Russia Pulls Biggest Bank License of Year Over Dubious Transfers

Russia’s central bank revoked the license of OAO Master-Bank, a retail lender where President Vladimir Putin’s cousin serves on the board, after accusing it of repeatedly breaching money laundering laws.

The Moscow-based lender, the biggest to lose its license this year, failed to comply with legislation, falsified accounting and was “involved in major suspicious transactions,” according to a central bank statement today.

Bank Rossii is striving to clear the market of banks involved in dubious activities, seeking to curtail net capital outflow, which is forecast at $55 billion this year. The regulator is probing “many” banks and won’t ignore violations, Chairman Elvira Nabiullina said in October.

“The process of cleaning up the banking system has intensified under Nabiullina,” Natalia Berezina, a banking analyst at UralSib Financial Corp. in Moscow, said by phone. The chairman started her term in June.

Master-Bank had negative capital of at least 2 billion rubles ($61 million), Nabiullina told lawmakers today in the State Duma, the lower house of parliament. The payout on insured deposits will be less than 46 billion rubles, with distributions no later than Dec. 4, she said. The preliminary estimate is 30 billion rubles, the Prime news service reported, citing the Deposit Insurance Agency.

Dubious Transactions

Master-Bank is the 17th bank to lose its license since Nabiullina took the helm at the regulator, raising the total number of revocations to 23 this year, according to central bank data. During 2012, 23 licenses were pulled.

Dubious transactions involving tax avoidance, theft of budget funds, bribes and kickbacks, money laundering, terrorism financing and drug-related operations, accounted for $38 billion of Russia’s $54 billion in net private capital outflow in 2012, former central bank Chairman Sergey Ignatiev said in June.

The lender is the biggest in Russia to have its license revoked since Moscow-based International Industrial Bank in October 2010, three months after the lender controlled by lawmaker Sergei Pugachyov defaulted on foreign currency bonds, according to UralSib’s Berezina. It was the 72nd largest Russian bank by assets at the end of the third quarter, according to data compiled by Interfax.

Master-Bank’s press service wasn’t available when Bloomberg called the number on its website. The lender has more than 1,100 automated teller machines and 3.4 billion rubles in capital, according to its website.

The lender hired Igor Putin, a cousin of the president, as it sought to expand.

To contact the reporters on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net; Jason Corcoran in Moscow at jcorcoran13@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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