Why is the West so weak when it comes to the Russian mafia?

Putin’s cronies. Putin’s proxies. Putin is a Kleptocrat. These terms could have shocked us a decade ago, but thanks to recent outstanding investigations and civic initiatives, they have entered into the routine experts’ narrative.

This new understanding of Putin is crucial while explaining Russian policy. After stealing money from the budget, why not steal neighboring territories in order to boost Putin’s shaken popularity? Media, acquired by Putin’s cronies, tirelessly explain to the people: “Everything Putin does is absolutely right.”

While no foreign jurisdiction would be expected to open a criminal case against Putin, they can and should effectively pursue illicit activity carried out by some of his closest friends. At least, on their own territories, of course, not in Russia, where the sovereignty “belongs to Russians.”

“We all have an understanding in the West about the scale of corruption in Russia, but it would be interesting to answer a question: why is so little done so far by prosecutors?” asked Harry Hummel of the Netherlands’s Helsinki Committee at the last working meeting of the expert group “Fighting Transborder Corruption”.  As part of the EU-Russia civic society forum, experts will raise this question in their upcoming report.

There are several recent examples of Western prosecutors’ actions which are not too inspiring.

On April 29, 2016, The German magazine Focus, known for its investigative articles, published an article “How Putin’s oligarchs may have laundered their millions in Germany.”  Focus reported that the German prosecutor’s office opened a €30 million money laundering case against the company Nordic Yards, a shipyard in Rostok Germany that was acquired by Vitaly Yusufov, a Russian citizen and former Gazprom official involved in the Nord Stream pipeline project. Even in Russia, the shipyard was the subject of a 2010 money laundering case because the money was stolen from the budget as subsidies. But the defendant, Yusufov’s partner – Andrei Burlakov – was shot dead in 2011,  amid doubts he was the real beneficiary of the scheme.

Burlakov, Yusupov and other partners likely acted in collusion with well-known mafia boss, Gennady Petrov. “In the taped conversation of Petrov, he discusses the purchase of this German shipyard, injecting money in it, then pumping them to Luxembourg and then bankrupting the company,” said José Grinda, a Spanish anti-corruption prosecutor.  Grinda added that he asked the Germans to start criminal proceedings in 2010, but no case was initiated.

Grinda recently brought a criminal case against top Russian mafia figures in the Spanish court. In Grinda’s file there is information about Gennady Petrov as Putin’s personal acquaintance since their St. Petersburg days, “In 1998, Mr. Alises informed Mr. Untoria that there was a serious Russian businessman, Putin’s friend as they used to work together at KGB. That gentleman would like to settle in Spain and looked for a lawyer to make deals in real estate.” Russian newspaper Vedomosti also speculated about this personal long-time acquaintance. Petrov was arrested during a raid on his villa in Spain in 2008, was later allowed to travel to Russia but never returned. Now the wanted Petrov carelessly lives in St Petersburg and Russia doesn’t have any plans to deliver him to Spain as well as other wanted people connected to Petrov including State Duma deputy Reznik, deputy chief of the anti-drug police department Aulov and others.

As for Germany, Putin built “Nord Stream”’s Gazprom project with Gerhard Schroeder, former Chancellor of Germany and his friends whom he met while stationed as a KGB officer in Dresden during the 80s – Matthias Warnig and Urs Hausheer. Both Warnig and Hausheer worked for East German intelligence [Stasi] and Hausheer is also known for avoiding CoCom sanctions. It seems, it will be difficult for prosecutors to investigate the mentioned case on money laundering by “Putin’s oligarchs” relative to Nordstream. It’s probably not coincidence that an article in Focus was taken down the day it was published, as well as its translations, without any explanation. (Like, by the way, the article on Kleptocracy bus tour in London where the name of Andrey Yakunin, son of Putin’s friend Vladimir Yakunin, emerged).

German prosecutors appear to have no appetite for pushing the corruption-related case against Russian oligarchs doing business in their country. In the past almost all cases against Russian mafia figures in the West have led to nothing. Why would this be the case? Russia failed to timely answer to appropriately commissions, to find and deliver its citizens to foreign jurisdictions and Russia has successfully claimed the cases would be better investigated in Russia (for example, the case of oligarchs Oleg Deripaska and Iskandar Makhmudov on money laundering in Spain was simply given to Russia and awaits for the expiry of the statute of its limitation). In a grotesque example, Swiss investigators arrived in Moscow but were told, in a bank, that seeking documentation on money stolen from the Russian budget is in Nizhnevartovsk, a remote town in Siberia.  The Swiss investigators made the choice to return to Switzerland, apparently showing little interest in going to a former Gulag area. This has been a persistent problem where foreign prosecutors begin an investigation; ask for legal assistance from Russia, only to be hampered by misdirection.  This seems to be enough for most foreign prosecutors and the cases are often dropped.

As for the United States, several Russian businessmen have sought justice under American RICO law  – Racketeer Influenced and Corrupt Organizations Act. Mikhail Zhivilo, Jalol Khaidarov and Maxim Freidzon claimed their businesses were taken away by gangsters close to Russian leadership and wanted their businesses returned. But in all the cases American officials suggested they seek justice in Russia, even though some of the financial operations in those cases seemed to have taken place in the US.

In a key trial making its way through a Manhattan District Court, judges are hearing evidence of a money-laundering and tax fraud scheme brought about by the Russian company, Prevezon Holdings, LTD.  The case is significant not only because it is has the potential to expose illegal financial dealings by businesses closely tied to Russian leadership, but because it’s been opened by British-American financier Bill Browder whose company was found guilty in absentia by a Russian court for failure to pay millions in taxes to Russia.  The lawyer and auditor for Hermitage Capital, Sergei Magnitsky, in defending Hermitage, uncovered large amounts of theft from the Russian treasury by Russian officials.  Magnitsky himself was charged with tax fraud and famously died in prison while awaiting trial, leading to sanctions placed on dozens of Russian officials. It should be noted, the court filings show that defense lawyers, a U.S. law firm Baker Hostetler, are trying to make Mr. Browder a central figure in this case. So, will U.S. prosecutors be able to prove the origin of laundered money in the court not only without proper cooperation from Russia but actually with its fierce resistance on the case?

According to Prosecutor Grinda, “Russian criminals are merged with Russia’s law enforcement system.”  Witnesses in the case of the Izmaylovskaya gang in Stuttgart made the same conclusion in 2010. Russian mafia gangs have FSB generals as their protectors.

It’s time for the West to realize that the situation is very serious. Western law-enforcement structures shouldn’t wait for the Russian authorities to assist them in catching Russian criminals. The Mafia never gives away its people; it hides and protects its soldiers. Russia is a mafia state, and the West should drop any hopes for legal assistance from Russia. Instead, it should start investigating the cases of corruption and money-laundering on a broader level and in a more systematic way before it’s too late.