Customs Union Frauds Behind 40% of Russia Capital Flight

File Photo of Man Placing Stack of Large Bills into Inside Pocket of Suitcoat

(RIA Novosti – MOSCOW, June 20, 2013) Fictitious import contracts with entities from Customs Union member states Belarus and Kazakhstan accounted for 40 percent of Russia’s net capital outflow last year, business daily Vedomosti reported on Thursday citing Central Bank data.

About $10 billion could have been laundered through fake imports schemes via Kazakhstan, the Central Bank said in a letter posted on its website on Thursday. In a similar letter posted a week ago, the bank said similar operations with Belarusian entities topped $15 billion last year.

Belarusian and Kazakhstan import scams “whose real goals could be money laundering, financing terrorism and other unlawful goals” allow Russian businesses to transfer money to foreign bank accounts outside Belarus and Kazakhstan under the guise of payments for import contracts, the bank’s letter said.

The Customs Union regime between Russia, Kazakhstan and Belarus does not allow Russia’s Central Bank to verify how genuine these deliveries are, Vedomosti said, adding this was the first time the Russian regulator has reported the scope of capital flight through these schemes.

In his last report to the Russian parliament on Wednesday, outgoing Central Bank chief Ignatyev said shell companies had illegally funneled 760 billion rubles (about $25 billion) from Russia in the past three years.

“The impression is created that this entire network of one-day companies is controlled by one group of persons,” he said, repeating claims he made earlier this year.

“It is very important that this criminal probe should be investigated as fully as possible and the organizers and operators of this network of shell companies should be exposed, as well as their clients ­ real beneficiaries in whose interests illegitimate financial operations are carried out,” Vedomosti quoted him as saying.

Capital flight from Russia peaked at $133.7 billion in 2008 when the global economic crisis broke out, falling to $56.1 billion in 2009. Capital outflow from Russia stood at $80.5 billion in 2011, up from $34.4 billion in 2010. Capital flight from Russia in 2012 amounted to $56.8 billion.