in the back
Landing on Mayfair
Money laundering, Issue 1485
money.jpg AFTER years of scandal and despite universal recognition of the economic and security risks posed by money laundering for the former Soviet region’s corrupt elite, dirty money is still big business at one of London’s best-connected banks.

A recent employment tribunal judgment contains remarkable revelations from inside the Swiss-owned, Mayfair-based EFG Private Bank, which in 2015 acquired Coutts International’s central and eastern Europe (CEE) unit from Royal Bank of Scotland. As recently as last year, for example, the bank accepted $100m from cronies of Chechen president and warlord Ramzan Kadyrov, without checks and despite obvious signs the money was illicit.

The details emerged in a case against the bank brought by Dmitri Rozanov, the former head of the CEE unit, over his dismissal last year. Rozanov had joined from Coutts in 2015 with 11 “client relationship officers” headhunted as “Team Eagle”. He was keen to improve scrutiny of so-called “politically exposed persons” (government officials, oligarchs and associates, known as PEPs), which before long brought him into conflict with one client relationship officer with an especially keen eye on a quick Russian buck.

Greater vigilance
In May 2017, Sabrina Mason told the bank’s Guernsey branch to accept $100m from a friend of Ramzan Kadyrov, a Putin devotee whom the most cursory of checks would have shown to be neck-deep in corruption and worse. She did so without identifying the client as a PEP (who would require greater vigilance under money laundering rules) and without mentioning the deal to her boss, Rozanov, despite having been told repeatedly that she needed to discuss high-risk clients with him.

This might have been put down to the recklessness of one bonus-driven rogue banker, but when EFG top brass learned of the affair from Rozanov it was Mason with whom they sympathised.

“I accept that this is not the sort of business a pure-play private bank wants to engage in,” wrote Zurich-based head of private banking Michael Vlahovic to EFG Private Bank chief executive Anthony Cooke-Yarborough. “But, in [this] case, it’s a prerequisite for picking up an increasing amount of investment business he’s now seriously considering.” Mason herself thought that, if the funds were returned, Kadyrov’s chum would be “hugely embarrassed” and “business in excess of $200m [will be] lost to the group”.

‘Leave it to Sabrina’
It is not clear what happened to the cash now sitting in Guernsey, though Mason proposed moving it to Monaco where there would be less scrutiny. Rozanov again objected, pointing to how in a similar episode in, in the tribunal’s words, EFG’s “Guernsey office had decided to close the accounts of [a client] because his father was a close associate of Vladimir Putin, [the bank] had moved his accounts to Luxembourg and Monaco”. Vlahovic’s response to the latest idea was “leave it to Sabrina”.

This was some faith to show in an officer who – although she now claims to have been a “director” since 2015 – was still unqualified, having “failed the [investment and regulatory] exams at least three times”. She wouldn’t have passed a geography exam, either. Two months later, seeking to persuade the Guernsey branch to take some funds from Kazakhstan from a Chechen client, perhaps connected to the same dubious business as before, she explained that “Grozny (where the client was born) after the split of the USSR is classed as Kazakhstan now”. The two are in fact hundreds of miles apart, the former still a subject of Russia. Vlahovic dismissed the error as “quite amusing and immaterial”.

When Rozanov suggested that disciplinary action should be taken against Mason over the Kadyrov-linked business, chief executive Cooke-Yarborough was equally indulgent. “We don’t want to lose Sabrina,” he replied. This was a remarkable position for the chief executive to take over such clear money-laundering failings. But it was in keeping with the EFG culture. Even before he arrived at the bank, Rozanov had been told by Vlahovic (also then about to join from Coutts): “Business has always taken precedence at EFG, sometimes excessively so, and that’s not going to change.” Compliance staff complained, in the tribunal’s words, that the bankers “liked to bulldoze their way through, expecting every exception in the book to be made for them”.

‘Client business’
The attitude at the top of the bank is all the more disturbing given that as recently as 2013 EFG, with Cooke-Yarborough then at the helm too, was fined £4.2m by the Financial Conduct Authority for “serious, systemic” money-laundering failures, particularly in relation to PEPs. It promised to mend its ways. Yet he and Vlahovic still “took a fairly casual attitude towards Ms Mason’s conduct in relation to the Guernsey and Grozny incidents”, the tribunal found. Their “clear priority… was not to lose the client business”.

The judges concluded, however, that Rozanov had been dismissed not because of his whistleblowing but for coincidental management changes that made his position redundant. But they rejected his claims “with no great enthusiasm”, observing that “both Ms Mason’s conduct and the bank’s handling of the matter does none of those concerned any credit”.

Two men have emerged with plenty of career credit, though. Cooke-Yarborough was recently promoted to head Swiss bank EFG’s global private banking business, while Vlahovic moved to the UK to take over private banking here. Glasses could be heard chinking from Moscow to the Caucusus.

PS: Entirely coincidentally, EFG is well plugged in to the British establishment. Among its customers are Conservative party chairman Brandon Lewis and party treasurer and art gallery owner Ehud “Udi” Sheleg (Eyes 1481 & 1482).

More top stories in the latest issue:

SACKS OF CASH
Failing private probation firms that squeezed an extra £500m in bailouts from the government have spent at least £19m of their public cash on redundancies.

RUMPUS AT THE RSPCA
Nepotism… theft… selling land that had been entrusted to it for wildlife to a developer…the RSPCA’s halo just keeps on slipping.

BRIGHT SPARKS
More on the doomed Bright Tribe academy trust, whose financial mismanagement was first highlighted by the Eye in 2016.

SMELLING A RAT
A Manchester care home closes after inspectors find vulnerable residents living in squalor with rats, carpet bugs, filthy bedding and stinking rooms.

HIGH PRINCIPALS
Ulster University bars a lecturer from standing for election as a staff rep on the university council, claiming her union activities are a conflict of interest.

EDUCASHUN NEWZ
A multi-academy trust head paid £145,000 over and above his teaching salary has been suspended pending a disciplinary investigation.

CALL TO THE BAR
Legal advice obtained by a campaigning publican gives hope to hard-pressed pub tenants trying to win a fair deal from rapacious pubco landlords.

SKIN GRAFT
An NHS trust tries to cut waiting lists by dumping nearly 2,000 dermatological patients, some seriously ill, on to community doctors’ services.

GROUNDED CONTROL
The RAF is set to lose its fleet of very useful Sentinel R1 surveillance aircraft in 2021, even though their service life could be extended with an upgrade.

KILLER BLOW
A professional boxer jailed for manslaughter after punching a promising young student in the head is out of jail and back in the boxing ring.

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Next issue on sale: 25th December 2018
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