Bank of NY Agrees to Pay Russia in Money Laundering Suit

From RIA Novosti:

MOSCOW, September 16 (RIA Novosti) – The Bank of New York will pay Russia’s customs authorities at least $14 million as an out-of-court settlement of a $22.5 billion money laundering lawsuit, Finance Minister Alexei Kudrin said on Wednesday.

The Federal Customs Service had sought compensation from the bank, which it accused of helping to transfer billions of dollars in shadow imports to Russia in the late 1990s.

Kudrin, who is also deputy prime minister, said the bank’s “guilt has not been proven, and the agreement will be signed.”

He said the U.S. authorities had also failed to prove similar money laundering charges against the bank, but BNY paid them $14 million in costs acknowledging its employees’ mistakes.

“The sides have come to an amicable settlement and agreed that some costs, amounting to no less than the sum paid to the U.S. government should be paid,” Kudrin said, adding the bank would also give a loan to the Russian government.

He did not elaborate on the amount of the loan saying it would be a “gesture of goodwill” and a sign of the bank’s willingness to work with Russia.

Kudrin’s statement confirmed Tuesday’s Wall Street Journal report, citing people close to the talks with Russia’s customs service, that court costs would be paid in the case.

The U.S. paper also said the bank had agreed to resume lending and plans “a $400 million trade-finance facility” to be available to Russian state banks to help fund imports and exports, which would run for five years.

Russia’s Federal Customs Service filed the lawsuit in Moscow in May 2007 following a U.S. Justice Department investigation in which a Bank of New York vice president allegedly helped to transfer $7 billion out of Russia in the late 1990s. The bank has fired several staff responsible for the Russian money transfers.

The settlement talks have been on and off since the spring.

Russian business daily Kommersant said in March citing a Russian government source that the Russian customs authorities were ready to drop the lawsuit in exchange for an $800 million compensation settlement.

The discussions seemed to stall in the late spring and early summer, according to those close to the talks. Progress resumed after a U.S.-Russian summit in July, WSJ reported.

Kudrin and the paper would not say when the agreement could be signed.

So, what have we here? The Russian customs authorities agree to drop a case for a fee despite having no proof of any wrongdoing? Not that I have any sympathy for Bank of New York, but this sounds like a bit of blackmailing going on.
Looks like the Russians are copying the SEC. However, I am not sure whether in Russia a court could intervene and actually block such a deal – probably not.

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