Russian bank quizzed over IMF $4bn loan to Russia

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THE RUSSIAN procurator-general has begun an investigation into the Central Bank for a wide range of offences, including the misuse of billions of dollars in International Monetary Fund (IMF) funds sent to bail out the country.

The corruption scandal is focusing on the Central Bank as it prepares to turn on the printing presses and start churning out roubles. The procurator- general, Yuri Skuratov, said that an investigation is underway, which has already reached the preliminary conclusion that the Central Bank "infringed the law".

The focus of the inquiry, which embraces other banks, appears to be a wide range of fiscal activities flowing from Russia's financial collapse and the devaluation of the rouble. Among the issues under inspection is the use of the first $4.8bn tranche of a $22.6bn rescue package supervised by the IMF, which was supposed to enable the Central Bank to defend the rouble but failed. Suspicions abound in Moscow over how the money was used.

Although the investigation may be an attempt by the new guard in government to discredit the previous administration, the Russian authorities appear to be taking it seriously. The inquiry is being spearheaded by intelligence agents from the Federal Security Service, the procurator-general's staff, and Russia's general accounting office.

Mr Skuratov, who warned against drawing premature conclusions, also reportedly said that the investigation, which began five days ago, would focus on Russia's short-term, rouble-denominated high interest bonds, known as GKOs. The crash of the GKO market and Russia's decision to default led to the breakdown of the banking system, which has now paralysed the economy.

Official attention is also trained on the events of 17 August, the day that Russia announced its plans to devalue, and default on billions of dollars worth of debt. "We are investigating the implementation of the laws [regarding banking and the Central Bank] and the events of 17 August," Alexander Zvyagintsev, spokesman for the public prosecutor's office, said.

The bank - already smarting from criticism of its handling of the crisis - has conceded that individuals may have been at fault. But, a spokesman said, "an investigation of some staff does not mean an investigation of the Central Bank".