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Bulgaria: Balkanbank Managers Arrested in Laundering Scheme

  • Ron Synovitz

Sofia, August 2 (RFE/RL) -- Four officials at Bulgaria's largest state-owned commercial bank, Balkanbank, have been arrested in $186 million money laundering scheme involving an unnamed firm in Cyprus. The money represents about half of Bulgaria's budget deficit for this year and nearly equals a tranche of credits from the International Monetary Fund meant to help stabilize the country's rapidly crumbling economy.

Stefan Stefanov and Vladimir Mitkov, who both work in the Department of International Bank Transfers at Balkanbank's Ruse branch, were arrested late Wednesday and charged with making an illegal transfer abroad. The director of the Ruse branch, Simeon Minev, was arrested today along with the bank's deputy director, Adela Petrova. A former police officer named Krassimir Kirilov, who now works for the Cypriot firm, also was arrested today.

Reports say the money originated outside of Bulgaria and was being transferred to a third country. An Interior Ministry statement did not disclose the destination of the transfer. A local prosecutor in Ruse said the case is now being handled by the National Investigations Service in Sofia.

Like other institutions in Bulgaria's banking sector, Balkanbank is on the brink of insolvency. International financial analysts attribute the sector's decline largely to corrupt management.

The World Bank has questioned the relationship between bank managers, loss-making state companies, and "dubious" private firms that continue to earn enormous profits at the expense of the national budget. The World Bank notes that many of Bulgaria's private and state banks continue to issue questionable loans within this network, despite the "inability or unwillingness" of loss-making firms to pay the money back.

The Ruse branch of Balkanbank works as the financial agent for the "Dunrit" arms factory at Ruse. The director of that factory, Stoyan Sabotinov, was arrested a month ago on charges he falsified contracts with a second state-owned arms factory at Kazanluk.