The Cable

Russia Isn’t Responding to the ‘Russian Laundromat’

But New York can.


Moldova has not received an official response from Russia in response to complaints that Russian security officials sabotaged Moldova’s investigation into an alleged money laundering operation, Moldova Parliament Speaker Andrian Candu said on Thursday.

Moldova says over $20 billion was moved through its banks between 2011 and 2014. The scheme was known as the “Russian Laundromat,” and the Organized Crime and Corruption Reporting Project (OCCRP) originally reported on it in 2014. On Monday, it released a new report, this time detailing the way in which the “Laundromat” worked. Money flowed in through shell companies in Russia and into a small bank in Moldova.

Billions then apparently moved out of Moldova and into companies around the world, some of which “unwittingly took part when beneficiaries used their Laundromat money to buy goods and services.” International banks reportedly ended up as hosts for money. (It should be noted that it cannot be said for certain that the over $20 billion that then moved out of that bank and into companies around the world were the same billions that came in from Russia.)

Thursday, three days after the publication of the new report, Moldova publicly announced that it is getting no response from Moscow on its alleged attempts to harass Moldovan officials who went to Russia to investigate the scheme. Russia for its part claims that its officials were were harassed by Moldovans.

But even if Russia isn’t playing ball, other countries can take steps to rein in the practice — or even prosecute it.

“Banks, when they’re converting anything to dollars, kind of loop through New York to do it,” said Bill Alpert of Barron’s, who wrote about it and contributed to the OCCRP report. “That gives us terrific reach” to do something about foreign corruption, he said.

Money laundering doesn’t only affect criminal gangs or Moldovan banks. Rather, a flood of dirty money ends up messing with markets all over the place.

“It distorts prices around the world,” Alpert said, noting “black money is spent in a kind of crazier or less deliberate way. The kooky inflation that the world’s seen in real estate in London and New York is to some extent stoked by money that people are in a hurry to get out of Russia and countries like that.”

Most of the questionable money flows from the Laundromat steered clear of the United States, Alpert said. “There were hugely more flows to Hong Kong and China and any number of pretty small countries, like Denmark or Estonia, compared to the U.S.” That’s not because Estonia is necessarily a better place to invest.

“When I asked about that,” Alpert continued, “people told me that one explanation is that the U.S. is relatively better at policing this stuff and prosecuting it.”

That leaves open the possibility that New York, if not Moldova or Moscow, could clean up the dirty laundry — and hopefully send a message, Alpert said.

“You could police this stuff and clean it and deter future bad actors through prosecutions here.”

Photo credit: VASILY MAXIMOV/AFP/Getty Images

Emily Tamkin is the U.S. editor of the New Statesman and the author of The Influence of Soros, published July 2020. Twitter: @emilyctamkin

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