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Tuesday, October 19, 1999 Published at 10:32 GMT 11:32 UK


World: Europe

Q&A: Who's behind Russia's money laundering?




[ image:  ]
What are the roots of Russia's money laundering scandal?

Organised crime is responsible for spiriting billions of dollars out of Russia, cash suspected to include large sums of international aid.

The emergence of money laundering linked to accounts at the Bank of New York has set alarm bells ringing but the Russian mafia is not a localised operation concerned with petty protection rackets - it's a sophisticated business with tentacles stretching across continents.

So who is behind this scandal?

Since the fall of communism, thousands of new organised crime gangs have emerged, displaying an apparent ability to grow, murder and extort with impunity in the political and economic vacuum of a half-reformed Russia.


[ image: Shooting: Mafia killings now take place in public]
Shooting: Mafia killings now take place in public
In 1996, the interior ministry said that the number of groups had leapt from 785 during the Gobachev era to 8,000.

The Kremlin says that the Russian Mafia now controls four out of every 10 businesses and 60% of state-owned companies. Foreign companies are paying up to 20% of profits to organised crime rackets.

Almost 100 bankers have been murdered in five years. Other targets have included journalists, hoteliers and and politicians, most notably Galina Starovoitova, the campaigning reformist.

Russian organised crime emerged during the Brezhnev era (1964-82) amid economic stagnatation.

The first groups were the Vory y Zakone, or Thieves in Law, who illegally sold luxury goods.


[ image: Jailed: Vyacheslav Ivankov, their man in America]
Jailed: Vyacheslav Ivankov, their man in America
These groups maintained a low profile, fearing the gulags, but with the collapse of communism the gangs slid into the newly opened and poorly regulated market economy.

Their influence grew with their wealth and the larger groups diversified into drugs, prostitution, gun running, racketeering and taking over entire state businesses.

With an absence of adequate state institutions, some of the more influential gangs often played the role of local arbitrators in circumstances similar to the growth of the Italian Mafia families.

Former KGB agents flocked to join the new criminal gangs, which were also taking on low-skilled young men as foot soldiers to carry out the day to day duties of terror, assault and extortion.

Many groups are so powerful that they do little to hide activities, knowing that they face virtually no public scrutiny.

Who are the suspected gang leaders?

Two of the biggest gangs are the Dolgopruadnanskaya and the Solntsevskaya.


[ image: Targeted: Mafia attempts to recruit police officers]
Targeted: Mafia attempts to recruit police officers
The latter has an estimated 5,000 members and its leader was named as Sergei Mikhailov, known as Mikhas.

Specialising in drugs, gun smuggling and extortion, it was blamed for the 1995 murder of American hotelier Paul Tatum.

However, following a high-security trial in Switzerland, 40-year-old Mr Mikhailov was cleared of belonging to an illegal organisation.

Chechens and Georgians, like Sicilians and Neapolitans, have also played a disproportionately large role in the underworld, the largest Chechen Mafia being Obshina.

Vyacheslav Ivankov, known as Yaponchik or Little Japanese, was one of the Russian mafia's top men in the US before he was jailed in 1997.

But, according to investigators, Semyon Mogilevich, a secretive multi-millionaire living in Budapest, is possibly the most powerful of the crime bosses and has been linked to the the Bank of New York accounts.

How is Russia's political leadership involved?

The scale of the Russian mafia's ambition became clear when one gang attempted to sell a Russian submarine to Colombian drug smugglers.


[ image: Grand plan: Mafia attempted to sell sub to drugs smugglers]
Grand plan: Mafia attempted to sell sub to drugs smugglers
Russia's gangs have influence and members inside the corridors of power.

It takes little to persuade a badly paid police officer to sign up while the kick-backs for a corrupt regional official will be far more than he or she can expect in their salary.

Many new businesses can now only go ahead with a krisha, literally a roof to protect the business - a pay-off to a protection racket.

Swiss authorities are investigating the awarding of contracts to a construction firm, Mabetex, to renovate Kremlin buildings.

The scandal goes to the heart of the presidential administration, alleging that the company paid off the credit cards bills of Boris Yeltsin's daughters Tatyana Dyachenko and Yelena Okulova in order to secure contracts.

Lower down the order, such is the collusion between officials and local gangs, it may be difficult to define where the state ends and criminality begins.

Many Russians now say that if the country has not already become a kleptocracy, it soon will.



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