it would have no comment on the investigation.


An initial round of federal subpoenas issued to the Bank of New York produced 3,500 pages of transactions for one account in the name of a company called Benex, said investigators. They would say little about what information they have about Benex, its location or its activities.


British intelligence reported that some of the money from the Benex account went to pay contract killers and some went to drug barons, American officials said.


It is likely to take many months before investigators sift through the documents and penetrate thecomplex web of offshore companies and holding companies to determine precisely where the money came from and where it went.


But in documents provided by the British investigation, American investigators found references to Benex linking it to an American company, YBM Magnex.


YBM, based in Philadelphia and once traded on the Canadian stock exchange, was an operating company - it made and sold industrial magnets - and was a money-laundering vehicle for Mogilevich, American and British officials have said.


In June, YBM pleaded guilty to one count of securities fraud in a federal District Court in Philadelphia, and the U.S. Attorney's office there is still considering whether to indict Mogilevich.


The account at the Bank of New York was opened by a Russian-American last year, an investigator said. He declined to give the person's name.


The volume of transactions through the accounts has been extraordinary, officials said, and often the money came in and went out quickly. This should have made the bank suspicious, an investigator said.


But, according to investigators, the bank has filed only one "suspicious activity report" with the federal authorities and that was only after the authorities began investigating.


At one time, American authorities froze the Benex account, which had $34 million in it, an investigator said. But they quickly unfroze it when they realized that it was just the tip of a very large operation and it would aid the investigation to keep the account active.


The accounts had been handled by Mrs. Kagalovsky. But investigators believe that Ms. Edwards' husband Berlin had authority over the Benex account. Berlin could not be located and Mrs. Kagalovsky, 44, declined to answer questions Wednesday.


The Bank of New York, with assets of about $67 billion, is the 17th largest bank in the United States and one of the oldest.


It was set up by Alexander Hamilton in 1784 and is known for its role in getting foreign companies to list their shares on U.S. stock markets. It is a conservative, well-regarded institution that earns steady profits from humdrum businesses like securities processing and trust management.