Mining Secrets: Solway-Linked Companies Moved Nearly $2 Billion in Suspicious Funds

Credit: Forbidden Stories

by Joachim Dyfvermark (SVT), Linda Kakuli (SVT), Holger Roonemaa (Eesti Ekspress), and Karina Shedrofsky (OCCRP)

Solway was labeled a “high-risk” client over suspect transactions, while companies tied to the mining group and its executives were reported to U.S. regulators.

Key Findings

Swedbank Estonia dropped Solway as a customer in 2011 because shell companies related to the mining group had carried out suspicious transactions.

Reporters identified hundreds of transactions worth almost $1.9 billion between 23 companies with links to Solway between 2007 and 2015 in leaked banking data.

Several of these companies were reported to U.S. regulators during that period for millions of dollars’ worth of suspicious payments.

Others transacted with companies that have been used in several Russian tax evasion and money laundering scandals.

It was early 2019 and executives at Swedbank were worried. News that their bank’s Estonia business may have been used to launder billions of dollars had broken a few days earlier, and they were scrambling to contain the fallout.

On February 25, a memo was circulated to staff outlining measures that the bank had taken to deal with “high-risk” clients in previous years, including hundreds of customers whose accounts had been closed. Among them was Solway Investment Group, a metals company that operates mines and smelting facilities around the world.

Most of the companies in the Solway group were identified as “holding/transaction entities,” some of which had carried out “questionable transactions,” said the memo, obtained by Eesti Ekspress. It noted Solway had “declined the request to present correct ownership documentation” and so was “offboarded in 2011.”

Swedbank dropped Solway at a time when huge sums of suspect money were flowing through its Baltic operations. Investigators would later find that at least 200 billion euros were laundered through accounts in the Estonian branches of Swedbank and Denmark’s Danske Bank between 2007 and 2015. Much of this flowed from Russia and Eastern Europe to shell companies, in one of the world’s largest-ever money laundering scandals.

Now, a data from these banks leaked to Swedish broadcaster SVT — analyzed as part of the Mining Secrets project led by Forbidden Stories — has identified hundreds of questionable payments that might have led Swedbank to drop Solway as a customer.

Reporters identified 23 companies related to the mining group that moved close to $1.9 billion between 2007 and 2015 in large, round-dollar payments without a clear business purpose — hallmarks of what is known as “suspicious activity.” OCCRP established that all of them have been linked to the Solway group or its senior executives.

Maíra Martini, who leads Transparency International’s anti-money laundering work, said anonymous companies are commonly used to move questionable money because it is so difficult to determine who owns them.

“It is not uncommon to use a network of companies, including shell companies and others with real operations, to engineer transactions that mix legitimate and illegitimate funds,” she said.

Swedbank wasn’t alone in its concerns about these companies. Other banks also flagged some of them to the U.S. Treasury’s financial crimes bureau for making suspicious transactions during the same period, according to reports leaked to BuzzFeed News as part of a project coordinated by the International Consortium of Investigative Journalists, known as the FinCEN files.

It’s unclear where any of the $1.9 billion originated, or why Solway would need to move money around like this. But buried in banking records from previous OCCRP investigations, reporters found that companies from the group of 23 had transacted with other companies used in Russian tax evasion and money laundering scandals.

A former Swedbank official, who spoke on condition of anonymity, said the country of Estonia positioned itself as a “kind of transit republic” for Russian money at that time.

“Today, having connections to the Kremlin is a negative,” the former official said. “At that time, it was more of a reassurance that your client would probably have a slightly longer career than other clients.”

Solway denied it had been involved in any illicit transactions, saying it acts “strictly in line with applicable national laws and international regulations” and works to combat corruption. A spokesperson declined to comment on Swedbank’s decision, except to say Solway had “followed all the necessary procedures to comply” with the bank’s new policies.

“Solway Investment Group firmly rejects the allegations of money laundering and corruption. No accusations of wrongdoing were ever brought against us by any financial or regulatory bodies,” the company said.

After OCCRP and 20 partners published an array of stories this week as part of the Mining Secrets project, Solway released a statement rejecting reporters’ findings and adding that the company has exited all of its investments in Russia.

Swedbank declined to comment on individual customers, but noted that it had already been fined by authorities for “past shortcomings in the management and control of measures against money laundering in the bank’s Baltic operations.”

Danske Bank also declined to discuss its Estonian business, which is still being investigated, but said it had invested significantly in compliance systems. “We are now in a different position with respect to combating financial crime and money laundering than when the situation in Estonia developed,” said chief administrative officer Philippe Vollot.

Credit: Agencja Fotograficzna Caro/Alamy Stock Photo

Swedbank’s office in Tallinn, Estonia.

Red Flags

OCCRP scoured corporate registries and leaked documents to identify who controlled the 23 companies involved in the suspicious transactions. In a few cases, details of their owners and directors were publicly available.

Other companies were based in secrecy jurisdictions, so reporters relied on listings of subsidiaries or “related entities” in old Solway annual reports. Filings to the U.S. regulator, found in the FinCEN files, gave clues that two more were linked to Solway.

By piecing together this disparate information, reporters found 21 companies had corporate ties to Solway or its senior executives at some point during the period of the suspicious transactions.

In several cases these executives — which included Solway’s co-founders Aleksandr Bronstein as his son Dan, along with Solway group secretary Andre Seidelsohn — directly represented or controlled the companies. One was owned by companies belonging to another group director, Christodoulos Vassiliades, a Cypriot lawyer who has reportedly worked with notorious Russian crime boss Semion Mogilevich.

It’s not clear who owned the other two companies, Core Trading Ltd and Raznoimport Holdings Ltd, but media reports and official investigations show that they have ties to the mining group and its founders stretching back years.

Credit: Edin Pasovic/OCCRP

Solway disputed the connections, saying that only 13 companies out of the 23 identified by reporters are related to the mining group. Vassiliades did not respond to a request for comment, but his law firm has previously said that it complies with due diligence regulations.

SVT used the same techniques as financial investigators to identify suspect transfers made by these companies, looking for frequent transfers of large, round-dollar amounts made for no clear reason. In total, reporters flagged more than 1,000 transactions, together worth close to $1.9 billion, made between 2007 and 2015. Anti-money laundering experts who reviewed some of the data confirmed the transfers ought to raise red flags.

Most of the transactions were described as payments for loans. The records show some of the companies moved money back and forth between them, or made several payments in the same week or day citing the same or similarly named agreements.

“Why is a company apparently both borrowing and lending similar amounts? This doesn’t make commercial sense,” said Graham Barrow, an expert in financial crime who reviewed some of the transaction data.

“When a company has a complex corporate structure and moves money around within that structure for no obvious commercial benefit, it will likely be viewed by the bank as a ‘red flag.’”

One of the most prolific companies was Tactica Limited, which a leaked 2011 report from the FinCEN files suggested was affiliated with Aleksandr Bronstein. Tactica made over 750 transactions worth more than $900 million between 2007 and 2011, most of them with another company from the group of 23 named Core Trading. Almost all the transactions, including multiple payments on the same or consecutive days, were described as related to the same loan agreement                                                                        

https://www.occrp.org/en/investigations/mining-secrets-solway-linked-companies-moved-nearly-2-billion-in-suspicious-funds