Friday September 15, 4:35 pm Eastern Time
Reuters

Russia's Sobinbank seen pipeline in laundering scheme

NEW YORK, Sept 15 (Reuters) - Russian bank Sobinbank was at the heart of a massive money laundering scheme in which Russian businessmen and criminals illegally funnelled about $7 billion through accounts at the Bank of New York Co. Inc. (NYSE:BK - news), according to U.S. court papers.

Suspected Russian mobsters and businessmen used Bank of New York accounts held by Sobinbank and a related Russian bank as the main pipeline to wire ill-gotten funds -- including money from tax fraud and kidnappings -- out of Russia, documents alleged.

The papers, recently unsealed, were filed by the Manhattan U.S. Attorney's office in a far-reaching government probe into money laundering. Money laundering involves pushing illegal profits through a series of businesses and bank accounts to make them appear legitimate.

Investigators from around the world are tracing the flow of funds from Russia to the United States that passed through accounts at the Bank of New York, in an effort to crack a tangled money laundering scheme. The vast bulk of the $7 billion went through the two Russian banks' New York accounts, the papers allege.

As a result, the U.S. government has frozen about $15.3 million held in Sobinbank's Bank of New York account last autumn, the papers said. It also seized an account held by Russia's Depozitarno-Kliringovy Bank (DKB), in which Sobinbank has a 20 percent interest.

Sobinbank, the newest name to emerge in the scandal, denied any knowledge of alleged crimes related to the money. The bank fought the U.S. government's seizure, but the court denied its motion to dismiss the complaint.

``The U.S. government's seizure of the funds in Sobinbank's correspondent account at the Bank of New York is not based on any substantiated wrongdoing by Sobinbank,'' the Russian bank's deputy chairman, Andrei Serebrennikov, said in a statement in Moscow.

The story was first reported by The Wall Street Journal on Friday.

Prosecutors allege that from 1996 to 1999, billions of dollars passed through the two Russian banks' accounts into Bank of New York accounts used by two companies - Becs International and Benex - to launder money.

The money in the Sobinbank account often was used to pay criminals for crimes including kidnapping, the court papers said. The transfers also defrauded the Russian government of taxes and broke the country's currency controls, they said.

Becs and Benex were both controlled by Russian emigre Peter Berlin, the husband of Russian-born former Bank of New York executive Lucy Edwards. The couple pleaded guilty earlier this year to their role in the conspiracy and have been cooperating with the authorities as part of their plea agreement.

The Bank of New York, one of the oldest commercial banks in the country, was not charged with any crime and has reportedly been cooperating with authorities.