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Russians Ask Where All The Money Is Going

Who needs large quantities of cash, and why?
Who needs large quantities of cash, and why?
There are strange things going on in the world, ladies and gentlemen. Particularly concerning the global economic crisis, and particularly in Russia.

Some small, little-noticed events are especially intriguing. The devil, as they say, is in the details.

For example, last week the Federal Financial-Monitoring Service reported that as the crisis has developed, criminal groups have stepped up their efforts to get their hands on cash. The report was made by Deputy Director Dmitry Skobelkin. I’d like to take a quick look at some of the basic ideas of his amazing presentation.

Skobelkin said his agency has been investigating bank transactions in connection with the use of state aid given to banks since there were reported cases of the misuse of funds at the end of 2008.

“Now the number of violations has been reduced,” he said. “They have all understood the challenges, and all state aid is being used for the purposes for which it was given.”

He was asked what kinds of violations had been uncovered during the early phase of the government’s aid to banks. Skobelkin conceded that some banks had used the money to speculate in foreign currency instead of extending loans to the real sector of the economy. And he also said that 60 percent of the financial operations carried out by banks are “suspicious.”

Sixty percent. Amazing.

It would be like being called into your child’s school and being told that most of time your child is acting “suspiciously.” Or if you were called into the local police precinct and told that you are a “suspicious” person and a potential criminal. This could only mean two things – either your local police had gone insane, or you are really a dangerous person who has to be stopped before you start shooting people in the local supermarket.

But, instead, imagine that you were such a dangerous person, and now you were being forgiven on the condition that you stop stealing from people’s pensions. Say they gave you taxpayer money to support you so that you would go out to the market and buy some caviar and give the change to pensioners, whose pensions are small and not regularly paid. But you took that money and spent it all on caviar. You put it in the refrigerator and invited guests over, and some of it you just tucked away for yourself (could come in handy!). And there was nothing left over for those poor pensioners.

But even after all this, if you are willing to promise you won’t do it anymore, then they’ll hand over some more money. And they’ll call off the police so they don’t bother you anymore.

Large Quantities Of Cash

And there was one more intriguing little detail, regarding cash transactions. After all, the Financial-Monitoring Service says the process of accumulating cash has accelerated. So, we should ask who needs large quantities of cash and why?

Before the crisis there were two answers to these questions: Cash was needed to bribe officials and to make major purchases without attracting the attention of the tax authorities.

It goes without saying that a lot of these major purchases are made by bureaucrats, picking up things for their wives, children, in-laws, and so on. Or investing in not entirely transparent -- and sometimes completely unfathomable – businesses. But now is not the time for major purchases, and people are trying to hoard cash.

But bribes are needed as much as ever. Also, as the crisis has unfolded, wages have begun to return to the shadow economy. That is, cash is needed to pay workers under the table. Apparently this accounts for a large portion of the rising demand for cash. And, of course, bribes are needed as much as ever.

This, in a nutshell, is what the deputy head of the Federal Financial-Monitoring Service reported to the public. Reported, and then went right back to work.

Olga Romanova is a regular contributor to RFE/RL’s Russian Service. The views expressed in this commentary are the author's own and do not necessarily reflect those of RFE/RL.