In June 2006, the central banker went to Estonia personally to warn the local authorities that billions of rubles were being transferred illegally into dollars and euros in the West via an Estonian outpost of Sampo Bank. Sampo, an institution based in Finland, was subsumed by Denmark’s largest bank, Danske, later that year.
When he got to Tallinn, Kozlov told Andres Palumaa, the head of anti-money-laundering at Estonia’s Financial Supervision Authority (FSA), that the proceeds from tax evasion and money-laundering in Russia were being passed through the financial system that he oversaw. Kozlov demanded the closure of several specific accounts.
The unusual visit was first reported by the Estonian investigative newspaper Eesti Ekspress a month after Kozlov was killed. His trip over the border to Estonia never became a global news story because the significance of the crime Kozlov had been trying to expose was still an extraordinary secret.
It would be another 12 years before Danske Bank admitted that $234 billion in non-resident money had flowed from Russia and former Soviet republics through Danske’s tiny operation in Estonia. According to a whistleblower's claims leaked to Danish newspaper Berlingske, it was discovered that some of the suspicious accounts were operated by “the Putin family and FSB.”
One organization that did follow up on that article in the Estonian press was the U.S. Embassy in Tallinn. According to a telegram that remained buried until now in the cache of 250,000 diplomatic cables leaked by WikiLeaks in 2010, U.S. officials went to interview Palumaa soon after the story appeared.
The Estonian regulator downplayed Kozlov’s warning, according to the cable sent from the embassy in Tallinn to the U.S. embassy in Moscow and back to the State Department in D.C. He conceded there could have been some legal issues with the accounts, but said he had seen no evidence of wrongdoing.
“Palumaa said that after Kozlov’s warning, the FSA followed up with their Russian counterparts in Moscow, but the Russians said that they had no information to substantiate Kozlov’s accusations,” the cable reads.
In other words, soon after their meeting in June, Palumaa flagged up Kozlov’s anti-corruption operation to the authorities back in Moscow.
Russian officials may have already have been aware of his attempts to shut down the gross corruption of his political superiors. Either way, according to leading Russian newspaper Kommersant, the Ukrainian contract killers had begun to track Kozlov by July.
“The Ukrainian contract killers had begun to track Kozlov by July.”
The Estonian branch of Sampo bank, which was bought by Danske, was alleged to be a central nexus in a host of criminal enterprises run out of Russia. As the Danish bank’s own internal inquiry found last month (PDF), more than $200 billion in foreign money was allowed to race through its accounts in the years after Kozlov raised the alarm.
For a lot of well-connected Russians, removing the potential obstacle of Kozlov has proved to be extremely lucrative.
Danske’s internal report, written by the Danish law firm Bruun & Hjejle and published in September, did not examine the status of all of the $234 billion identified, but concluded that “a large part” of it may need to be considered suspicious.
The law firm also identified three major international scandals tied to Danske’s accounts in Estonia. It found almost 200 accounts linked to the “Russian Laundromat” exposed by the Organized Crime and Corruption Reporting Project (OCCRP), which uncovered a complex laundering system used to funnel approximately $20 billion out of Russia illegally. An additional 75 accounts were linked to the similar “Azerbaijani Laundromat.”
The third scandal tied to Danske in the report is the $230 million fraud uncovered by Sergei Magnitsky. In 2008, the tax lawyer was detained, beaten, and left to die in a Russian jail cell after uncovering evidence that Russian officials had been involved in stealing Russian public funds in a scam that victimized Hermitage Capital Management, an investment fund founded by Bill Browder.
“It may take years to disentangle all of the suspicious accounts.”
Browder has since campaigned for the introduction of a series of anti-corruption laws, which have been enacted all over the world. The U.S. laws passed in Sergei Magnitsky’s name have so far been used to sanction 74 individuals accused of corruption.
Of the $230 million obtained fraudulently, Browder estimates that more than $200 million passed through the Danske bank in Estonia. He first reported suspected money laundering at the bank to the Estonian authorities in 2012. In July this year, Browder sent a 22-page complaint to the Danish public prosecutor detailing 190 suspicious accounts linked to the Russian fraud.
Danske announced last week that the U.S. authorities had opened an investigation into the bank to run alongside similar probes launched in Britain, France, Denmark, and Estonia. It may take years to disentangle all of the suspicious accounts.
One controversial figure allegedly linked to money-laundering through the bank was Perepilichnyy, whose company IC Financial Bridge was a client of Danske’s Estonian branch, according to the Financial Times. The Russian businessman turned whistleblower died suddenly near his home in the suburbs outside London; he had been due to testify in Switzerland as part of a case alleging endemic corruption in Russia.
His is one of a number of suspicious deaths linked to Russia in Britain that are set to be re-examined by the authorities.
In Russia, officials are in no rush to re-open the murder of Andrei Kozlov.
Five years after his murder conviction, Alexei Frenkel saw his latest appeal turned down in 2012.
Doubts that Frenkel, a young financier, would have ordered the hit on a senior Russian official emerged as soon as he was publicly accused of the killing by Putin’s close confidant Yury Chaika.
Chaika, whose son has been hit with sanctions by the U.S. under the Global Magnitsky Act, is Russia’s prosecutor general. After Kozlov’s death, he said he would take the case under his personal control. Chaika is a hugely influential man in Moscow; he is also the alleged source of both the supposed Hillary Clinton kompromat offered to Donald Trump Jr. at the Trump Tower meeting and the propaganda handed to controversial Rep. Dana Rohrabacher (R-CA).
When Frenkel was arrested, a diplomatic cable from the U.S. Embassy said the reaction in Moscow was mixed. Some were impressed that the prosecutor general’s office had shown a determination never previously glimpsed. “This is the first time that authorities went after not just the ones who committed the crime, but the ones who ordered it and paid for it,” a source said. “It is also the first time that a Russian, not a Ukrainian or a Georgian, was found responsible.”
Other sources expressed “disbelief that Frenkel could have orchestrated the murder.”
The Austrian government would also come to doubt the official account of Kozlov’s demise. Similar to his work in Estonia, Kozlov had been in touch with Austrian financial regulators to warn them of illicit sources of money coming out of Russia. A few weeks before his death, he had ordered the closure of a small Russian bank engaged in suspicious activity linked to the Austrian banking sector.
““There is no need to end your life with an article — someone might simply wait for you at the entrance to your apartment building, and they will not find a killer afterward.””
— A warning to investigative journalist Natalia Morar
In April 2007, seven months after Kozlov was shot dead and long after Frenkel was placed behind bars, the Austrian interior ministry made public a report of its own investigation into Kozlov’s death.
They said they had passed their findings to the Russian prosecutor general’s office but had received no response, according to a report in The New York Times. The Austrians confirmed they had been working closely with Kozlov about shutting down these money-laundering pipelines out of Russia, and concluded that they could not rule out “official corruption” as the motive for his murder.
An investigative reporter for Russia’s opposition New Times newspaper also wrote that Kozlov may have been killed for delving into money-laundering issues that may have upset powerful people in Russiam rather than interfering in the work of a small independent bank.
“The New Times interviewees at the Interior Ministry, in the State Duma, and in the banking community are convinced that ‘Frenkel has nothing to do with murder,’” wrote Natalia Morar.
Morar’s sources even suggested that Frenkel could have been framed because he knew too much about the very same black-money trails that Kozlov was investigating. Either way, she reported that Kozlov was heading up an investigation into “the possibility of money-laundering through foreign banks by a number of Russian commercial organizations, and also by individuals” when he was killed.
Soon after her story was published, Morar, a Moldovan citizen, was denied entry to Russia. She said sources close to the FSB had warned her to quit: “There is no need to end your life with an article—someone might simply wait for you at the entrance to your apartment building, and they will not find a killer afterward.”
According to Amy Knight’s book Orders to Kill, Kozlov feared that there may be agents in the FSB who wanted to stop him, too.
Despite that specter hanging over him, when Kozlov went to Estonia to try and shut down the Sampo/Danske bank route to the West, nobody—not even Kozlov himself—realized that he was stumbling into what would become the single biggest money-laundering scheme used to clean up the ill-gotten gains of Russia’s most powerful men.