The New Yorker unveiled the name of a Russian broker standing behind the notorious mirror trades that cast a $10 billion shadow over Deutsche Bank's reputation. The latest investigation found out about a connection between the scheme's sponsors and Putin's administration.
The New Yorker's Ed Caesar shared his detailed investigation of the scandalous scheme involving transferring illegal funds from Russia abroad via the so-called "mirror trades" that took place in Deutsche Bank's office in Moscow in the past few years. The full story can be found here.
Caesar interviewed 14 Deutsche Bank's current and ex-employees as well as people who were indirectly involved in the scheme, most of them asked to remain anonymous. According to one of the sources, the mirror trading is not something new in Russia: it was first created back in 2000s by some Russian banks that were looking for ways to escape paying high taxes in the country.
It was previously unclear who exactly was interested in transferring large sums of money via the mirror trades using Deutsche Bank's services. In his investigation, Caesar mentions one of the sources, a Russian banker, who was involved in organizing the mirror trading scheme, claiming that a large part of the money going through the mirror trade was coming from Chechen people, closely connected with Kremlin.
Chechnya, is a predominantly muslim region of Russia situated in the North Caucasus. It is ruled by "exuberantly barbarous", as Caesar puts it, Ramzan Kadyrov. Kadyrov is also famous for his close "friendship" with Putin and frequently receiving major subsidies from the government that often end up in the pockets of Kadyrov himself and his supporters.
According to several Caesar's sources, the main clients involved in the mirror trading scheme came to Deutsche Bank's Moscow office back in 2011 with the help of Serghey Suverov, who working as a manager at the bank back then. However, Suverov left the bank shortly after without any official wrongdoings behind his back.
Yet the main figure in this story is Igor Volkov, a broker who was calling Deutsche Bank's Moscow office almost every single day leaving orders for expensive trades on behalf of his "clients". Volkov declined any contact with the press about this. Caesar says that Volkov started out by placing normal trades on stocks, but shortly after he made it clear that he was interested in something else: making simultaneous bets with large sums of money.
Between 2011 and 2015, Volkov's communication with the bank's office went as follows. First, he would call and ask the traders to buy a blue-chip Russian stock for the total sum of approximately $10 million for his client. Then, shortly after the purchase was completed, he would directly ask for a second trade selling the exact same stocks in exchange for dollars, euros and pounds, but now on behalf of another company, typically registered in an offshore territory. Interestingly, both companies would be registered under the same owner. In this scheme, Deutsche Bank was getting a small commission for these transactions.
Mirror trades are not inherently illegal, as Caesar says, but Volkov's transactions were something different.
"Because the Russian company and the offshore company both belonged to the same owner, these ordinary-seeming trades had an alchemical purpose: to turn rubles that were stuck in Russia into dollars stashed outside Russia," writes Caesar.
Four Deutsche Bank's employees interviewed by the author, mentioned an interesting detail: no one was trying to hide the mirror trades. Tim Wiswell, the head of the trading department in Moscow, together with the two Russian traders Dina Maskutova and Georgiy Buznik were openly meeting with Volkov in the office and making the trades on his demand. In addition to that, several employees of Deutsche Bank's London office were also aware of it.
The New Yorker says that normally every new client who wants to trade with the help of Deutsche Bank, was supposed to go through a thorough check by the compliance departments in Moscow and London. On top of that, the employees had to make the "know your client" assessment in order to rule out any possible taint of criminal activity associated with the client. But in Volkov's case, none of this happened. The only thing that Russian employees asked of him was to state the source of funds he was working with. No further questions asked.
In the summer of 2015, Deutsche Bank started an internal investigation against the Moscow-based office and finally unravelled the mirror trading scheme. By the end of the investigation, Tim Wiswell, Dina Maksutova and Georgiy Buznik were suspended for taking central part in managing the scheme. In the report following the investigation, the bank stated that up to $10 billion went through the mirror trading scheme due to the bank's internal controlling failure.
Shortly after the investigation, the two co-CEOs of Deutsche Bank, Anshu Jain and Jürgen Fitschen stepped down from their positions.They were replaced by John Cryan who promised to "clean up the bank", says Caesar. In September 2015, Cryan announced his decision to completely shut down the investment-banking activities in the Russian office as a gesture to finally put an end to the scandal that was going out of hands for way too long.