Bank Of NY Says Cooperating On Russian Mob Probe

Updated 3:13 PM ET August 19, 1999

NEW YORK (Reuters) - The Bank of New York, reported to have been the channel for billions of tainted dollars from a Russian crime mob, said Thursday it was cooperating with a federal money laundering probe.

The probe, reported in the New York Times, involves wealthy Russian crime boss Semyon Mogilevich whose activities have been monitored by U.S. and European authorities for at least five years.

The Times article, sourced to unnamed law enforcement officials, said that from October through March some $4.2 billion passed through one account in more than 10,000 transactions.

Because the account was kept open to help the investigation by federal authorities, officials estimated as much as $10 billion may have flowed through the bank since early last year in what would be one of the largest money laundering operations ever uncovered in the United States.

The bank said in its statement it had been "cooperating with the office of the U.S. Attorney for the Southern District of New York in the confidential investigation of the use of bank facilities to transfer funds from Russia to other countries".

"There are no allegations of wrongdoing by the bank. There has been no loss of customer funds or the bank's own funds. Two employees of the bank who have been mentioned in the investigation are now on leave pending completion of the investigation.

"After a thorough investigative effort on our part, confirmed by independent review, this appears to be an isolated incident."

The bank would not release names or details of the two employees, but the New York Times said they were senior officers in the bank's Eastern European division.

It said they were married to Russian businessmen, one of whom was believed to have controlled one of the accounts. The paper said the accounts being investigated had been linked to Mogilevich.

Mogilevich, who is believed to be living in Budapest, was named during a 1996 hearing before a U.S. Senate subcommittee as the leader of one of 25 so-called "Eurasian" organized-crime groups operating in the United States.

A year earlier Britain's National Criminal Intelligence Service said he was "one of the world's top criminals" with "personal wealth of $100 million." The report centered on a money-laundering scheme allegedly being run by Mogilevich- linked companies in Britain.

He is also connected to an ongoing investigation by federal authorities in Pennsylvania involving defunct magnet maker YBM Magnex, which was based in suburban Philadelphia but traded on the Toronto Stock Exchange.

YBM, which authorities said was a money laundering vehicle for Mogilevich, pleaded guilty in June to securities fraud for cheating investors out of several hundred millions of dollars.

Last year, trading in YBM stock was halted when federal authorities raided the firm's headquarters in Newtown, Pa., weeks after the company's accounting firm raised questions about millions of dollars in transactions and its ties to Mogilevich.

In charges filed against the company, prosecutors said YBM falsified records to inflate its value and jack up the price of its stock.

YBM, whose penny stock rose from 10 cents to about $20 a share before the scheme was detected, is under receivership in bankruptcy court in Canada where it was incorporated in 1994.

A spokesman for Mary Jo White, U.S. Attorney for the Southern District of New York, said he could not confirm or deny the money laundering probe at the Bank of New York.

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Ray

-- Ray (ray@totacc.com), August 19, 1999