Poroshenko Ukrainian Money Laundering Scheme Explained
https://creativedestructionmedia.com/investigations/2019/10/21/poroshenko-ukrainian-money-laundering-scheme-explained/
As promised, we are now releasing complicated information on the alleged scheme by former Ukrainian President Petro Poroshenko and related officials to launder hundreds of millions of dollars via the Ukrainian sovereign bond market, with the help of the Bank of Ukraine.
CD Media can confirm this scheme is under investigation by the Ukrainian Prosecutor General and the information has been provided to the FBI.
First some background.
Valeriya Gontareva, the former head of the Bank of Ukraine (NBU – Ukrainian central bank) made her reputation at ING Bank where she was responsible for local trading of Ukrainian debt. Her nickname was ‘Lerka-Obligashka”, loosely translated to English as “Valery-Obligation”. She met Poroshenko when she worked at ING and became a trusted financial advisor of the soon to be minister and then president of Ukraine.
Leaving ING Bank, Gontareva obtained financing from Poroshenko and investors. She and others from the finance sector created ICU Capital — an investment brokerage house and later investment bank. Her partner at ICU included Makar Paseniuk, a nephew of Oleksandr Paseniuk, and Konstantin Stetsenko. The work team was sourced from various places, including BNP Paribas, ING, Calyon Bank, etc.
As head of the Bank of Ukraine, Gontareva issued liquidity financing for ‘special banks’. In Ukraine, this procedure is known as ‘refinans’ — a short name for ‘refinancing’ credit based on collateral deposited by commercial banks at the central bank. Complaintants to the Ukrainian prosecutor’s office allege Gontareva and her ‘refinancing team’ received kickbacks of 10-15% from the procedure. The choice of banks to credit is totally under the control of a few specific individuals at NBU — the head of the central bank, the head of monitoring, and the head of the banking sector. Gontareva controlled the refinancing rate. It is worth remembering that Gontareva was the head of NBU for three years, yet still remained an owner of ICU the entire time.
The head of the central bank works with the head of internal debt at the Ukrainian Ministry of Finance (MOF). The MOF issues local bonds (OVGZ) for sale to state-owned banks (Privat Bank, Ukrasbank, Oschadbank) at a discount. The treasury heads of state-owned banks work with the head of NBU to obtain financing from NBU. The NBU could use IMF aid money for the financing.
After the state-owned banks buy OVGZ, they sell the securities with a larger discount to certain ‘shell companies’ in Ukraine, or offshore, administered by ICU Capital and others. The shell companies then sell the bonds back to the state-owned banks at a higher price, and ICU or other brokerage firms keep the spread. The state-owned banks will then wait for redemption, or use the bonds as repo collateral at the Bank of Ukraine.
The end result is that state-owned banks book losses, and the brokerage firms book profits, very large profits. The schemes are a bit different each time and might include multiple ‘middleman’ shell companies as intermediaries. What is sure is that all of the transactions are visible to NBU. NBU’s head of monitoring and the deputy of NBU see the transactions, but close their eyes, not flagging the illicit schemes, alleges prosecutors.
According to our sources, who at this time do not want to be identified due to fear of retribution, these schemes are performed with many captive banks in Ukraine. There are more than 100 cases open against money laundering in Ukraine using OVGZ. The amount of money laundering numbers in the billions of dollars.