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By John Helmer, Moscow

The Central Bank of Russia has authorized Suleiman Kerimov to take shareholding control of Vozrozhdenie Bank from Dmitry and Alexei Ananiev. The negotiation between Kerimov and the Central Bank occurred late last week. The Ananievs were absent abroad.

Eight weeks earlier, on December 15, the Central Bank had ousted them from shareholding control of Promsvyazbank, the first of the Ananiev banks; announced several billion dollars in bailout financing,  and began an  investigation of the Ananievs for grand larceny and fraud.  The Central Bank and the Finance Ministry have subsequently decided to nationalize Promsvyazbank.

The new deal with Kerimov privatizes Vozrozhdenie Bank on terms which provide state bank funding and guarantees, details of which have not been officially announced.

The circumstances of the double bailout are unprecedented in Russian banking history. Never before have two suspected bank thieves on the run been replaced by a man under arrest and facing trial for money laundering, fraud, tax evasion and other crimes.

There is one difference between the Ananiev brothers and Kerimov. For the time being, the Ananievs have yet to face criminal or civil charges in a Russian court; they have taken the Central Bank to court in Moscow charging abuse of power. Kerimov, by contrast, is facing indictment by French prosecutors in Nice for financial transactions identified in the Nice magistrate’s records  at almost one billion Euros. He is under house arrest at Cap d’Antibes, with a court-ordered bail of €40 million to relieve him of imprisonment after he had served two days. 

There is one more difference. According to the United Nations Convention Against Corruption (UNCAC) which Russia ratified in 2006,  Kerimov as a senator in the Federation Council is a politically exposed person (PEP) who cannot be authorized to take control of a bank while he exercises political functions unless he meets exceptionally strict domestic and international standards of disclosure and supervision.  Kerimov cannot qualify.  In addition, Russian law on the status of elected officials prohibits Kerimov from conducting business transactions with the Central Bank or anyone else for personal gain.

The Central Bank was asked this week to confirm whether it had negotiated in Moscow with Kerimov and authorized him to take control of Vozrozhdenie from the Ananievs.  The bank refused to say by telephone, and did not provide an official release. It requested an email of the question, and then  refused to answer.

Senator Yury Vorobyov (Vorobiev), deputy speaker and head of the Federation Council’s control commission for enforcement of the senators’ code of conduct, was asked if Kerimov’s negotiations with the Ananievs in January and with the Central Bank a few days ago violate the law prohibiting members of the Council from carrying on business. Vorobyov refused to respond either directly, or through a spokesman.

At the time of Promsvyazbank’s (PSB) takeover by the Central Bank on December 15,  Vasily Pozdyshev, a deputy governor of the Central Bank, said the Central Bank bailout of PSB would  require between Rb100 billion and Rb200 billion ($1.7-$3.4 billion), based on his preliminary estimate. 

PSB reported at the same time “the bank ranks 9th by total assets among Russian banks (with RUB 1.3 trillion as at 1 December 2017) and is on the list of systemically important credit institutions. The Bank established correspondent relations with 297 credit institutions, its portfolio comprises a total of 2.73 million clients, including corporates, SMEs and some 2.5 million individuals, and operates offices across all federal districts.”  

Source: https://www.psbank.ru/~/media/Files/Bank/Investors/Investor_Presentation/IP_eng.pdf

The PSB announcement  wasn’t a concession by the Ananievs that they were letting go, let alone losing their bank.  They claimed the December deal was “to enhance the Bank’s financial stability and ensure its business continuity in the banking market, the Bank of Russia is to be engaged as an investor using the resources of the Fund of Banking Sector Consolidation.”

This month in a presentation  PSB claims it is too big to fail, by Russian standards – a “systemically important financial institution” and the “#3 privately owned bank in Russia by assets”.  By the time the bank said this,  it was no longer privately owned, since the Ananievs have fled abroad.

Left to right: Dmitry Ananiev; Alexei Ananiev; Vasily Pozdyshev.  

Their flight was triggered by a public accusation by Deputy Governor Pozdyshev that the brothers  had looted the bank. “From a market-focused bank it turned into a lender which financed its owners,” Pozdyshev said. “The amount of loans issued to the owners exceeds the bank’s capital.” As of December 15, he calculated that Ananiev self-lending exceeded Rb150 billion ($2.6 billion).  When the Central Bank took over, a provision for non-recovery or loss of that money was made out of the bank’s capital of Rb104 billion ($1.8 billion). That left PSB with just Rb52 billion  ($897 million) in the kitty. According to Pozdyshev, the refinancing requirement from the Central Bank is three times as much.

In mid-January the Central Bank’s bailout had become the conversion of PSB into a state entity, “a special-purpose bank for serving military-industrial-complex businesses”, according to an official release.  The estimate of the black hole the Ananievs had left behind had grown to Rb200 billion ($3.5 billion). Converting PSB, it was announced,  would shift up to Rb1 trillion ($17 billion) in loans for the industrial complex, including loans from state banks like Sberbank, VTB, Gazprombank,  and Rosselkhozbank, all of which are already under US and European Union sanctions. The loans are covered by Russian state guarantees, but their transfer to PSB was reported by the Finance Ministry to require fresh capital backing  for PSB of Rb80 billion ($1.4 billion).  

The state bankers, German Gref of Sberbank and Andrei Kostin of VTB, have told the press they oppose the government’s decision to move the bulk of bank lending for the military-industrial complex to PSB, and thus into competition with themselves.   Their lobbying against the move caused the Finance Ministry to retreat from clarity on what shape the new, nationalized PSB will take.  

Press reports in Moscow indicate the Ananievs are being investigated for looting the bank through related-party loan and other fraudulent schemes, but so far no PSB executives have been arrested, and no charges have been laid.  This week it was reported that a fortnight after the Central Bank had taken over PSB, the brothers arranged  the transfer of Rb4.5 billion ($83 million) in cash from PSB to Vozrozhdenie Bank, which they also controlled.  Reportedly, the cash was moved between the banks on December 28 and 29 in convoys of trucks.   It is suspected the cash was then transferred to Ananiev accounts abroad.

A few days earlier, expressing itself with euphemisms, the Standard & Poors Rating agency  downgraded Vozrozhdenie Bank by a notch on account of what it called “contagion risks” and the bank’s inability “to maintain liquidity cushions”.   The bank objected, claiming it had raised its “liquidity cushion” to Rb78 billion ($1.4 billion), and that clients’ funds were on the rise at Rb141 billion ($2.4 billion), as of September 30.  

The Moscow stock market didn’t believe it; the bank’s share price and market capitalization plummeted. Downwards, too,  went the value of the Ananievs’ stake. At today’s share price, this is worth the equivalent of about $110 million.


Source: https://markets.ft.com/data/equities/tearsheet/summary?s=VZRZ%3AMCX

Alexei Ananiev has responded in the Russian press that the allegation of his criminal cash-out by truck  is “complete nonsense”. He and his brother have launched lawsuits in the Moscow courts to challenge the Central Bank actions and allegations. They say they are the victims of fraud, not the perpetrators. 

In their version, the Ananiev brothers had struck a deal with Central Bank deputy governor Dmitry Tulin (right) for recapitalization of PSB by the sale of non-bank assets and by repayment of PSB loans to their entities. The Central Bank reneged on this deal, the brothers claim.  “I had a clear understanding,” Dmitry Ananiev told a Moscow newspaper, “that the bank had time until at least the middle of next year, but in the optimum scenario the whole of next year to show a profit and results we promised, month-by-month. The provisions which appeared after the (Central Bank) check we could have covered with the bank’s profit. There was no need to take such a harsh decision.”

As the Ananievs allegedly trucked cash out of PSB, they started secret negotiations with Kerimov to take over their 52.7% stake in Vozrozhdenie Bank before they lost it altogether. In mid-January, the French prosecutor in Nice announced  that “Mr Kerimov has received a permit from the investigating judge to make a short trip to Russia to visit his close relative, a brother or a cousin”, purportedly because the relative was ailing. The Russian press have subsequently revealed that Kerimov met with the Ananievs to discuss the purchase of their shares through a Kerimov vehicle called Bonum Capital.

Source: http://bonumcapital.ru/ 

Vozrozhdenie means renaissance; bonum is Latin for a good thing. Bonum Capital’s Russian website reports offices in Moscow, Cyprus and London. The UK-listed entity in the group reports Cyprus clerks as company officers, but a Russian, Murat Aliev,  is given as the individual with significant control of the company.    

Aliev is a longtime employee of Kerimov. He ran the treasury, stock trading, and investment operations for Kerimov’s Moscow holding Nafta Moskva, until Kerimov decided in 2014 to create Bonum as a separate front. Shareholding control, cashflow and tax minimization for Bonum were then divided between entities in Cyprus, the UK and British Virgin Islands.  

The Ananievs, Vozrozhdenie Bank, the Central Bank and Bonum Capital have issued no official confirmations of the deal between them. Bonum did tell Reuters that it has proposed names for the new bank board. The terms reported suggest  the Ananievs swapped obligations they and their bank already owed Kerimov in exchange for all but 10% of their shareholding.  They may have agreed with Kerimov on an option to buy back their 43% control stake later and offshore, if the Central Bank agrees.   

Two nationalization options for Vozrozhdenie were presented to the Central Bank:  one, a takeover by the pension fund of the state Russian Railways conglomerate, and merger with its cashbox, Absolut Bank; the second, a VTB takeover. Both have been rejected by the Central Bank in favour of the Kerimov privatization. Russian sources believe that even without a cash outlay for the bank shares, Kerimov does not have the money required to recapitalize Vozrozhdenie.  

How much this may be has not been estimated publicly. Vozrozhdenie has  issued no  reports on its financial condition since last September;  no audited financial report was published during 2017.   The accountant on the Vozrozhdenie board, Tamjid Hossain Basunia, was at the same time a director on the PSB board, and a former partner of the Russian practice of PriceWaterhouseCoopers (PWC). PWC has been the auditor of both banks.

Moscow and London sources suspect that Kerimov is a front for state financing for the takeover, probably through Sberbank. For details of Sberbank’s closeness to Kerimov’s businesses and his indebtedness to the bank, read this.     For the intimacy between Kerimov and Sberbank chief executive German Gref, click to follow.   Insiders claim they have seen senior Sberbank executives kowtowing to both Kerimov and his operational deputy, Allen Vine, an American. 

For the case of the fake privatization of the state licence for Russia’s largest gold deposit Sukhoi Log, in which Kerimov has also been engaged as a front for state bankers, read this

Counting the distress discount for the dwindling Vozrozhdenie Bank, Kerimov’s takeover has cost less than $80 million on paper. If Kerimov and the Ananievs have simply swapped obligations they owe to Sberbank and other state sources, the deal is no more than an accounting transfer on state bank books. The Russian business press have failed to ask. Having neither sources of their own, nor Russian reporting to crib from, details of the Kerimov transaction have also escaped the western business press. 

But even if Kerimov is a front man for Sberbank, is he legally permitted to take Vozrozhdenie Bank under either international or Russian law and banking practice?

Source: http://www.vbank.ru/en/  At the June 30, 2017, annual general meeting of the bank both Ananiev brothers led the election to the board. The board members also included Otar Margania (Marganya) who has been associated with the bank for more than a decade, and before that with VTB. Margania’s  record at the bank  can be followed hereMargania’s involvement in the Russian diamond sector is notorious; click to read.  

The framework agreed by Russia and the international community for regulating the private gain of public officials, including elected officials like Kerimov, is the United Nations Convention Against Corruption (UNCAC).  The full text can be read here.  140 countries have now signed the convention. Russia signed in 2003 and ratified the convention in 2006. Kerimov is covered as a “person holding a legislative, executive, administrative or judicial office of a State Party, whether appointed or elected, whether permanent or temporary, whether paid or unpaid, irrespective of that person’s seniority.”

The convention requires the implementation of Russian laws and regulations “to adopt, maintain and strengthen systems that promote transparency and prevent conflicts of interest”. For elected officials to negotiate and gain personally from state awards of major assets like Vozrozhdenie Bank, the Central Bank is required by the convention to  follow “appropriate systems of procurement, based on transparency, competition and objective criteria in decision-making, that are effective, inter alia, in preventing corruption.”  Article 10 requires  “transparency in its public administration, including with regard to its organization, functioning and decisionmaking processes.”

Left: Russian General Prosecutor Yury Chaika signs a cooperation agreement with Central Bank Governor Elvira Nabiullina. Right: Jean Michel Prêtre, the French state prosecutor in charge of the Kerimov case in Nice.

Art. 14 not only requires the Russian authorities to “institute a comprehensive domestic regulatory and supervisory regime for banks and non-bank financial institutions, including natural or legal persons that provide formal or informal services for the transmission of money or value.” The article also obliges Russia “to cooperate and exchange information at the national and international levels” in money-laundering. That means exchange of the French evidence against Kerimov for Russian evidence of the sources of the cash he is accused of transporting to France, and spending on real estate.

Kerimov himself, along with the Central Bank and Vozrozhdenie Bank officials with whom he has been dealmaking, are also regulated by UNCAC’s provisions on conflict of interest, trading in influence, abuse of functions,  and concealment. To prevent corruption, UNCAC requires state and commercial banks to maintain “books and records, financial statement disclosures and accounting and auditing standards”; and in particular to detect and prevent “the establishment of off-the-books accounts [and] the making of off-the-books or inadequately identified transactions.” If Sberbank or another state bank is lending Bonum Capital the money the Central Bank requires for recapitalization of Vozrozhdenie, UNCAC requires disclosure of the sum and the terms.  Concealment is an obvious violation.

The Ananievs are charging the Central Bank with multiple violations of these provisions.  They have been accused by the Central Bank of fraud, embezzlement and money-laundering, but have yet to be indicted. Kerimov is under arrest charged with criminal offences in France. The presumption of innocence applies to their fates, but the requirements of UNCAC apply to the evidence and testimony already in circulation. The extent of this evidence requires the Central Bank to be fully transparent in the deal it has done with Kerimov, and state why it finds Kerimov a fit and proper person. 

When the Central Bank refuses after repeatedly being asked to confirm its deal with Kerimov for Vozrozhdenie,  it is openly flouting UNCAC and its implementing Russian legislation. For elaboration of codes of conduct and standards of disclosure required for Politically Exposed Persons (PEPs), read this World Bank report.    

There been no exchange of evidence or cooperation between the French and Russian prosecutors. Instead, the Russian side has been attempting to arrange Kerimov’s escape from French jurisdiction and custody. Gref is the Russian official leading this effort. Other Russian state officials involved against the French include several senators and the Kremlin spokesman, Dmitry Peskov; they are named here

A veteran Russian banker comments that so long as Russia is facing both US and European Union sanctions, Kerimov should be defended at home. “Let us not forget that the person has official status in the Russian polity. One should ask whether that is compatible with a European indictment. The latter may be politically motivated and an instrument of war.”

Since 2013 it has been illegal for elected officials like Kerimov to hold assets offshore. Kerimov devised a Swiss foundation to sidestep the law; one of the Swiss associates at his foundation, Alexander Studhalter,   has also been arrested in Nice, and indicted for acting as Kerimov’s straw man in the offences which have been charged against Kerimov himself.  At last report, Studhalter is still in prison; he says he is innocent. For details of Kerimov’s Studhalter scheme and the loopholes in Russia’s law, read this

The Federation Council claims it has cracked down on offshore asset disclosure and commercial business operations by its senators. Several of them have resigned either voluntarily or under pressure. None among the sitting senators has been prosecuted. For more on other cases, read this.  Since he took his Federation Council seat in 2008, Kerimov and his spokesmen have not provided evidence   of a speech in the chamber, a piece of legislation he has drafted,  or a vote he has cast.  This week Senator Vorobyov (right), whose committee is in charge of enforcement of the laws covering senators’ conduct, was asked if Kerimov’s negotiations for the takeover of Vozrozhdenie  Bank violate the law. Vorobyov refuses to answer.      “For sheer cynicism, this takes even my breath away,” comments a veteran international banker who knows Kerimov well enough never to have agreed to lend him money. “Everybody knows who supplies Kerimov with money, and what they get out of the relationship. In Nice the French are only doing to him what should have been done by the Russian prosecutors over the past twenty years. That [Central Bank Governor Elvira] Nabiullina should authorize Kerimov to replace the Ananievs as camouflage for another state nationalization for yet another criminal failure by a Russian system bank tells me this has nothing to do with US sanctions. This is a Russian disgrace – and there’s not a Russian banker who dares say so.”


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