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. Last Updated: 07/27/2016

Auditor: No Proof IMF Cash Misused

The Audit Chamber, which investigates the use of public funds, has no evidence that an International Monetary Fund loan to the country last year was misappropriated, an Audit Chamber official said Wednesday.

Russia received a $4.8 billion loan from the IMF in July 1998, which, unlike previous funds, went not to the Finance Ministry but mostly to the Central Bank to support the ruble.

"If we speak from the point of view of the law, this is all legal," auditor Eleonora Mitrofanova said in an interview against a background of fresh allegations that IMF loans to Russia may have been misused or spirited abroad.

Mitrofanova said the Central Bank, whose use of reserves is now being examined by IMF experts and international accountants PricewaterhouseCoopers, sold much of last year's IMF loan to commercial banks. "It was legal, but absolutely ineffective," she said.

The ruble crashed anyway in the August economic crisis just weeks after the loan was disbursed.

The Audit Chamber, acting on a request from the Prosecutor General's Office, launched its investigation into the Central Bank this year after a parliamentarian suggested not all of the IMF money may have reached Russia.

The prosecutor's office also alleged that Central Bank reserves had been managed by an obscure offshore subsidiary called Financial Management Co. in the Channel Islands.

The Central Bank denied any wrongdoing, and a report by international accountants PricewaterhouseCoopers showed nothing illegal. But the IMF said Russia had misreported reserve data in 1996 as a result of the Central Bank's use of FIMACO.

PricewaterhouseCoopers is expected to make another report on the Central Bank's handling of funds before the IMF approves the next tranche of a $4.5 billion loan approved in July.

The Audit Chamber's investigation finished in mid-June, before a scandal erupted last month over alleged Russian money laundering through the Bank of New York.

U.S. authorities are investigating the suspected laundering, which newspapers say may have included IMF cash.

The Bank of New York is cooperating with the investigation and no one has been charged with any wrongdoing. The IMF says it, too, is investigating but it has no evidence of its loans being involved.

The Audit Chamber, which answers to the State Duma lower house of parliament, said it checked on whether money went abroad from Central Bank accounts and on how the Central Bank used its reserves.

The Audit Chamber report on last year's loan showed that, out of the $4.5 billion, the Finance Ministry received $1 billion for current budget expenses, a move which the IMF did not object to.

Mitrofanova said an exact check on how the Central Bank had used the remaining $3.5 billion was impossible, because the money was mixed in with the rest of the bank's reserves.

The investigation showed the Central Bank sold $10.7 billion from the end of July 1998, until December, to commercial banks as it tried to prop up the ruble.

"Something bad could have started only after the money was sold to commercial banks, but this is not IMF money any more," Mitrofanova said.