Bureau Recommends: Global criminal money laundering network uncovered

Billions of euros circulate in a vast criminal system that enriches organised crime groups.

In 2008, a Romanian tyre dealer took three former business partners to court in the tiny republic of Moldova. He claimed that they used a phantom offshore company called Tormex Ltd. to defraud him of US$437,176.

When prosecutors subpoenaed Tormex’s bank accounts from Latvia, they found the appearance of more than US$680 million pouring through them.

The case opened the door to a vast, hidden illicit network which allows corrupt politicians and organized crime groups to evade taxes, plunder state resources and launder crime and corruption-generated money.

Delving into Tormex, reporters from the Organized Crime and Corruption Reporting Project (OCCRP), a consortium of investigative centres, journalists and media organisations throughout the Balkans and Eastern Europe, uncovered a system ‘built on hundreds, maybe thousands, of evolving phantom companies’.

OCCRP reporters traced Tormex transactions to Chisinau, Moscow, Kiev, Riga, Bucharest, London and Auckland, cities that ‘have become hubs in a huge network of banks, proxies, financial consultants and offshore companies that launder money and hide stolen assets.’

In their brilliantly presented multimedia project, The Proxy Platform, OCCRP researchers describe their findings. ‘For over 12 months, thousands of transactions and commissions from all over the world circulated through the Tormex bank account in Latvia before they were diverted to other offshore companies.

‘Yet Tormex didn’t really exist. It was a phantom. It had no offices, no employees. Its director was a Russian citizen; an unwitting stand-in with no idea there was such a thing as Tormex.’

Through their investigation, the OCCRP uncovered connections to  crime figures, businessmen, Asian gangsters, Sinaloa Cartel Drug money, and Russian authorities, including those thought to be behind the corruption uncovered by Sergei Magnitsky, a lawyer who alleged wide-scale tax fraud sanctioned by Russian officials.

Magnitsky, imprisoned after blowing the whistle, died in suspicious circumstances in police custody in November 2009. The OCCRP found that Russia was one hub for money laundering.

Ruslan Milchenko, ex-operative officer of the Department of Tax Crimes of Moscow police, and head of the anti-corruption center Analyses and Security, told OCCRP reporters: “Unofficially we believe that of the 5 million firms registered in Russia, 3 million or even more are phantom companies, which don’t conduct any real commercial activities and are aimed only on money laundering,” said Milchenko.

However, the OCCRP found that Russia was not the only culprit.  Many of the proxy companies they identified were registered by GT Group in New Zealand and Midland Consult in London.

Read the full interactive project here.