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Hedge Fund Corruption in Russia

magnitsky 585The financial industry in Russia has been at the centre of corruption allegations recently as critics accuse the authorities of “plundering the state”. Andreas Gross, a Swiss MP has been at the forefront of the corruption allegations and presented a report speaking of the death of anti-corruption campaigner Sergei Magnitsky. Magnitsky, who worked as a lawyer, died four years ago and diplomatic tensions rose dramatically after the incident. At the time of his death, Magnitsky was working for Hermitage Capital Management, the UK hedge fund group. He alleged that he has uncovered a $230 million fraud against the Russian taxpayer and went public with the information.

Following his revelations, Magnitsky was sent to prison by the very same police officers who he had named as being involved in the scandal. After developing pancreatitis in prison, being beaten by the officers and then denied any medical attention, he soon died in his cell. The report by Andreas Gross, who is also a member of the Socialist Group of the Parliamentary Assembly, points the finger at several state officials in prominent positions of power. The consequences of the incident, and the aftermath, have been far reaching throughout the US and Russia. Many businesses and important trade relations have already been affected and the US has also blocked visas and frozen assets of those they believe to be involved. Upwards of 60 Russian citizens have been linked to the death. In response to the US reaction to the incident, the government in Moscow imposed new regulations banning citizens of America from adopting children from Russia.

Although the incident took place over four years ago, nobody involved has yet been held accountable and investigations are ongoing. The latest report from Andreas Gross urges the Russian government to “fully investigate the circumstances and background” of the death. He is especially keen to uncover why there is no CCTV footage available from the prison in question on the day of the death.

Hermitage Capital Management is a leading global investment advisory firm who specialize in emerging markets. The company was established in 1996 by William Browder and they have won numerous awards around the world for their long term performance.

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£162 Million Fine For BTMU

bank_2596917b (1)The biggest bank in Japan is currently facing a £162 million fine for money laundering totalling billions of pounds. Their actions were in clear violation of banking sanctions in Asia. The Bank of Tokyo-Mitsubishi UFJ (BTMU) will have to pay the sum to the state of New York for their behaviour between 2002 and 2007. The complaints came after 28,000 transactions in New York which amounted to a total amount over £65 billion.

BTMU will now be monitored by a specialist consultant in accordance with penalties given by New York’s Department of Financial Services. The banking regulator of New York, Benjamin Lawsky, said, “We have and will continue to take a hard line in rooting out misconduct at banks that threatens our national security. Whenever and wherever we uncover serious wrongdoing, we will take strong enforcement action to protect our country from money laundering, terrorism, and other dangerous misdeeds”.

It was discovered that employees of BTMU were stripping information from wire transfer messages which would have allowed the authorities to identify those involved in breaching sanctions. It is alleged that the bank had even issued documents to employees instructing them how to delete transfer information in order to increase the processing time. Doing so is in violation of the banking laws in New York. In response to the accusations made against them, BTMU responded that they had already “self-identified” their illegitimate practices and had stopped doing so more than six years ago.

A spokesperson for the bank stated that, “Since 2007, BTMU has significantly improved its compliance policies and procedures. BTMU is committed to conducting business with the highest levels of integrity and regulatory compliance, and to continually improving its policies and procedures”. It has also been revealed that the same bank already paid £5.5 million last year to the US Treasury Department in 2012 for violating the same sanctions. Regulators in the US have been increasingly determined to clamp down on such banking violations recently with an ever growing number of institutions facing criminal charges.

 

 

 

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Europe in Turmoil

images (1)The financial world in Europe was once again facing turmoil last week as the European Central Bank warned that the failing economy of the euro zone could cause a new crisis. Reports of the financial markets finally taking a turn for the better have been heard throughout the continent in the past few months however, there are still several problem areas to pay attention to. An increase in loans is thought to be one of the biggest contributing factors to a potential slump.

The European Central Bank released a report explaining that the extended length of the recession had made it increasingly difficult for people to pay back loans. This then causes trouble for the banks who are trying to get the money back from borrowers. Although individual institutions were not named in their report, the E.C.B did comment that those most affected were in countries where the unemployment rate was particularly high and the house prices getting lower. This is surely a reference to countries like Spain, Italy and Greece where the situation seems only to stagnate or become worse as opposed to any noticeable amount of positive progress.

That is not to say that countries with a stronger economy aren’t feeling the effects of this loan issue too. For example, in Germany many publicly owned banks are also struggling to get loan repayments from many industrial companies.

The E.C.B makes a report on the state of the financial system within Europe once every six months. Even though they occur at this frequency, it seems this latest report has been a larger cause for concern than those before it. Banks are paying high attention to the issues raised within its pages. One problem that was outlined a few times within the report was the fact that European banks often struggle to absorb losses as they occur. This poses bigger problems for their continued stance within the market. As long as mass unemployment is such an omnipresent issue within Europe, the problems of the banks will continue to be equally persistent.