Russian Offshore Banks Set For Disposal?
Tax-news.com
01 October 1999

The delayed September IMF payment to Russia has been held up partly by a PricewaterhouseCoopers investigation into the use by Russia's Central Bank of five offshore subsidiaries. In the Fimaco incident earlier this year, one of the five banks (Banque Commerciale Pour L'Europe du Nord) was found to have routed Central Bank money to its Channel Islands Fimaco subsidiary. The five banks may have been used extensively in this way, distorting Russian Central Bank Reserves, since the loans to these banks were counted as assets even though much of the money may have been invested in loss-making State bonds. The purpose of all this jiggery-pokery may have been an innocent attempt to support the GKO market, or even just to make money, and there doesn't need to have been any fraudulent intent. Still, the IMF's covenants would have been broken. It now seems probable that Russia will have to sell off the five banks, which have no legitimate trade purpose nowadays. The other four banks are Moscow Narodny Bank (London), Donau Bank (Vienna), Ost-West Handelsbank (Frankfurt) and East-West united Bank (Luxembourg).

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