Russian Intelligence Connected Bank Deposited $330 Million Into Deutsche Bank America
October 1, 2020 12:16 pm
A small financial institution in Russia whose owner has been called a “front” for Russian intelligence services quietly moved $330 million dollars into an account at Deutsche Bank’s New York branch by 2013, according to documents exclusively obtained by Forensic News.
By the fall of 2013, Yugra Bank (or “Jugra”; “Ugra”) was the 106th largest bank in Russia, with just eight branch locations in the country. A small bank by any measure, Yugra Bank was akin to “Bank of Hope” in the United States in terms of assets.
But interviews with those familiar with Yugra Bank and its evasive oligarch owner, as well as exclusively obtained documents, shed light on how this small regional bank in Russia was able to quietly transfer nearly one-third of a billion dollars into a Deutsche Bank subsidiary on Wall Street in New York.
The principals of the bank, mainly majority shareholder Alexey Khotin, are now accused of embezzling millions by Russian authorities after a falling-out with his political connections.
Khotin and others in his inner circle are said to have had close ties to the intelligence services of Russia, with multiple sources confirming that he paid senior Russian intelligence officials and had the protection and backing of former spy chief Nikolai Patrushev.
The remarkable episode is just one example of how dark Russian money connected to the upper-echelon of Putin’s siloviki – former Russian military and intelligence officials – flowed into the Deutsche Bank division that lent Donald Trump hundreds of millions of dollars.
Much of Khotin’s past remains shrouded in secrecy. What is known indicates that Khotin has acted with the support of the politically powerful – first in his native Belarus and then in Russia after he moved to the country in the 1990s.
Khotin and his father began buying real estate in and around Moscow and by the 2010s were considered one of the largest real estate holders in the country.
The Khotin family was on good terms with the ex-Minister of Internal Affairs of Belarus Vladimir Naumov who introduced them to a close ally of Vladimir Putin, the former Speaker of the Russian State Duma, Boris Gryzlov, according to Russian press reports.
The reports stated that Khotin’s business ventures were supported by Gryzlov and his former classmate, the then Chief of the Russian intelligence service FSB, Nikolai Patrushev. A Forbes report later said that Gryzlov and Patrushev would personally call bankers to persuade them to give Khotin’s businesses loans.
“I don’t have the feeling that this is a one-man show,” a former high-ranking political source told Russian newspaper Vedomosti, “I definitely feel the support of security officials at different levels.”
Ilya Shumanov, Deputy Director of Transparency International Russia, confirmed to Forensic News that Khotin’s “primary allies were Nikolai Patrushev of the Security Council of Russia, the Patrushev Group, and FSB, and Boris Gryzlov, who was a classmate of Patrushev, United Russia party member, and former head of Russian police.”
“For years, the Russian tradition is to have an FSB internal advisor in banks,” Shumanov told Forensic News, explaining how it was possible for Khotin to have such cozy relationships with intelligence officials.
Khotin’s connections to top Russian intelligence officials don’t end with Patrushev.
According to Forbes, Khotin financially supported a young fashion designer who happened to be the daughter of Colonel-General of the FSB Mikhail Shekin. One department that Shekin oversaw was the intelligence service’s economic sector.
By all measures, Khotin’s business ventures were supported by the Kremlin. He received funding for his real estate empire from state-owned banks VTB, Sberbank and Rosselkhozbank. Rosselkhozbank, one of Khotin’s longest and largest financial backers, was run by the spy chief Nikolai Patrushev’s son, Dmitry.
By 2012, Khotin purchased Yugra Bank, which was at the time managed by the former Russian Deputy Minister of the Ministry of Fuel and Energy, Anatoly Fomin. Fomin would stay on the Board of Directors at Yugra Bank after Khotin’s purchase.
After Khotin purchased 30% of the London-listed Exillon Energy in late 2013 for $300 million via a Cyprus company, state-owned Gazprombank swiftly loaned the Cyprus LLC $110 million according to documents acquired from the Cypriot government.
A former member of the board of Exillion Energy, who spoke on the condition of anonymity due to current business relationships in Russia, told Forensic News that immediately after taking control of the oil exploration and production company, Khotin demanded that all cash reserves be transferred to Yugra Bank. “This was not a normal business practice. Nor was it acceptable to the board,” he said. “There was a clear conflict of interest because Khotin was both the owner of Exillion Energy and Yugra Bank. Khotin moved the money anyway. The board resigned en masse.”
The resignation of the entire board of Exillon Energy allowed Khotin to fill management positions with his own choices, which included the Deputy CEO of state-owned VEB Capital and a former CFO of state-owned Sberbank.
After Khotin’s purchases of both Yugra Bank and a plurality share of Exillon Energy, the bank began touting its sponsorship of events at the State Duma and soon thereafter became a main sponsor of the Night Hockey League, an amateur sports organization that was established by Putin in 2011. Putin himself has played an annual hockey match in the league.
The Chairman of the Management Board for Yugra Bank was Yury Gusev – who simultaneously served as the CEO of the Armenian branch of the powerful VTB Bank. VTB is widely seen as a vehicle for the Kremlin to spread its political influence.
“VTB is really a slush fund for Putin,” Anders Aslund, a resident senior fellow at the Atlantic Council told the New York Times in 2017.
Notably, Gusev was invited to the National Rifle Association’s 2016 convention (p.68) by an assistant to Maria Butina, a convicted Russian agent.
Even after Khotin landed on the Forbes list of the top 100 wealthiest Russians in 2016 for his real estate, oil, and financial holdings, an aura of secrecy surrounded his dealings. Forbes, at that time, was still unable to find a single photograph of the businessman who had a net worth of $900 million.
“Few people know them personally,” a banker told a Russian media outlet, noting that they carried an “atmosphere of complete secrecy and inaccessibility.” Another banker for of one of the banks that lent to Khotin and his father posited that they were merely front-men for Russian intelligence:
They hide all the time. In general, there is an opinion on the market that the assets do not belong to them – they are just a front for some of the security services (siloviki).Russian banker
Deutsche Bank and Yugra Bank
Shortly after Khotin purchased Yugra Bank, in April 2013, internal documents showed that the bank had siphoned over $93 million to a correspondent bank account at Deutsche Bank Trust Company Americas (DBTCA).
The number was remarkable. The bank at that time had just 6 branches in Russia and no international presence. Its net assets were minuscule, making it just the 196th largest bank in the country.
But by October 2013, according to internal DBTCA documents provided by Val Broeksmit, the son of a Deutsche Bank executive who committed suicide in 2014, Yugra Bank had shifted approximately $330 million into their account on Wall Street. It was listed as the 5th largest foreign liability by the Deutsche Bank branch.
Forensic News has previously written about the relationship between the Russian state-owned Gazprombank and DBTCA.
Deutsche Bank previously told Forensic News that Gazprombank, like most others on the internal report, including Yugra Bank, had cash accounts at DBTCA to exchange their currency to US Dollars and disburse the money as the banks saw fit. This was part of Deutsche Bank’s cash management program with banks across the globe. Deutsche Bank did not identify the vendors or clients that received these foreign payments.
The internal Yugra Bank documents acquired by Forensic News showed a fluctuation of money in their correspondent account at DBTCA, from $11 million to $115 million.
- Oct 1 2014 – $115.2M
- Jul 1 2014 – $4.4M
- April 1 2014 – $13.3M
- Oct 1 2013 – $17.2M
- Jul 1 2013 – $68.9M
- April 1 2013 – $93.6M
Forensic News does not have documents accounting for the time periods before and after the dates shown above.
It is unclear why the Yugra Bank number for October 1st, 2013 ($17.2M) does not match or remotely resemble the Deutsche Bank number for October 18, 2013 ($330M). The difference could be explained by a huge influx of cash in between the two reporting dates, or inaccurate accounting records by Yugra Bank. Forensic News has previously confirmed the accuracy of the 2013 Deutsche Bank report by publishing a contemporaneous email between senior DBTCA officials to which the report was attached.
Pressed numerous times to explain its relationship with Yugra Bank and/or any concerns raised by their dealings with a bank whose owner was closely tied to Russia’s intelligence services, Deutsche Bank declined to comment.
A banking expert with over 15 years of experience in correspondent banking and anti-money laundering compliance who spoke on the condition of anonymity because s/he remains at a senior position in a large US bank told Forensic News that the relationship between DBTCA and Yugra Bank appears curious at best.
After reviewing the documents, the banking expert said,
The information presented here is just outright concerning based on the documentation showing DBTCA had at one point, a $330 million account balance with a Russian bank that claimed only $22 million in cash. Yugra is not a significant bank in terms of the global banking network and only maintained branches in eight Russian cities in 2013.
When you consider this, one must ask, what transaction activity was Yugra using DBTCA to desire to send this kind of money into the US? What was the business justification for DBTCA to open an account and maintain the relationship?International banking expert
Khotin’s empire collapses
By 2017, Khotin’s high-level connections began to turn on him, in what has been described as a major shakeup in the Russian political system. Russia’s central banker, Elvira Nabiullina, accused the bank’s leadership, mainly Khotin, of operating a pyramid scheme, siphoning off money from the bank to pay their personal businesses. Yugra Bank’s license was revoked and soon went bankrupt. The Central Bank of Russia did not respond to a request for comment.
Shumanov, of the anti-corruption group Transparency International, stated that Nabiullina directly “presented Putin with clear evidence of Khotin’s money laundering and Putin had no choice but to act.”
Then, in 2019, FSB officers arrested Khotin for large-scale embezzlement, echoing the central banker’s claims, saying that Khotin stole more than $100 million from Yugra Bank. He was placed on house arrest where he remains today.
Multiple reports, including one from Intelligence Online, stated that Khotin’s arrest was connected to the arrest of senior FSB officials on charges of taking bribes, including Colonel Kirill Cherkalin, who oversaw the major banks in Russia. Cherkalin allegedly had large sums of cash taken from his apartment after his arrest.
Intelligence Online reported that, “the purge currently underway at the FSB, Russia’s internal intelligence service, is linked to the Alexei Khotin affair,” and that Khotin “benefited from the protection of the economic department of the FSB for many years.”
Khotin, through a lawyer, denied paying bribes to Cherkalin or any other FSB official. His arrest and detention in Russia is not publicly believed to be related to Yugra Bank’s financial relationship with Deutsche Bank.
Whether the Yugra Bank money held at DBTCA was the proceeds of a rogue oligarch funneling allegedly embezzled cash from his own bank, or something more nefarious, remains to be seen.
Under the large umbrella of Deutsche Bank, DBTCA is just one small component, even in the United States. According to a document detailing its operations, DBTCA makes up just 22% of the bank’s assets in the United States. The vast majority of Deutsche Bank’s business is done via Deutsche Bank Securities Inc (DBSI).
DBTCA has faced a number of scandals in recent years for a plethora of anti-money-laundering failures. In January 2017, the branch was fined over $425 million for allowing a massive $10 billion Russian money-laundering scheme that ran through the bank from 2011-2015.
Earlier this year, the branch was fined a further $150 million for its dealings with convicted sex offender and alleged child rapist Jeffrey Epstein as well as its relationship with FBME Bank in Cyprus and Danske Bank in Estonia. With Danske Bank, DBTCA overlooked “large quantities of money being moved on behalf of Russian oligarchs,” according to New York regulators. “Danske transferred at least $150 billion in payments from Russia and other former Soviet states through” DBTCA from 2007-2015 according to the regulators.
Most recently, DBTCA was fined again for violating Russian sanctions by processing payments in 2015 destined for a sanctioned Russian bank. “At a minimum, DBTCA, including several senior managers within the bank’s anti-financial crime division, as well as a representative from its counsel’s office, failed to exercise a minimal degree of caution or care,” the Department of Treasury concluded.
DBTCA issued large loans to Donald Trump in 2012 and again in 2015 for his properties in Miami, Chicago and Washington, DC, totaling approximately $340 million. The loans have been of intense public interest given their proximity to the branch laundering billions in Russian cash. Robert Mueller’s special counsel team, according to those who worked for the office, did not pursue Trump’s records with Deutsche Bank, and the Supreme Court said earlier this year that a subpoena issued by House Democrats to Deutsche Bank seeking Trump’s records was overly broad.
According to the New York Times, Trump still owes $297 million to Deutsche Bank for the loans for these properties.
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