Jersey's Financial Services Commission is looking into the affairs of Fimaco, a St Helier-based company set up nine years ago by the island's current attorney general and one of its financial regulators.
It is not illegal or even uncommon for governments to dispatch hard currency reserves overseas for investment, but the decision to use an unheard-of start-up company is considered exceptional. Nor has there been any clear explanation from Russian officialdom as to what happened to the money after it had passed through Financial Management Company Ltd (Fimaco).
In an open letter to President Boris Yeltsin, Sergei Dubinin, former head of Russia's Central Bank, and his deputy, Sergei Aleksashenko, confirmed that cash reserves were transferred to Fimaco between 1993 and 1997.
Boris Fyodorov, a former finance minister who claims to have complained about the use of the funds in 1993 only to get the brush-off from top government officials, has offered his view that commissions - which he estimates at "tens of millions of dollars" - were pocketed by cronies of the Russian government.
Scandals regularly fly around Moscow, but this one has wider dimensions, not least because it raises questions about Moscow's relationship with the International Monetary Fund, which has lent Russia billions of dollars since the collapse of the Soviet Union.
There is no suggestion of any illegality by Fimaco, which was set up in November 1990 by the St Helier law firm, Ogier and Le Masurier, "to undertake the business of a financial institution or bank other than the acceptance of deposits" - a wide-ranging brief allowing it to undertake virtually every type of financial activity.
Inquiries on the island have confirmed that it was set up on behalf of the Paris-based bank, Banque Commerciale pour l'Europe du Nord (Eurobank), which is controlled by Russia's Central Bank.
The partners listed as founder members, or shareholders, were Michael Birt, now Jersey's attorney general, Julian Clyde-Smith, still with the firm but also now a commissioner with the Financial Services Commission, and Malcolm Sinel, who recently retired as Ogier's senior partner.
Mr Birt, who relinquished all directorships and shareholdings when he was made the attorney general in 1994, said that he has no recollection of Fimaco and that it was standard practice at the time the company was formed for three of Ogier's partners to be the founder members.
"Fimaco means nothing to me, and I don't recall the firm having many Russian clients in those days - certainly I didn't have any," he said.
Exactly how much money went through Fimaco is disputed. Mr Dubinin has challenged the figure of $50bn, saying the largest amount managed by the firm at any one time was $1.4bn, in 1994.
The last hard currency reserves were removed two years ago, he said.
He said that Fimaco provided a means of sheltering Russian assets from its circling foreign creditors. It was, he said, "a necessary measure to defend the economic safety of the nation".
Neither Mr Sinel nor Mr Clyde-Smith was available for comment yesterday.Reuse content