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"Yanukovych's money" scandal: Ukraine's businessmen launder money on state bonds

Author : Oleksiy Kushch

Source : 112 Ukraine

Political establishment used Ukraine's state bonds of Ukraine as a tool for laundering money, received in a corrupted way, and the functioning of the rental model of the economy
18:07, 15 January 2018

Read the original text at 112.ua.

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Al Jazeera wrote that “secret Ukrainian court ruling has, for the first time, exposed exactly how former President Viktor Yanukovych stole nearly $1.5bn from the country. It has also revealed that President Petro Poroshenko's former financial advisers played a role in the fraud, embarrassing the government. Al Jazeera's Investigative Unit on Wednesday released the 95-page document, which declared a state secret last year.”

Journalists from distant Doha, the capital of Qatar, managed to do something that Ukraine’s people's deputies failed to do. A remarkable document surfaced in the waters of the Persian Gulf. However, if some Ukrainian media suddenly started an investigation of the financial manipulations of their local royal family there, it would be strange.

In fact, this contradiction is quite ostensible. Al Jazeera is quite suitable for this role. A well-known media agency, which regularly conducts loud investigations, is perfect for creating an information bomb. If this investigation was published by The Times or The Washington Post, Kyiv could perceive this as a "silk lace", which the Chinese emperors sent to their provocative governors. Therefore, the authors of the publication decided to confine themselves by sending a "verbal" hint: next time it could be something more dangerous.

The so-called "Yanukovych’s money" could be compared with a guinea pig, which has nothing in common with guineas or pigs. The situation is very similar here: this is not money, and it does not belong to Yanukovych. All these assets belonged to a wide conglomerate of people, which could be correctly called with one capacious word – the "power". In fact, the confiscated $ 1.5 billion mainly consists of interest-bearing government bonds purchased by a group of the offshore companies. The fact that they are connected with oligarch Kurchenko was established by the court solely on the grounds of the testimony of one of the directors of front companies. They dealt with the investigation and gave evidence about the fictitiousness of economic activity. They also disclosed the organizational structure and revealed the ties with Kurchenko. Our law enforcers state that the interaction of the latter with the runaway president is 100% obvious. They say it is not necessary to prove it.

In fact, the group of fictitious companies is the offshore company created by the turducken method. One offshore entity belongs to another one, and so forth. All of them were managed by directors who, in the court's opinion, were just the frontmen. The above-mentioned group of companies carried out the introduction of more than $ 1 billion into Ukraine in order to buy government bonds denominated in dollars with an interest rate of 8% per annum. According to Al Jazeera, the money passed through the state’s Oschadbank, and the "Investment Capital of Ukraine" company, which provided brokerage services.

Actually, for many years, Ukraine’s state bonds have been used by the existing political establishment as an instrument for laundering proceeds from corrupt activities and the functioning of the rental model of the economy. It looks like this: we would consider hypothetically possible schemes; they did not appear in the materials of the mentioned case). The officials receive a bribe in the amount of several tens of millions of dollars. Naturally, the money goes to the accounts of the offshore company. But those are dirty money, and increasingly difficult to use them in decent jurisdictions of the EU of the US. Therefore, they are invested in government securities.

In addition to primitive money laundering functions, the bonds have a function of a permanent corruption fuss. For example, I bought bonds for $ 100 million at a market price and sell it to a certain state bank for $ 120 million due to a "change" in the market situation. Or a certain state bank buys bonds for $ 10 million and give them to the "right client" for garbage securities or bills. The result is obvious here.

Or let us imagine that some corporation wants to enter Ukrainian market and must pay the so-called "entrance fee", but this is a system structure, and it does not have cash. But it "can" buy from the right person the needed bonds at an inflated price or sell them at a low price.

Bonds perform the function of "exoskeleton" in this scheme, and corrupt income is increased here. In the end, the bonds are repaid and the scheme goes into nowhere, giving way to other schemes. In this model, $ 1 million invested in bonds of funds, might bring some 2-3 corrupted million. Naturally, all this requires the necessary market infrastructure: banks, securities traders, depositaries, custodians, who, naturally, must conduct financial monitoring and perform full customer identification and block suspicious transactions. But are they really doing this? The question is rhetoric. Moreover, the current legislation always allows finding loopholes. So it turns out that there is no securities market in Ukraine, but there are very wealthy traders who earn more than brokers from the Wall Street.

For a long time, the acting government could not get closer to "Yanukovych’s money". It was impossible to do so with the help of an honest transparent court, because in that case many of the current politicians, who wear embroidered shirts and camouflage jackets, had a good life in times of " Yanukovych’s criminal power".

However, Ukrainian politicians prefer not to think about long perspectives. As well as they do not think about the risks of losing the case of Yanukovych's debt to the Russian Federation by $ 3 billion in the court, they do not recall the $ 2 billion that Gazprom may have to pay to the "victorious" Stockholm arbitration. By the way, the mentioned payments have already been dubbed the "black swan" for Ukraine in 2018. 

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