n March 10th, Congresswoman Maxine Waters, the ranking Democratic member on the House Committee on Financial Services, wrote a letter with four other Democrats to Congressman Jeb Hensarling, the Republican chairman of that committee, the contents of which would have been considered extraordinary in a less chaotic and febrile political atmosphere. The letter began:
Consistent with your past practice of monitoring the Department of Justice’s (“the Department”) investigations, we write to request that the Committee conduct a formal assessment of the Department’s investigation into Deutsche Bank’s Russian money-laundering scheme, including a review of the new Attorney General’s role in continuing the investigation. We also urge the Committee to initiate its own investigation, using the full range of the Committee’s oversight authorities, to determine the nature of the Russian money-laundering scheme, including who participated in the arrangement and whether violations of U.S. Law, beyond the failure to maintain appropriate anti-money laundering controls, may have occurred.
The letter then outlined the anxieties shared by Congresswoman Waters and her Democratic colleagues on the committee. They included a concern “about the integrity of this criminal probe . . . given the President’s ongoing conflicts of interest with Deutsche Bank”—Trump businesses owe hundreds of millions of dollars to Deutsche Bank—and that “suspicious ties between President Trump’s inner circle and the Russian government . . . raise concerns that the Department may fail to implicate those who benefited from Deutsche Bank’s trading scheme.”
I read the letter with interest. Last year, I reported on the ten-billion-dollar Russian money-laundering scheme in question, Deutsche Bank’s so-called “mirror trades,” for the magazine. It worked like this: between 2011 and 2015, related corporate entities in Moscow and London bought and sold identical quantities of the same stock, through Deutsche Bank’s Moscow equities desk. By this alchemy, rubles in Russia were transformed into dollars in London. The process bypassed tax officials, currency regulators, and anti-money-laundering controls.
In January, Deutsche Bank agreed to pay six hundred and thirty million dollars in fines levied by financial regulators in the U.S. and the U.K. over the mirror-trades scandal. The report from the New York State Department of Financial Services was particularly damning. It said that the mirror trades lacked “obvious economic purpose,” and, as such, were “highly suggestive of financial crime.” The Justice Department was also investigating the trades, and has the power to bring criminal charges, but no action has yet been taken. The implication of Waters’s letter was that the investigation appears to have stalled.
Whatever view the Justice Department ultimately takes on whether mirror trades constituted “violations of U.S. Law,” there is a clear path to investigate at least one member of the Russian branch of Deutsche Bank, Tim Wiswell, a U.S. citizen. Between 2011 and 2015, he supervised the desk in Moscow where the suspicious trades were made. According to professional money launderers who spoke to me in Moscow, as well as a report from the New York State Department of Financial Services that appears to identify him, Wiswell took millions in bribes to facilitate the scheme. (Wiswell was last thought to be in Indonesia with his family, involved in a surf school run by Russians, TakeOff, near Seminyak, Bali. Coincidence or not, Indonesia has no extradition treaty with the United States.)
Russia has been on our minds. Indeed, the subject of Russian influence in American life has arisen so often in the first, frantic weeks of Trump’s Presidency that there is a danger that the various investigations, proven facts, and suspicions—political, financial, espial—will begin to meld into one amorphous scandal: Russiagate.
Recent developments in other financial cases, however, suggest that there are two distinct lines of inquiry, not mentioned in the Waters letter or in the financial regulators’ reports, that the Department of Justice should be investigating in the mirror-trades affair.
The first is the question of scale. Last week, the Organized Crime and Corruption Reporting Project, which is a nonprofit international journalism consortium, released a trove of new information in partnership with news outlets in thirty-two countries, including Novaya Gazeta and the Guardian. The information included bank records that detail a capital flight and money-laundering operation known variously as “The Russian Laundromat,” “The Global Laundromat,” or “The Moldovan Scheme.” The information was built from several years of work on this subject, in particular a recent leak of bank records.
The story of the Moldovan Scheme is, in short, that, between 2010 and 2015, a group of Russian money launderers and criminals who had links to the Russian government and security services shifted at least twenty billion dollars (and possibly as much as eighty billion dollars, according to British law-enforcement officials who spoke to the Guardian) of ill-gotten or ill-purposed funds out of Russia, using fake debt agreements in Moldova and shell companies based around the world. The Guardian reports that the tainted money made its way not only into the hands of Russians abroad but into offshore accounts and property deals, into fur coats and school fees, through dozens of banks, like H.S.B.C. and Barclays, and even into unwitting blue-chip companies, such as Samsung and Ericsson.
What is not mentioned in the O.C.C.R.P.’s admirable reporting is a link between the Moldovan Scheme and the mirror-trades affair at Deutsche Bank. Alexander Grigoriev, a “shadow banker” whom the O.C.C.R.P. claims “is connected to the F.S.B.,” the Russian security agency, and who masterminded the Moldovan Scheme, was a shareholder in a little-known bank called Promsberbank, in Podolsk, outside Moscow. Promsberbank also used Deutsche Bank’s mirror trades. Indeed, one of its shareholders, a company named Financial Bridge, was integral to the scheme. Another major shareholder of Promsberbank, Alexei Kulikov, was arrested in Russia last year on charges of “large-scale fraud,” which Bloomberg reported as being connected to the mirror-trades affair at Deutsche Bank. (Meanwhile, Igor Putin, the President’s cousin, sat on the boards of both R.Z.B., a bank owned by Grigoriev, which used the Moldovan Scheme, and Promsberbank.)
The paper trail also offers evidence that there were overlaps between the two schemes. One of the counterparties that used mirror trades was a British shell company called Chadborg Trade, LLP, based out of a second-floor office in Potters Bar, an unremarkable commuter town in Hertfordshire, England. One of the companies named in the Moldovan story this week by the O.C.C.R.P., Tronlux Ventures, LLP, shares the same mailing address as Chadborg. Indeed, both companies list the same two companies as their “directors”: Kenmark, Inc., and Ostberg, Ltd., both registered in the Commonwealth of Dominica.
So, the first new line of inquiry prompted by these insights might be: Was Deutsche Bank’s mirror-trades scheme connected to a much larger money-laundering operation—one that seems to have been instigated by people close to the Russian security services? The O.C.C.R.P. suggests that the money that flowed through the Moldovan Scheme “may have been diverted from the Russian treasury through fraud, rigging of state contracts, or customs and tax evasion.” In my report for the magazine, I noted that some mirror-trades money originated in Chechnya. Just how dirty was the rest of it?
The second, and related, question is: Did Deutsche Bank launder Magnitsky money?
Some background: In the U.K., where I live, we are awaiting a long-delayed coroner’s inquiry into the death of a Russian citizen named Alexander Perepilichnyy, who collapsed while jogging near his home in Surrey, England, in November, 2012. Initial reports suggested that Perepilichnyy had died of natural causes, but there have been subsequent reports that traces of gelsemium, or “heartbreak grass,” were found in his bloodstream. Gelsemium is not found naturally in England, and is commonly thought to be used as a lethal agent by Russian and Chinese assassins. In any event, we are unlikely to discover what really killed Perepilichnyy, as the British government has applied for Public Interest Immunity to keep certain documents out of open court, “in the interests of national security.”
Perepilichnyy had a complicated professional life in Russia. Among other things, a 2010 message from Interpol to Britain’s Serious Organised Crime Agency said that he was suspected of “fraud, money laundering and abuse of power.” In 2012, however, he turned whistle-blower, handing over information and documents to investigators at Hermitage, the fund owned by Bill Browder, who is American. At the time, Hermitage was examining the suspicious circumstances surrounding the death of its lawyer, Sergei Magnitsky, who was killed after he uncovered a massive scheme to defraud the Russian tax office of two hundred and thirty million dollars, and to launder the stolen money. According to Browder, Perepilichnyy had been helping to wash the stolen tax funds in the scheme uncovered by Magnitsky, which is why he was able to speak with such authority when he flipped on his old co-conspirators. Nobody knows a crook like a crook.
In the wake of Magnitsky’s death, Browder and Hermitage successfully lobbied many countries to institute a “Magnitsky Law,” blocking criminals and corrupt government officials associated with the theft and subsequent lethal coverup from entering their country, and preventing them from using banking systems. President Obama signed the Sergei Magnitsky Rule of Law Accountability Act into law on December 14, 2012—contributing to a froideur between Russia and the West that never thawed, at least during the Obama Administration. The Magnitsky affair remains sensitive for the Russian government. Recently, a lawyer representing the Magnitsky family, Nikolai Gorokhov, was seriously injured after falling from the fourth floor of his home near Moscow, the day before he was due to appear in an appeals court to contest the court’s refusal to investigate organized crime. Russian media reported that Gorokhov fell while trying to hoist a bathtub into his apartment.
It should interest both Congresswoman Waters and investigators at the Department of Justice, then, that, the name Alexander Perepilichnyy appears as a major shareholder on the official Russian documentation of Financial Bridge, a brokerage that was one of Deutsche Bank’s key Russian counterparties in the mirror-trades affair. We can’t know what that means, exactly, beyond its face. But we do know plenty about the kind of work Perepilichnyy did, and the kind of money that he moved, and his connection to the Magnitsky affair. Simply seeing his name on the document caused the hairs on my arm to rise. One wonders whether it might have a similar effect on investigators at the Justice Department. In a less chaotic and febrile political atmosphere, such a detail would have been considered extraordinary.