Yeltsins linked to IMF scandal

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The Independent Online
SWIRLING ALLEGATIONS of financial fraud and international money laundering on an astonishing scale by business and political figures in Moscow continued to multiply yesterday amid fears that the scandal may extend to members of Boris Yeltsin's administration and even his family.

After days of silence, the Russian chief prosecutor, General Vladimir Ustinov, said he had ordered an investigation into reports that the schemes may have involved $15bn, much of it laundered through the Bank of New York. The unproven allegations are already being investigated in Britain, Switzerland and the US.

Political alarm are sounding in Washington after suggestions that much of the money may have been siphoned from funds provided to Russia as economic aid by Western institutions and the International Monetary Fund.

USA Today, citing unidentified sources, said at least five current and former members of the Yeltsin administration are being investigated in Moscow and London, including Yeltsin's daughter and adviser, Tatyana Dyachenko, his former chief of staff and Finance Minister, Anatoly Chubais, and a former Finance Minister, Alexander Livshits.

The newspaper quoted a senior official in the Russian prosecutor's office as saying it was "hard to believe" President Yeltsin was not involved in the dealings, or that he wasn't at least aware of them.

The Italian newspaper, the Corriera della Serra, yesterday said Russian and Swiss prosecutors are probing claims that President Yeltsin himself improperly received $1m diverted from funds earmarked for the restoration of the Kremlin and Russian parliament building.

The Kremlin denied the report. "The President of Russia, his wife and his children have never opened accounts in foreign banks," a spokesman said. "The incomes of the family of the President have been declared according to the legally established order."

The allegations surfaced last week when The New York Times said $10bn of Russian funds had been mysteriously laundered through the Bank of New York. The money was then thought to come from Russian organised crime.

The Bank of New York, which has not been accused of wrongdoing, last week suspended Natasha Kagalovsky, who headed its East European Division in New York. Her husband, Konstantin, is a former Russian representative to the IMF in Washington, who returned to a senior post at Moscow's now-defunct Menatep Bank.

Lucy Edwards, a Bank of New York vice-president in London who oversaw East European business, was also suspended. Her husband, Peter Berlin, also a Russian businessman, was believed to have had control of the accounts in New York through which illicit funds were said to be passing.

Investigators say a laundering account was also set up at the Republican National Bank in New York. The Wall Street Journal said accounts at other international banks, including UBS and Credit Suisse Group, are being checked.

The newspaper also named a financial firm based in the Isle of Man as possibly being implicated in facilitating the laundering.

Congress announced plans for its own investigation and officials fear they may be looking at America's biggest money-laundering scheme.

Jim Leach, a US Representative, said the role of the Bank of New York would come under keen scrutiny. He added: "The question is whether they were unwittingly duped or were willing facilitators in what may be the greatest example of kleptocratic governance in modern history."