Anticorruption officials in Kyrgyzstan say they have exposed a $58 million money laundering operation — the largest ever seen in the country’s history.
The graft-fighting department at the State National Security Committee (GKNB) said on January 20 that the cash was laundered by a construction company called LLC Berkut Stroi, which they said was based in the southern city of Osh.
The GKNB say two employees of a commercial bank in Osh, Amanbank, registered the construction company in the name of Kanybek M. They then opened bank accounts in Amanbank and another bank, Rosinbank.
The next step was to sign bogus contracts for the purchase of construction materials from companies in China and Latvia, to which the 4.4 billion Kyrgyz som ($58 million) were transferred between January and October 2014. Meanwhile, tax records at Berkut Stroi reflected no economic activity.
The man identified as the founder of Berkt Stroi, whose name can only be given as Kanybek M., said he had no idea of what business was being done by the company he purportedly controlled.
“I was told [by a friend]: ‘Let’s start a company, we will take care of banking operations.’ I know nothing about banking operations,” he told the Kloop.kg news website.
Kanybek M. said anytime the alleged money-launderers need a document signed, they paid him an additional 500 soms ($7).
Another figure that Kloop.kg reported was linked to the case said that although he worked at the bank at the time of the alleged offense, he worked as the chief accountant and didn’t work directly with clients, so he couldn’t know who transferred the money.
Uzbekistan’s foreign minister has begun a round of annual consultations in Washington that happen to follow shortly after Tashkent launched an offensive to recover millions of dollars frozen in a U.S. corruption case involving the Uzbek president’s daughter.
Abdulaziz Komilov began the three-day talks on January 19 with a meeting with Nisha Desai Biswal, Assistant Secretary of State for South and Central Asian Affairs, the U.S. Embassy in Tashkent said in an e-mailed statement.
Topics for discussion include the usual suspects: security, political developments, human rights and trade. But one onlie Uzbek media outlet is speculating that Komilov may also be raising another thorny topic behind the scenes.
According to documents recently filed with a U.S. court, copies of which have been seen by EurasiaNet.org, Tashkent has begun pressing for the release of $300 million in assets frozen during a bribery investigation involving the president’s daughter, Gulnara Karimova. The last that was heard of Karimova, she was under house arrest in Tashkent.
The funds are allegedly illicit proceeds from “an international conspiracy to launder corrupt payments” made in Uzbekistan’s telecoms sector, according to a lawsuit filed by the U.S. Department of Justice last summer.
The $300 million – held in Bank of New York Mellon accounts in Belgium, Ireland, and Luxemburg – were frozen by a U.S. Federal Court order in July.
The lawsuit named two Karimova associates, Gayane Avakyan and Rustam Madumarov, as owners of shell companies “beneficially owned by GOVERNMENT OFFICIAL A.”
In one of the greatest falls from grace in the post-independence history of Kazakhstan, a court in the industrial city of Karaganda on December 11 sentenced former prime minister Serik Akhmetov to 10 years in jail for corruption.
The severity of the punishment has set tongues wagging about ulterior motives and show trials, especially since corruption is rife and cases of abuse of office have abounded in recent years, but rarely with such severe outcomes.
Akhmetov was arrested on charges of grave corruption on November 18, 2014, less than one month after being removed from his post as defense minister. Rumors immediately began circulating of infighting among Kazakhstan’s notoriously fractious elites.
According to prosecutors, Akhmetov, who was prime minister for 18 months until his resignation in April 2014, took bribes of $2.4 million and embezzled large amounts of a state resources.
Another 20 officials from the Karaganda city and region were also in the dock in the broad-ranging and lengthy trial, which reviewed material contained in 338 volumes of evidence.
Prosecutors had asked for a 12 year sentence. Although the sentence passed was milder, it also included provisions for the confiscation of Akhmetov’s property.
Akhmetov, who had until his arrest been a figure whose work experience suggested unusually close ties to President Nursultan Nazarbayev, appealed in vain for clemency before being convicted.
“I sincerely ask forgiveness of Nursultan Abishevich for failing to live up to his trust. I understand that I bear moral responsibility for the fact that, among other things, such an atmosphere has been created in Karaganda. And that the head of state has been forced to think and worry about these things,” Akhmetov said.
A top Norwegian business executive has been arrested in Oslo on corruption charges relating to a multimillion-dollar bribery case involving the ruling Karimov family of Uzbekistan.
The detention ramps up the pressure from international investigations into alleged bribery by multinationals of Gulnara Karimova, the disgraced daughter of Uzbekistan’s President Islam Karimov, to gain a foothold in the country’s lucrative telecoms market.
Jo Lunder, former chief executive of embattled Russian-owned telecoms company VimpelCom, was arrested as he flew into Oslo airport late November 4, a public prosecutor told Norwegian media the following day.
“He has been charged in connection to the VimpelCom case. It is a corruption charge,” Marianne Djupesland said in remarks quoted by Stockholm-based newspaper The Local, declining to reveal further details.
Lunder’s lawyer Cato Schiotz says the accused believes he is innocent, the newspaper reported.
The arrest comes three months after the U.S. Department of Justice won a ruling in a New York court to have $300 million dollars frozen as part of an investigation into what it described as an “international conspiracy to launder corrupt payments.”
The lawsuit alleges that illicit payments were made by two telecoms companies, Russia’s MTS and Amsterdam-based VimpelCom, which is majority owned by Russian billionaire Mikhail Fridman, to curry influence and secure favorable decisions to operate in Uzbekistan’s telecommunications sector.
An International Crisis Group report on Kyrgyzstan published on September 30, only days ahead of parliamentary elections, paints a grim portrait of the political situation and warns that the entire region could suffer from failure to adopt urgently needed reforms.
ICG identifies persisting ethnic tensions, corruption, unchecked nationalism and the surge of political Islam, fuelled by disaffection at self-interested party clans, as key and pressing problems facing Kyrgyzstan.
Despite those potential looming threats, ICG sees little likelihood of an imminent change in direction.
“Parliament and the presidency seem unwilling and institutionally incapable of addressing these issues,” the report said. “Few expect the 4 October parliamentary elections to deliver a reformist government.”
Kyrgyzstan bucks the overall trend in the region with its often rowdily competitive political system. Billboards up and down the country testify to the abundance of choice being offered to voters as they head to the polling stations to pick the 120 deputies that will represent them in parliament.
For all that political diversity, the picture on the ground appears bleak, ICG said in its report.
The ethnic Uzbek community, which accounts for 14.5 percent of the population, has been thoroughly marginalized on the political scene and remains subject to harassment from an almost homogenously ethnic Kyrgyz police force.
That trend has been coupled with the ascendancy of virulently nationalist and conservative groups.
In what will come as a surprise to nobody, a pre-election poll conducted in Kyrgyzstan by the International Republican Institute has revealed corruption to be near the top of a list of the country’s greatest perceived burdens.
The theme has been part of the background noise during campaigning season, which will culminate with a vote on October 4.
IRI’s poll revealed that 46 of respondents saw graft as the most important problem facing Kyrgyzstan. Corruption was sandwiched between the 59 percent that see unemployment as a pressing issue and the 35 percent concerned at rising prices.
Parties vying for ballots have sought in various ways to address these concerns, albeit in often less than specific details. That has not deterred voters, however, according to the IRI survey.
IRI said its research showed 77 percent of its 1,500 respondents declared their intent to participate in the election.
IRI’s Eurasia regional director Stephen Nix said in a statement accompanying the release of the survey that the poll results indicate a strong mandate to tackle graft.
"The parliamentary elections are a great opportunity for the Kyrgyz government to demonstrate its commitment to the fight against corruption,” Nix said.
So what are all the parties offering on corruption?
President Almazbek Atambayev’s Social Democratic Party (SDPK), which is expected to easily outpace its rivals, this past week unveiled its Taza Koom, or Clean Society, program, which it says will prevent the theft of 30 billion Som ($434 million).
Baku’s Court for Grave Crimes found 39-year-old Ismayilova guilty of tax evasion, illegal business activity, embezzlement and abuse of power — the types of alleged crimes which, ironically, she herself investigated in covering senior government officials and the family of President Ilham Aliyev.
"It is not a coincidence that these charges were brought against me. After all, I have talked and written in detail about these very same crimes myself," Ismayilova said in her final statement, as published by Radio Free Europe/ Radio Liberty, one of her employers.
To many, Ismayilova's story brings to mind “One Flew over the Cuckoo's Nest” — a lone battle against an autocratic, ossified system and an inspiration for civil society kept in a straitjacket by an entrenched, ruling élite. Rights activists and many journalists alike see her conviction on spurious criminal charges as retribution for her exposes of corruption within President Ilham Aliyev’s family and circle.
Before prison, Ismayilova, who also has worked for EurasiaNet.org, faced an ugly character assassination campaign that culminated in a video of her intimate life being posted on the Internet. A pro-forma police investigation has led nowhere.
A government anticorruption agency in Tajikistan headed by the president’s son has made a move to broaden its remit by pursuing alleged Islamic extremists.
The Agency for State Financial Control and Combating Corruption said in a statement on July 13 that it has detained a group of suspected members of the Islamic Movement of Uzbekistan.
The charges being leveled _ creating a criminal group, incitement to extremism and failure to report a crime _ are notable for having little to do with financial misdemeanors as such.
It is typically the state security services that initiate such cases, which raises the suspicion that Rustam Emomali, who has been head of the Agency for State Financial Control and Combating Corruption since March, has ambitions beyond chasing down mere bribe-takers.
Emomali’s agency said a resident of the northern Sughd region was detained after he was found with video and audio recordings of the late IMU leader Tahir Yuldashev, who is believed to have been killed in a U.S. drone strike in Pakistan’s South Waziristan province in August 2009.
“It is believed that (Muhammadshod) Gafurjonov planned to use the the ‘sermons’ and ‘appeals’ of IMU amir Muhammad Tohir for extremists aims in Tajikistan,” the agency said in its statement.
The statement carries on to accuse Gafurjonov of communicating with a countryman currently engaged in fighting in Syria for advice on how to lure Sughd youths toward extremist activities. Another three people are suspected of failing to turn Gafurjonov in to the authorities, the agency said.
Since all criminal investigations and subsequent trials into Islamic radicalism in Tajikistan are shrouded in secrecy, there is no way to determine the credibility of the case.
The US government wants to recover hundreds of millions of dollars in allegedly illicit funds that American prosecutors contend enriched a “close relative” of Uzbekistan’s strongman president, Islam Karimov.
A forfeiture complaint filed in US federal court in New York seeks the recovery of $300 million in assets “involved in an international conspiracy to launder corrupt payments” made in Uzbekistan’s telecoms sector, according to a copy of the complaint sent to EurasiaNet.org by the Department of Justice, which filed the case on June 29.
It alleges that illicit payments were made by two telecoms companies, Russia’s MTS and Amsterdam-based VimpelCom, to curry influence and secure favorable decisions from Uzbekistan’s government to operate in the lucrative telecommunications sector.
The alleged beneficiary is not named, but is identified as “GOVERNMENT OFFICIAL A,” and is further characterized as “a close relative of the President of Uzbekistan.” The unnamed beneficiary “held several positions in the Uzbek government” during the period in question (2004-2011), according to the complaint.
Gulnara Karimova, the president’s eldest daughter who is under house arrest in Uzbekistan on corruption charges, has previously been named as a suspect in a money-laundering probe in Switzerland involving payments in Uzbekistan’s telecoms sector. During the period in question, she held government positions, including as deputy foreign minister and ambassador to Spain and the United Nations in Geneva.
The lawsuit names two Karimova associates, and two shell companies they allegedly operated to funnel illicit funds: Gayane Avakyan, owner of Takilant, and Rustam Madumarov, owner of Expoline.
With the World Bank and Asian Development Bank soon to decide on Tajikistan’s request for $40 million more in budget support, they may wish to consider how past donations have benefited people close to the autocratic president while doing little to solve the long-term problems they were aiming to fix.
The two banks have spent over $140 million since 2009 topping up Tajikistan’s budget. But where does the money go? In 2012 alone the government spent $145 million recapitalizing a private bank that had handed out dozens of astronomically risky loans, many of them benefitting companies owned by relatives of the then-deputy prime minister, Muradali Alimardon (a man who had been promoted after admitting he’d lied to the IMF about the country’s reserves).
As I wrote for The Economist last week, the loans then disappeared but the directed lending continued. The bank is now deep in the red and Tajikistan’s whole banking sector looks on the edge of collapse.
Donors concede they struggle to piece together what is really going on. Their documents repeatedly describe Tajik bank statements as if they are purposely misleading. Internal memos say the banking sector’s structural problems stem from government resistance to reform, the lack of an independent central bank, ineffective internal controls, and ongoing fraud.
As Tajikistan’s banking crisis has snowballed over the last two or three years, donors have repeatedly seen their calls for reform ignored. So will they reward President Emomali Rahmon and his cronies for their persistent unwillingness to change the system?