The scope of the Azerbaijan’s “slush fund” that made numerous payments to secretive shell companies in the UK may have been larger than expected, according to a report published by the Organised Crime and Corruption Reporting Project (OCCRP).
Danish bank, Danske Bank authorised the payments to UK companies via its branch office in Estonia. Flemming Pristed of the bank’s Group General Counsel, said:
We have previously established that, in the period leading up to 2014, our branch in Estonia had inadequate measures in place to prevent Danske Bank from being exploited for money laundering and other illegal activities.
He continued, “We have taken the steps necessary to remedy this. We do not in any way want to be exploited for money laundering or other illegal activities. Since 2014, we have terminated relationships with all customers that were unable to document a legitimate purpose for maintaining an account in Estonia, and we have tightened our procedures and controls significantly. In recent years, we have generally stepped up our AML measures and made a huge effort to prevent exploitation. We cannot guarantee that all attempts to launder money through Danske Bank will be unsuccessful, but it has never been harder than it is now.”
“We cannot comment on specific customers or specific transfers in the present matter. If we found reason to submit reports on suspicious circumstances to the authorities, we did so. It is then for the authorities to conduct investigations and decide whether and to what extent the purpose of the transactions was illegal. We are cooperating fully with the authorities since we all share the same interest in combating money laundering and other illegal activities.”
“On the basis of the suspicion of possible money laundering or other illegal activities, we have decided to take another look at the situation in Estonia during the period leading up to 2014. We have started various investigations to establish what exactly took place during that period and to learn from what happened then. These efforts form part of our measures to make it as difficult as possible to exploit Danske Bank for money laundering or other illegal activities.”
The spokesperson added that other measures the bank has taken include employing 550 people to combat financial crime, screening over 3 million customer transactions and 15 million customer numbers against international sanction lists and recording 150,000 warnings of unusual customer behaviour.
The report stated that the four British companies involved in the scandal were: Polux Management and Hilux Services, based in Glasgow; Metastar Invest in Birmingham; and LCM Alliance in Potters Bar, Hertfordshire. They attempted to send the funds to anonymous tax haven entities in the Seychelles, Belize and the British Virgin Islands. Woodward Incorporation, which owned Polux Management, was approached to make a comment about its involvement in the incident, but they declined the offer.
The details of the three European politicians linked to the scandal have not yet been revealed. However, the OCCRP report, which is part of the Global Anti-Corruption Consortium’s efforts via a partnership between the OCCRP and Transparency International to tackle corruption, says that the recipients may not have been aware of the original source of the money. They are investigating an alleged secret fund called the Azerbaijani Laundromat.
Many European newspapers investigated the scandal for a considerable period. They included: The Guardian, Berlingske (Denmark), Suddeutsche Zeitung (Germany), Le Monde (France), Tages-Anzeiger and Tribune de Geneve (Switzerland), De Tijd (Belgium), Novaya Gazeta (Russia), Dossier (Austria), Atlatszo.hu (Hungary), Delo (Slovenia), RISE Project (Romania), Bivol (Bulgaria), Aripaev (Estonia) and Czech Centre for Investigative Journalism.
The report said that there is evidence of a connection between the fund and Azerbaijan’s President, Ilham Aliyev, even though he has denied any involvement or misdemeanours. The President’s office provided a statement last Tuesday condemning attempts to establish links between the President and his family to the slush fund.
Lead financier George Soros, whose Open Society Institute welcomed the OCCRP’s report, was attacked by the President’s office of being a “fraud” and a “fake.” They urged the investigation to be reopened. The OCCRP report said the operation was used by Azerbaijan’s government officials to disguise the origin of the funds whilst channelling them through many shell companies. The recipients of the money were professionals who served Azerbaijan’s politicians’ best interests.
Azerbaijani Laundromat was active in between 2012-14, according to the report.
The OCCRP report said that all the companies were dissolved before it was issued. Metastar Invest closed on 19th January 2016 and LCM Alliance ended on 22nd September 2015. Strangely, according to Companies House, Polux Management and Hilux Services are both still active. These British companies were able to channel the funds to various countries that included Germany, France, Turkey, Iran and Kazakhstan. The report added that the payments were occasionally quite repetitive.
The origin of the money has not yet been clarified, but the investigation claims there is sufficient evidence of its links to President Ilham Aliyev and his family. The OCCRP report said the money may have emerged from Azeri and Russian government circles, though a lot of them are likely to have come from Azerbaijan originally. Even though European politicians benefitted mostly from receiving the cash, it is believed that lobbyists, journalists and businessmen were also rewarded finances. To coincide with the slush funds scandal, the wealthy former Soviet nation was accused of large-scale corruption, voter fraud and human rights abuses, which consisted of jailing opposition politicians, human rights activists and journalists. The OCCRP report said the money was used to silence opponents.
Azerbaijan’s Deputy Prime Minister, Yaqub Eyyubov, received money alongside lobbyists campaigning to clamp down on corruption in the former Soviet state and members of parliament with links to big businesses, including pharmaceutical companies. The Deputy Prime Minister has not commented on the report’s allegations. Azerbaijan’s capital, Baku, has been linked to the slush fund by the report, as politicians in the capital bought luxury items such as private education for established Azeri families residing abroad. According to the OCCRP’s investigation, 13,000 banking transactions were revealed to the press. They showed that millions of dollars in accounts of businesses and individuals across the globe were spent at car dealerships, football clubs, travel agencies and hospitals.
The OCCRP said the scheme succeeded in convincing the Parliamentary Assembly of the Council of Europe (PACE) to vote against a damning report of Azerbaijan in 2013. This vote is also being investigated and a report will be produced at the end of this year. Many European politicians have since expressed grave concern over the body’s links to the Azerbaijani government. Members of PACE’s legal affairs committee are attempting to amend a final report on human rights in the former Soviet state, which will explore the Laundromat initiatives without hesitation. They believe that the original report, which was created by Belgian MP Alain Destexhe, avoids the problem of overwhelming corruption in the oil-rich country. PACE, which is in Strasbourg, is one of the world’s oldest human rights bodies.
The investigation was established in July to explore unethical practices, after an Italian centre-right group once headed by Luca Volonte. was accused of receiving millions of euros in cash from Azerbaijan in exchange for supporting its government.
Pieter Omtzigt, a Dutch centre-right MP who led calls for PACE to set up an investigation earlier this year, said the body was finally cleaning up its act. But he said the Volonte case highlighted a systemic problem within PACE, which was created after the Second World War to protect democracy and human rights.
Azerbaijan joined the Council of Europe in 2001 and was accused of cavalier diplomacy in 2012 for deploying cash and gifts to buy influence by the European Stability Initiative thinktank.