Russian FinTech Allegedly Laundered $6.9 Billion Via Global Banks

Some of the world’s largest banks have reportedly handled billions of dollars for a Kremlin-backed FinTech that used forgery to enter the international financial system.

An investigation by the Financial Times (FT) published Monday (Sept. 21) found that A7, a company established as an alternative to western payment systems, used “old-fashioned money laundering” to move more than $6.9 billion through the global banking system in spite of sanctions on Russia.

The investigation is based on hundreds of A7 files obtained by the news outlet. Although A7 has touted its financial innovations, the report said the company relied on a network of front companies and existing businesses to make payments via the Swift system. 

It obscured the use of these companies with an “industrial-scale forgery operation” to create counterfeit invoices, the FT said.

According to the report, A7 held accounts with banks including Standard Chartered, JPMorgan Chase and Citigroup. These banks all pointed to their commitment to anti-money laundering (AML) controls but declined to comment further, the FT said.

A7 was established by Ilan Shor, a Moldovan oligarch, with the backing of Russia’s Promsvyazbank, a state-owned bank with close ties to the defense sector. The Kremlin government has trumpeted A7 as Russia’s leading cross-border import payments provider since the country’s banks were cut off from Swift after the invasion of Ukraine.

A7’s scheme, the report said, involved front companies arranging for cash to be deposited at banks within the Swift system, which can then be used to pay bills overseas for Russian companies. Chinese bank accounts were the ultimate destination for a little more than half of these flows, the FT added.

Zach Tvarozna, a former American government banking analyst who penned a report about A7 published by the Open Source Center based on an earlier leak from the company, said “the new data here really shows that the true scale of A7’s money-laundering network is much bigger than anyone had previously realized.”

Tvarozna added that the material “should make us think again about how hard it is to keep traditional correspondent banking clean.”

In other AML news, PYMNTS wrote last week that the U.S. Treasury is considering raising the thresholds for suspicious activity reports (SARs) and currency transaction reports (CTRs) based on customer tenure to lessen the burden on community banks.

Also last week, the UK government said it was refocusing its AML strategy from going after individual offenders toward disrupting the increasingly technology-enabled financial networks that permit illicit money movement.