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Mukhtar Ablyazov’s role in the world’s fight against money laundering

27 march 2015, 13:23
0

Except for a few family members and a dwindling number of those who consider him a dissident, most people who have followed the Mukhtar Ablyazov story have nothing good to say about him.
They see him as an embezzler, swindler and con man par excellence – a guy whose theft of as much as $15 billion from BTA brought Kazakhstan’s once-strongest bank to its knees.
In an ironic twist, Ablyazov actually may end up doing the world some good, although it won’t be of his own choosing.Mukhtar Ablyazov. ©RIA Novosti

BTA has filed 11 lawsuits against him in Britain to recover billions of dollars he is accused of embezzling from the bank’s operations in Kazakhstan, Russia and Ukraine. The former BTA chairman, who fled Kazakhstan in 2009 to avoid an embezzling conviction, is now in a jail in southern France awaiting extradition to Russia in the embezzlement case there.
He was “tracked down on the French Riviera, spotted through a villa window, clad only in underwear, arranging lilies on a bed while awaiting his mistress,” Quartz journalist Steve Levine reported.
Britain gave Ablyazov political asylum in 2009 because of his contention that he was a dissident in Kazakhstan, but revoked the asylum when one of its courts convicted him of criminal contempt in 2012.
BTA’s civil cases against him have generated tons of news coverage because of the amounts of money involved, his lavish lifestyle and his flight to France to avoid imprisonment on the contempt judgment.
The Ablyazov stories have helped cast an international spotlight on the problem of bad guys from overseas buying property in developed countries to launder money made illegally.
When news organizations in the West raise enough fuss about a problem, authorities often try to fix it – and that’s the case with money laundering in Britain and the European Union.
Both have drafted legislation to prevent bad guys from buying property to launder money from drug or sex trafficking, embezzling or other illegal activities.
Outside the continent, a New York Times expose on foreigners laundering money by buying Manhattan real estate has led to American law enforcement officials, prosecutors and lawmakers discussing the problem more – the first step toward fixing it.
British newspapers that have written about money laundering have noted that a favorite way bad guys from across the globe – including African despots, South American narcotics kingpins and Russian oligarchs – launder money is by buying choice real estate in the developed world.
The ne’er-do-wells’ favorite venues are London and New York City, according to Western justice-system officials and news organizations.
News organizations love to personalize a broad problem like money laundering by using a specific con man as an illustration. And the poster child whom many British journalists have chosen is none other than Mukhtar Ablyazov.
Many British journalists have also used an Ablyazov-owned property as THE example of the high-priced real estate that overseas bad guys purchase to launder money. It is the $22-million, seven-bedroom Carlton House on London’s Billionaire Row.
It took British courts months to determine that Ablyazov was the actual owner of Carlton House because he bought it through a maze of overseas shell companies.
One reason British journalists have chosen Ablyazov as their money-laundering poster child is the sheer amount of money he stole. Estimates range from $7 billion on the low end to $15 billion on the high end.
One journalist said the Ablyazov cases, which continue to wend their way through British courts, are collectively the biggest fraud case the country’s justice system has ever dealt with.
BTA’s British lawsuits seek to recover more than $6 billion. The bank has also sued Ablyazov for billions in Kazakhstan and Russia and hundreds of millions in Ukraine.

A signboard at the entrance to the BTA Bank office. ©RIA Novosti
Another reason British newspapers have chosen Ablyazov as their money-laundering poster child is that he got caught. A British court declared him in criminal contempt in February of 2012 for trying to hide hundreds of millions of dollars in assets to prevent BTA from reclaiming them.
“It is difficult to imagine a party to commercial litigation who has acted with more cynicism, opportunism and deviousness toward court orders (to disclose assets) than Mr. Ablyazov,” an appeals-court judge said in upholding the contempt decree.
Ablyazov fled to France within hours of the judgment to escape the 2 1/2-year sentence attached to it, but was caught in July of 2014. France’s highest court recently signed off on his extradition to Russia, which accuses him of stealing $5 billion from the BTA operation there. He has a couple of more chances to avoid being extradited, but legal observers say they’re long shots.
Still another reason Ablyazov has become British newspapers’ poster child for money laundering is the deviousness of the scheme he used to try to prevent authorities from learning who was the real owner of the British property he used for laundering.

Mukhtar Ablyazov. ©Yaroslav Radlovsky
He established more than 1,000 shell companies, which he registered in money-laundering havens such as the British Virgin Islands, to hide his ownership of the real estate, according to testimony in the court cases.
Many of the shell companies were layered atop each other to make the task of determining the real owner of a property a nightmare. In layering, one shell company owns another, which owns another, which owns another, and so on.
Unraveling the owner of a layered property can take years – and sometimes the owner’s identity never comes out. That’s because most money-laundering havens refuse to disclose the names of those who own shell companies.
News coverage of high-profile money launderers like Ablyazov, plus recent reports on the problem from corruption-fighting organizations like Transparency International, have made Britons more aware of the extent of the scourge.
That, in turn, has prompted lawmakers to introduce legislation to address the issue.
The proposed amendments to the law have a hole you could drive a Kamaz truck through, however, according to Transparency International’s British chapter.
The legislation requires companies that are registered in Britain to disclose who their actual owners are, but it fails to require companies registered offshore to do the same.
Yet offshore companies are the biggest problem, Transparency International says.
Here is some of the evidence it offered in a report that it issued in early March of 2015:

  •  Companies registered in offshore tax and money-laundering havens own 36,342 pieces of property in London. This overseas registration makes it virtually impossible for British officials to know the actual owners of the property.
  •  In 2011 alone, companies registered in the British Virgin Islands bought $5.6 billion worth of property in London.
  •  Companies in offshore havens account for 75 percent of the $265 million in real-estate transactions that British authorities have investigated for money laundering since 2004. The $265 million is a fraction of the amount of overseas money that’s been laundered in Britain in those 11 years, law enforcement officials believe.

Transparency International hopes its report prompts British lawmakers to require offshore-registered companies that buy British real estate to disclose the actual owners of the property.
You’d think there would be near-universal agreement on such a provision. But many high-powered lawyers, real-estate brokers and accountants who collectively make hundreds of millions of dollars by facilitating secretive property purchases stand to take a huge hit from an ownership-disclosure requirement.
They aren’t making their opposition public because they would face widespread condemnation. But many are quietly lobbying to try to derail an overseas-owner disclosure requirement.
Meanwhile, the European Union is moving forward with legislation that would require member countries to disclose the real owners of property purchased through shell companies.
Because there are so many countries in the EU, its legislative process can be slow as governments and interest groups weigh in on proposals. The most recent estimate is that a final version of the money-laundering legislation is two years away from adoption, according to news reports.
The recent New York Times series on overseas big shots’ secret purchases of Manhattan property to launder money suggests that the United States has a problem on a par with Britain’s.
We all know that the Times has some of the world’s best investigative journalists. It assigned a team to try to determine the real owners of condominiums in just one piece of Manhattan property – the Time Warner Center.
It took this crack team a year investigating 200 offshore companies to determine the actual owners of many of the condominiums.
Although lots of wealthy Americans own homes in the center, the Times said, the number of foreigners owning them is increasing – and many are unsavory.
Sixteen “have been the subject of government inquiries around the world, either personally or as heads of companies,” the Times said. “The cases range from housing and environmental violations to financial fraud. Four owners have been arrested and another four have been the subject of fines or penalties for illegal activities.”
A number of Russian oligarchs own Time Warner Center condominiums, the Times reported, including Vitaly Malkin, a banker and former member of the Russian Parliament “who was barred from entering Canada because of suspected connections to organized crime.”

Vitaly Malkin. ©RIA Novosti
The bad guys “have been able to make these multimillion-dollar purchases with few questions asked because of United States laws that foster the movement of largely untraceable money through shell companies,” the Times concluded.
Half of the $8 billion in annual purchases of New York City residences that cost $5 million or more are made through shell companies, the Times said.
As New York Times exposes often do, the money-laundering series has prompted American officials to begin discussing what can be done about the issue. The next step will be legislation to ensure that overseas bad guys can’t launder dirty money through purchases of U.S. property.
Little guys like me often wonder why it takes so long to fix problems like money laundering that facilitate big-time criminals. It took decades to get Swiss banks to begin cracking down on dirty money deposited with them.
Let’s hope the crackdown on property-purchase money laundering comes a lot sooner.
When it happens, we can toast our old buddy Mukhtar Ablyazov for the role he played in righting this global wrong.


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