13 December 2001, Volume 1, Number 7
THE EURO-LAUNDRYOn 1 January 2002, the euro will become the common currency for hundreds of millions of European shoppers. On that day, banks and currency exchanges will begin exchanging German marks, Italian lira, French francs -- in short, the currencies of all 12 nations who have agreed to join the euro-zone -- for euro bills and coins. Printing presses throughout Europe are busy producing some 14.9 billion new notes, the largest of which is worth 500 euros, or about $440. Some 50 billion new coins are being minted. In total, some 660 billion euros (worth about $590 billion) are on their way into the hands of citizens. It will be the largest legal money wash in history. It might also be a great opportunity to launder millions of dollars in dirty money from Eastern Europe or funds currently in the hands of terrorist organizations.
Money launderers will now have to deal with only one currency across 12 countries -- simplifying the transfer of funds from banks in, say Cyprus, to Luxembourg or Austria and from there on to banks all over Europe. Euros will be used in casinos throughout Europe, and this too will simplify the lives of those who prefer to launder money through their own betting houses or obliging casinos.
A U.S. State Department report on money laundering details the ways this activity has taken on new and increasingly creative forms:
"Internet gaming executed via the use of credit cards and offshore banks represents yet another powerful vehicle for criminals to launder funds from illicit sources as well as to evade taxes. Advertised on the Internet as being located primarily in the Caribbean Basin, virtual casinos can be extremely profitable for governments that sell the licenses and likely share in the operator's profits. By the end of December 2000, Antigua and Barbados, for example, reportedly had licensed more than 80 Internet gaming websites at a cost of $75,000�$85,000 for a sports betting shop and $100,000 for a virtual casino...
"Analysis of...reporting on ATM transactions confirms a continuing trend in suspicious transactions in which funds are wired to/through a U.S. financial institution from a foreign source and then withdrawn in cash in a third country using ATMs. Such ATM withdrawals occur in at least 57 nations, with the highest incidence in Colombia (408 occurrences), followed by Venezuela (145), Mexico (119), and Argentina (31). The wire transfers that start the cycle originate primarily in Switzerland, Italy, Germany, and England. Amounts up to several hundred thousand dollars have been withdrawn over several months using this method."
The countless currency-exchange booths on the European continent have been a traditional vehicle for money launderers, and on 1 January 2002 they will, without a doubt, be used to wash a substantial amount of dirty money. The 500-euro banknote will also be a godsend not only for honest shoppers, but for pickpockets and criminals who found the $100 bill too small for the amounts they were moving.
A NEW FORM OF LIQUID HEROIN
KYRGYZ PAPER SAYS 'ALLAH'S TEARS' BEING PRODUCED IN AFGHANISTAN.Kyrgyz law-enforcement bodies are expecting a new type of narcotic substance to appear in the next six months, Kyrgyz newspaper "Delo" reported on 5 December. It is a liquid concentrate of heroin which has virtually no smell and is translucent like water, the state commission for controlling narcotics has reported. The report claims that this new type of narcotic comes from the laboratories of Osama bin Ladin in southern Afghanistan and has been dubbed "Allah's tears" by its creators. The production technology was worked out by expert chemists hired in Europe by the world's most-wanted terrorist.
"Allah's tears" is produced from raw opium. About 50 kilograms of raw opium is needed to produce 1 kilogram of the liquid narcotic, the report said. By comparison, only 10 kilograms of opium is needed to make 1 kilogram of heroin. The "tears" are highly addictive, and specialists contend that it is nearly impossible cure addicts of dependence on the new narcotic.
BALKAN STATES TOUGHEN STANCE ON ORGANIZED CRIME.Balkan countries notorious for drug and people trafficking vowed on 5 December to tighten borders, toughen laws, and better cooperate to fight organized crime, the "Turkish Daily News" reported on 7 December. Ministers from Albania, Bulgaria, Greece, Macedonia, Romania, Turkey, Yugoslavia, and Croatia said after joint talks that they would share police intelligence and harmonize laws in a move toward closer European integration. Western countries are concerned at rising levels of organized crime in the Balkans, where many countries aspire to join Greece in the European Union.
In July, the United States put Albania and other Balkan countries on a blacklist of states that are not doing enough to fight trafficking in humans.
The countries agreed in a joint declaration to strengthen border controls to deter and detect cross-border crime. "This is a step forward to cope with this tough challenge, which cannot be handled without the close cooperation of police forces in the whole region," Albanian Minister of Public Order Ilir Gjoni told journalists.
ONE MILLION FAKE GERMAN MARKS FOUND IN BUCHAREST FLAT.The counterfeit equivalent of 1 million German marks was found by police in a Bucharest apartment, Pro TV announced on 30 November. The owner of the apartment, "Faur," has dual German and Romanian citizenship. He claims to have found the money in a bag left unattended next to a garbage bin. The money was divided into 110 packages of fake 1,000-mark notes, held together with white paper seals bearing the "Bundesbank" stamp, along with about 5 kilograms of yellow metal granules, most likely to be used to mint counterfeit coins.
In a second flat owned by Faur, police reportedly discovered a gun, 20 kilograms of metal granules and several hundred pesetas in 30-pure gold coins weighing some 37 grams.
RUSSIAN SECURITY CHIEF OPENS CIS FORUM ON INTERNATIONAL TERRORISM.Security council heads from those CIS states which are members of the Collective Security Treaty met in Minsk on 6 December. The purpose of the meeting was "to put into practice the understandings and political objectives worked out during the latest CIS summit in Moscow," according to Russian Security Council Secretary Vladimir Rushaylo. Interfax News Agency quoted Rushaylo as saying recent developments in the United States have demonstrated that it is hardly possible to resist international terrorism single-handedly. "Joint efforts are needed by everyone who advocates the principles of democracy, tolerance, and common human values," he told the forum.
DEFENSE MINISTER CALLS FOR SPEEDY CLARIFICATION OF SUSPECTED CORRUPTION.Czech Defense Minister Jaroslav Tvrdik sent a letter to Interior Minister Stanislav Gross asking that the investigation of the case of defective altimeters for the Czech air force's L-39 and MIG-21 fighters be clarified. Suspecting corruption in a tender for the altimeters, the police squad for uncovering corruption and serious economic crime, SPOK, forwarded the case to investigators last week. Several individuals--army officers as well as civilians--are under investigation. Tvrdik said the case involves employees of the Defense Ministry, the army staff, and the air force.
Tvrdik told the Czech CTK agency on 30 November that the army acquired the controversial altimeters in 1997 or 1998, and L-39s and MiG-21s have been grounded since 28 November in the wake of earlier crashes. Originally, a tender was launched for the altimeters. However, the army chief of staff's procurement officer canceled the tender and the order went directly to a Prague-based company, Mikrotechna Modrany.
POLICE BREAK UP GROUP EXTORTING MONEY FROM PRAGUE-BASED UKRAINIANS.Czech detectives from a unit formed to fight organized crime have arrested a group of six men from the former Soviet Union who are suspected of extorting money from Ukrainian businessmen working in the Czech Republic. The police operation started on 15 November. According to Czech radio on 1 December, those arrested were members of the so-called "Mukachevo Brigade," which extorted money for protection. The six were active in Prague and Central Bohemia. If found guilty, they face between eight and 12 years in prison.
KYRGYZ HOLD SEMINAR TO DISCUSS DRUG TRAFFICKING, ORGANIZED CRIME.A special two-day seminar on drug trafficking and organized crime was held in Bishkek, the capital of Kyrgyzstan. Kabar news agency on 27 November reported that the seminar was organized by the Kyrgyz National Commission for UNESCO and the UN Drugs Control and Crime Prevention Directorate's regional office in Central Asia. The chairman of the State Drug Control Commission, Kurmanbek Kubatbekov, presented the state's policies on drug control, while Timur Isakov, a senior official from the Interior Ministry, gave a detailed account of the national strategy for combating drug trafficking.
SEVEN ARRESTED OUTSIDE MOSCOW FOR ATTEMPTED SALE OF LOW-GRADE URANIUM.Police outside Moscow have arrested seven people who were trying to steal more than 1 kilogram of low-grade uranium, NTV reported on 6 December. Initial reports stated that the seized uranium was of "weapons-grade" quality, but subsequent police examinations showed it to be low-grade and a type that can be handled more easily.
The men were arrested in the town of Balashikha, just east of Moscow, trying to sell a capsule containing uranium for $30,000. The suspects were charged with illegal handling of nuclear materials. The report said the suspects were members of an organized crime gang.
CORRUPTION IMPEDING EU ACCESSION.Corruption is an obstacle to European Union accession which Latvia is not facing up to, the departing head of the EU's first anticorruption project in a candidate country told a business audience on 22 November, according to "The Baltic Times."
The statement accompanied the end of a two-year, EU-funded program entitled "Anticorruption Training, Legislation, and Public Information." Outgoing head Dave Wallis said the government has ignored many of his guidelines on the establishment of a new anticorruption office, which is due to start work next May but has yet to be approved by the Latvian Parliament.
"People with not much experience are trying to deliver a product they don't particularly want to deliver," said Wallis, formerly a police officer in the United Kingdom and a member of Hong Kong's model Independent Commission Against Corruption. By putting the bureau under the ministries of Justice and Interior, along with the prime minister, the principle of independence from political control had been "entirely destroyed," Wallis told Finnish entrepreneurs gathered at Riga's Stockholm School of Economics.
"Combating corruption is being driven by the EU. But how many people in the government want a strong investigative body?" Wallis asked.
In its recently published index of corruption perceptions around the world the corruption, non-governmental watchdog Transparency International rated Latvia the second-most-corrupt of all the candidates for EU membership, after Romania.
OVER 20 KILOGRAMS OF AFGHAN HEROIN SEIZED IN SIBERIAN OIL TOWN.More than 20 kilograms of heroin with an estimated street value of $1.1 million was confiscated in the Tyumen region, Russian television station ORT reported on 1 December. The packages carried Arabic script and a "777" demarcation -- a mark of high quality generally used by factories in Afghanistan.
ORT reported that 14 kilograms were transported to the town of Ishim in a Volga car belonging to a former serviceman stationed on the border. The drugs were simply laid out in packages neatly under the backseat and traveled unhindered through dozens of police checkpoints in Siberia. According to ORT, the trafficker knew that uniformed troops are not closely scrutinized at official road checks. Moreover, when uniformed troops cross borders, customs officers also do not check them particularly carefully.
The alleged drug courier is a former serviceman who lives in Kyrgyzstan. He allegedly brought two suitcases containing Afghan heroin into Russia by train. All the contraband was in its original "factory" packaging. An expert examination confirmed that the narcotics were of a very high quality. The suspect was to pass on his goods in Ishim to a pensioner who had organized a transit base for drug couriers in her home. When a search was carried out there, another 9 kilograms of heroin was found. A wholesale drug purchaser from Tyumen was also arrested.
A majority of the narcotics was apparently intended for distribution within Russia's oil and gas regions.
HIRED KILLERS MURDER RACKETEERS IN CRIMEA.Police in the Crimean city of Simferopil arrested the owners of one of the largest liquor companies in Ukraine, Soyuz-Viktan Ltd., and charged them with complicity on two counts of murder. According to the Ukrainian Service of RFE/RL, Andriy Okhlopkov and Victor Udovenko were arrested by law-enforcement agents in late November. According to the Prosecutor-General's Office, the two businessmen came under pressure from a criminal gang in Crimea to pay protection money. Instead of informing the authorities, they hired a contract killer for $50,000 who then murdered the two racketeers in the offices of Soyuz-Viktan. The bodies were removed and buried in a forest in the Crimea. Afterwards, one of the hired killers was himself murdered and the other has received threats on his life.
PAPER ACCUSES NATIONAL SECURITY ADVISER OF ILLEGAL ARMS SALES.The editors of the Kyiv-based newspaper "Kyivsky telegraf" sent a letter in early December to the Ukrainian prosecutor-general asking that a criminal investigation be launched against the country's national security adviser and former SBU intelligence service chief Yevhen Marchuk. They state that on the basis of their investigative reporting (see "Kyivsky telegraf," 26 November-2 December 2001), Marchuk is implicated in the sale of arms to Croatia in 1993-94 during a UN-imposed embargo. The paper printed excerpts from the Italian indictment of a group of arms dealers arrested in Torino in 2001 which states: "Marchuk took upon himself the role of initiating and organizing a criminal conspiracy. Streshynsky, Lebedyev, Zhukov, Harbar, companions in business,... accepted Marchuk's plan and began implementing it..."
In its letter to the Prosecutor-General, the newspaper quotes the publication by "RFE/RL Crime, Corruption, and Terrorism Watch" (Vol. 1, No. 4) of exerpts of a letter from Marchuk to then-President Leonid Kravchuk in which arms sales are discussed. Marchuk appears to warn Kravchuk that he must avoid dealing with Streshynsky, a reputed arms dealer, and that in case of criminal proceedings, he might be called on to testify.
Speaking in his own defense, Marchuk appeared on Ukrainian television on 4 December. He refuted the charges against him and said that the Ukrainian intelligence service under his command did everything to help in the investigation, prompting the UN Security Council to thank the Ukrainian government. Marchuk went on to say that the paper is acting on the orders of its owners to discredit him. According to reliable sources in Kyiv, the newspaper "Kyivsky telegraf" is owned by Andriy Derkach, a member of parliament and the son of Leonid Derkach, the former head of the SBU who was relieved by Ukrainian President Leonid Kuchma in the wake of affairs over the murder of Ukrainian journalist Heorhiy Gongadze and the ensuing "Tapegate" revelations. Many Ukrainian independent media have written that Andriy Derkach is himself suspected of illegal arms trafficking and other criminal activities.
So far it is not clear whether the Italian authorities have asked to interview Marchuk in conjunction with the allegations.
END NOTETHE TRACTOR DRIVER OF THE STATE -- THE CASE OF PAVLO LAZARENKO (Part 2).
The case of Pavlo Ivanovych Lazarenko, once one of the most powerful men in Ukraine and now an inmate at a federal detention facility in California, is a classic study of high-level corruption in Ukraine. It involves not only Lazarenko but a long list of players beginning with the Ukrainian president (who appointed Lazarenko prime minister), to the head of the Intelligence Service that vetted the appointment, to the Prosecutor's Office that watched as an impoverished nation was bled dry. It is also the story of a lax law-enforcement system and parliament which refused to investigate his dealings, preferring to let the dirty work be done by the United States and Switzerland and only afterwards becoming a minor participant.
The extent of Lazarenko's activities may never be known. The major frauds which have been documented in the West include his dealings with the Naukova State Farm, United Energy Systems of Ukraine, and the GHP Corporation scam. There is also evidence of his relationship with President Leonid Kuchma in the creation of a mobile-phone company in Ukraine, where Lazarenko's money was used as the start-up capital of this firm.
The case has been plagued by constant postponements of the trial date and changes in Lazarenko's defense team. Pavlo Lazarenko is alleged to have stolen hundreds of millions of dollars via different criminal enterprises. U.S. prosecutors have not even begun investigating his activities in other countries, limiting themselves to money laundered into the United States. How was this possible? In "Everything Is In Order," read how the president of Ukraine, Leonid Kuchma, appeared to ignore evidence and repeated warnings from members of parliament before making Lazarenko the country's prime minister.
"EVERYTHING IS IN ORDER."
On 18 August 1994, Leonid Danylovych Kuchma was inaugurated president of Ukraine. Standing in front of the parliament building and assembled guests, he swore on the Bible (the constitution had not yet been adopted) to uphold the law of the land. Nine days later, in one of his first official acts, he signed a presidential decree aimed at combating corruption in Ukraine.
In September 1995, Kuchma announced that he would appoint Pavlo Lazarenko as first deputy prime minister of Ukraine. At the time, the head of the parliamentary commission on combating corruption, Hryhoriy Omelchenko, met with President Kuchma to protest the Lazarenko appointment. This was not the first meeting between those two men regarding Lazarenko: In December 1994 and April 1995, he had given the president documentary evidence of Lazarenko's criminal activities and asked Kuchma to request that the SBU investigate the charges.
According to Omelchenko's version of events published in his 1999 book "Corrosion of Power," during the September 1995 meeting, Kuchma told Omelchenko that Volodymyr Radchenko, the head of the SBU at the time (and the current head of the service following Kuchma's dismissal of Leonid Derkach, who headed the service during the "tape scandal") had conducted the investigation and had found "everything to be in order with Lazarenko." On 21 October 1996, President Kuchma appointed Lazarenko the country's prime minister. Less than one month later, in a televised ceremony on 14 November, Kuchma awarded Pavlo Lazarenko the Order of Yaroslav the Wise, one of Ukraine's highest honors.
In December 1996, Omelchenko went to the prosecutor-general at the time, Hryhoriy Vorsinov, with a stack of documents hinting at Lazarenko's possible illegal activities. Upon seeing the documents, Vorsinov refused to accept it. In the ensuing conversation, he mentioned that Pavlo Ivanovych "had many friends in very high places from Dnipropetrovsk." Omelchenko argued that it was Vorsinov's duty to investigate this matter, but the latter steadfastly refused, according to Omelchenko's book.
Having few options left, Omelchenko went to see the president at noon on 3 January 1997. He handed him a packet of almost 300 pages of documents outlining in detail the prime minister's allegedly corrupt activities. He asked that these documents not be made public, for they were sensitive and their misuse could jeopardize the case against Lazarenko. Kuchma appeared amazed and angry. He ordered Vorsinov, the prosecutor-general, and Radchenko, the head of the SBU, to conduct an "objective investigation."
That same day, according to Omelchenko, this entire packet of documents found its way onto Pavlo Lazarenko's desk.
On 16 April 1997, Omelchenko received a phone call from an investigator from the Prosecutor-General's Office saying he needed to see him about the ongoing investigation. Omelchenko told him that he was leaving for Germany three days later and did not have time. That same evening, the investigator called again and said that it was an urgent matter. They met and, from Omelchenko's description of the meeting, the only topic which was of importance to the investigator was where Omelchenko had obtained his information about Lazarenko's accounts and activities abroad.
Omelchenko left for Germany on 17 April, two days earlier than he had told the investigator. On 19 April, Prosecutor-General Hryhoriy Vorsinov announced that he had begun a criminal investigation -- of Omelchenko.
What transpired between Lazarenko's appointment as prime minister and the start of a criminal investigation against Omelchenko can be found in the United States Superseding Indictment of Lazarenko.
(To be continued.)