A committee of experts from the Council of Europe has published a report assessing Moldova’s score on 40 recommendations from the Financial Action Task Force (FATF) – a key international anti-money laundering organization. The expert committee, known as Moneyval, is the monitoring body of the Council of Europe empowered with evaluating compliance with the main international standards for combating money laundering and terrorism financing.

The report offers a comprehensive evaluation of how each of the responsible institutions tasked with combating money laundering are faring, including the Prosecutor General’s Office and its subdivisions, independent criminal investigation bodies, the ministries, tax and customs agencies, the banking system, and others. 

According to the report Moldova faces various money laundering threats, which are a result of corruption, tax evasion, and smuggling, committed internally, and drug and human trafficking offenses committed abroad. The experts offer recommendations to improve confiscation, in particular, extended confiscation, financial sanctions, freezing, extradition and overall recovery of criminal assets. Another high-risk issue addressed in the report and previously by the International Monetary Fund is the opaqueness of the beneficial owners of legal entities and non-profit organizations. 

The evaluation also shows that although the number of money laundering cases that have been investigated grew, only a limited number of these resulted in criminal prosecution. At the same time, the report says that the Moldovan authorities have adopted and implemented several strategic documents, which demonstrates that depriving criminals of the proceeds of crime is a policy objective. 

Between 2013 and 2018, Moldova achieved final convictions of money laundering in 25 cases, with respect to a total of 28 persons and 12 legal entities. “The number of money laundering convictions seems to be modest, especially if compared to the overall number of convictions obtained for predicate offences,” claim the experts.

“The authorities were able to validate various forms of confiscations including instrumentalities, foreign proceeds, equivalent value and proceeds located abroad. Nevertheless, the figures on the number and the value of confiscated assets remain low and do not appear to correspond to the scale of proceeds-generating crime in the country,“ the document points out. 

The report underscores that Moldova has not made any designation and has not requested other countries to give effect to the actions initiated under freezing mechanisms, as there were no cases that would meet the designation criteria. 

Over 20 million euros have been sequestrated over a five-year period in relation to money laundering, corruption and tax offences, which constitute the highest threats in the country. However, no confiscation data was offered, which raised concerns. 

When a significant discrepancy is noted between the legitimate income and the persons’ assets and life-style, the unjustified wealth can be subject to extended confiscation. For the application of extended confiscation, a conviction is required for a list of criminal offences, including money-laundering, establishing or leading a criminal organisation, and corruption-related offences. 

In 2017, there was a total of six cases where extended confiscation was applied, amounting to 72,515 euros, of which the majority were connected to sexual exploitation crimes and illicit drug trafficking. As for corruption cases, about 10,000 euros were confiscated in relation to two corruption cases. The committee members report that “these rather modest figures indicate the issues with implementing the extended confiscation regime.” No extended confiscation cases were registered as of it yet in 2018 at the time of the on-site visits of the report committee. 

On the other hand, voluntary payments to the state by offenders who admit guilt and can benefit from a reduction of penalties have been registered. The Prosecutor’s Office for Combating Organised Crime and Special Causes reported to have successfully retrieved almost five million euros in 2017 and 2018 (up until October 1) based on court decisions for tax evasion, smuggling, and money laundering. Up to 2.7 million euros were recovered to the state budget through voluntary payments by the perpetrators for the recovery of the damage caused by money laundering and predicate offenses, within that broader group. 

Moneyval concludes that Moldova has a comprehensive legal framework for requesting and providing international cooperation in a proactive and timely manner, both on request and spontaneously. 

The report pays specific attention to money-laundering and corruption investigations from two high profile cases, the Bank Fraud and the Russian Laundromat, featuring as case in point anonymized examples of the money-laundering cases against Veacesalv Platon, Ilan Shor, Petru Lucinschi, as well as the corruption case against Vlad Filat, and detailing the sequestration of assets undertaken, including from foreign jurisdictions. 

The Bank Fraud took place in Moldova during a period of at least three years, between 2012-2014. Through fraudulent loans, the bank system is believed to have been robbed of about one billion dollars. After the bank fraud, the economic landscape of Moldova changed. Financial institutions were monitored at a higher level by competent organizations.  Three banks were liquidated and the largest remaining banks have been placed under the National Bank of Moldova’s special supervision, while some foreign banks canceled their bank correspondent relations with Moldovan counterparts. There are currently 11 banks operating in Moldova, including four foreign banks.

• Reading the Kroll 2 Report

Since 2015, banks were determined to be more cautious when it comes to international financial transactions. They were instructed to identify shell companies among customers and mitigate risks therein. The specific measures applied to legal entities included intensifying scrutiny on their activities and business partners to uncover accounts used in a pass-through capacity, as well as checking the websites and legal addresses or sometimes visiting their offices. All of these actions were determined to avoid using banks as an intermediary for money laundering. 

Subsequently, the companies Kroll and Steptoe & Johnson were contracted in order to elucidate the theft in the banking system. The second Kroll Report talks about Ilan Shor and one group of 77 companies linked to the fraud, as the main beneficiaries of the transactions from the three Moldovan banks: Banca de Economii, Banca Sociala, and Unibank.

• Kroll 2 Uncensored. What Information Was Previously Omitted

Another high profile case known as the Russian Laundromat was uncovered by journalists from the Organized Crime and Corruption Reporting Project, including Rise Moldova, in collaboration with reporters from the Russian publication Novaya Gazeta, the British newspaper The Guardian and other media institutions. The total value of these transactions totaled 156 billion dollars. The money circulated through 732 of banks in 96 states of the world. Their beneficiaries are 5,140 companies from different countries – ranging from the US and South Africa to China and Australia. The money laundering scheme used the banking and judicial system of several countries. 22.3 billion dollars were laundered in Moldova.

Read the full report here.