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evidence to link him with money-laundering between russian and UK

  Crime and business in the Russian Federation In the 1990s, there was a significant rise in crime in the Russian Federation. Economic crime...


Crime and business in the Russian Federation In the 1990s, there was a significant rise in crime in the Russian Federation. Economic crime is a major contributor to the increased gravity of the criminal situation in the Russian Federation. Legally, the term “crime in the sphere of economic activities” (in this paper simply named economic crime) was introduced in 1996 when the new Criminal Code of the Russian Federation was adopted by the State Duma. The Code contains a chapter entitled “Crimes in the Sphere of Economic Activity”, with 31 articles specifying provisions against a wide range of offences. The offences include legalization (or laundering) of monetary means or other property acquired by illegal means, bribes, smuggling, illegal entrepreneurship, illegal banking, illegal use of trademarks, tax evasion, evasion of customs payments, violation of rules for handing over precious metals, failure to return monetary means in foreign currency from abroad, obstruction of legal entrepreneurial activity, intentional and fictitious bankruptcy and many others. In 1998, compared to the previous year, the number of reported economic crimes increased by 15 per cent, while the increase in crime in general was by 7.7 per cent. 

In 1994, about 60,000 cases of economic crime were reported; in 1995, almost 100,000; in 1996, about 115,000; and in 1998, over 250,000 cases. Experts believe that these cases represent only a tiny segment (or from 1 to 3 per cent) of all the crimes committed in the economic sphere.41 In the banking and finance sector, the number of crimes increased 45 times during the period 1991-1997. In 1994, the damages from economic crimes were estimated at $4 billion; if losses of the victims of the financial pyramids were added to the above, the figure stood at $30 billion or 5 per cent of GDP. In 1996, the damages were estimated at 10 billion roubles and, in 1998, at twice that amount—20 billion roubles (new denomination).42 The damages from the crimes in the banking and financial sector were equal to three quarters of all damages caused by crime. Crime is increasingly committed by criminal groups, and particularly organized groups. The number of crimes committed by organized criminal groups has increased more than fourfold.43 According to the Ministry of Interior, from 1991 to 1996, the number of identified criminal groups increased from 952 to 6,743 (sevenfold increase), while the number of criminal groups with international links increased two times, and those with links with corrupt State structures more than six times. In 1997, there were 9,000 organized criminal groups in the country, controlling 40,000 businesses, including 450 banks. By the end of 1998, organized crime controlled about a half of commercial banks, 60 per cent of public and 40 per cent of private businesses.44 According to a survey of the managers of military enterprises, criminals controlled around 25 per cent of military enterprises, and the number was likely to increase according to 43 per cent of the managers.45 A major activity of crime-controlled businesses is money-laundering. Over 3,000 organizations seem to be specialized in money-laundering, as they have created special structures for that. Many of them started their operations in 1992 and 1993, when they reportedly laundered through money exchanges over 50 billion roubles.46 During the money-laundering process, Russian criminals habitually invest in seemingly legitimate businesses in other countries. They acquire stakes in or control of companies to ensure profits and safe deposits. They often obtain foreign citizenship or the protection of foreign Governments.47 Russian organized crime appears to play a significant role and exercise considerable power over the economic and political life of the Russian Federation. It has significant financial power and legal properties— information networks as well as well-developed structures for strategic planning and action. The groups are evolving increasingly into networks of associations. They imitate and create State structures, such as professional security and intelligence. They are advised by specialist lawyers, financial experts and economists

. The most dangerous trend, however, is the active participation of 14 Russian capitalism and money-laundering criminal groups not only in the legal economy, but also in administrative and political structures. The phenomenon of a democratically elected mafia is widely discussed and acknowledged in the Russian Federation. Hundreds and thousands of criminals who took advantage of the reform processes have been able not only to legalize their proceeds but also to enrich themselves further. These profits are being used to purchase local electorates and governments.

 As a result, the formal economy is often controlled by criminal groups that further increase their influence and monopolize the economy through their political dominance and power over the State structures. The use of force remains an option when vast amounts of money are involved. The famous case of the Afghanistan War Veterans’ fund is a case in point. After 34 deaths and 62 injured and hundreds of billions of roubles lost without any trace, the best criminal investigators, after months of investigation, have come up only with one case involving 2.5 million roubles and three offenders, and they could say nothing about the bulk of the funds stolen—over 267 billion roubles, as some report. The most critical witnesses of or participants in the crime have already been murdered, including the former manager of the fund and his widow, as well as his successor as a fund manager. Occasional reports emerge linking the money disappeared with the activities of the Russian secret services and the election campaign of the former Russian president.48 Another widely reported case is the Fund for the Rehabilitation of Chechnya. It was reported that, of 800 billion roubles appropriated for the rehabilitation of Chechnya, 600 billion mysteriously disappeared. Fraud, theft and corruption on an outrageous scale are mentioned in connection with this case. In general, however, the period of wild capitalism with its senseless chaos and violence against random small businesses seems to have ended.49 The markets are divided between krishas that are powerful and confident in their controlling abilities. Organized crime groups increasingly invest their money in the industries and markets they control, thereby increasing their profits and legalizing their assets. Occasional use of force appears to be related to the struggle between large business oligarchs using armed groups as their settlement tools. However, even these empires, as they grow larger, become interested in securing their dominant position through a stable economic and political environment, strong central Government, and a police force capable of combating conventional crime.50 More sophisticated crimes, such as international financial crime, mostly remain to be addressed. The lack of appropriate legal frameworks in the Russian Federation (and in other countries, in fact) to fight sophisticated financial crimes, often makes it impossible to incriminate alleged criminals. An interview with Semyon Mogilevich (considered to be one of the world’s top criminals) published in a Russian newspaper reveals that he is enjoying a quiet family life in the suburbs of Moscow, while many in the West believe him to be in hiding and on the run.51 The western media has already “convicted” Semyon Mogilevich of vast moneylaundering, manipulation and fraud. He is quoted as being one of the “most dangerous gangsters”, and one American author has written an account of him in a book named after the organized crime group (Red Mafia) that he allegedly ran.52 The company which he set up in suburban Philadelphia, YBM Magnex, pleaded guilty in a case of securities fraud in the Federal District Court of Philadelphia after it had been caught making money by artificially pumping up its stock price and cheating its investors. In addition, however, he has been accused of arms smuggling, drug trafficking, the smuggling of art treasures and their subsequent sale at auctions, trafficking in human body parts and murder. Mr. Mogilevich claims the accusations are groundless because he notes that, in 1997, a French court revoked the ban on his entry to France by the French authorities; in 1995, 

a British court decided to return his seized assets; and the Bank of New York case investigators seemed to lack any evidence to link him with money-laundering operations. According to Mr. Mogilevich, in the Bank of New York case, the grounds for suspicion were based on a confusion by the media about company names: he has a company called “Benex-Trade Medical Corporation” while in the files of the case a company called “Benex Worldwide” is mentioned. Until the Russian and international authorities come up with better grounds for Semyon Mogilevich’s arrest, he can continue living “peacefully” in his dacha near Moscow.

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