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 illicit activities, seeking to curtail net capital outflow that’s forecast at $55 billion this year. The regulator is probing “many” banks and won’t ignore violations, central bank 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 central bank head started her term in June.
Police and officials from the Federal Security Service, or FSB, conducted a search of Master-Bank’s head office in Moscow, according to a statement on the Interior Ministry’s website. They seized documents and electronic files in connection with an investigation of illegally cashing more than 2 billion rubles ($61 million) for clients, according to the statement.
Eight people stood outside the bank’s office on Tverskaya Street in central Moscow at 4:45 p.m., scanning central bank notices about insurance claims taped to the door. The branch, with a row of automated teller machines decorated with tinsel inside, was closed.
Clients will receive less than 46 billion rubles, with distributions no later than Dec. 4, Nabiullina told lawmakers today in the State Duma, the lower house of parliament. The Deposit Insurance Agency estimates that 30 billion rubles will be paid to insured depositors, which would be the biggest payout in the agency’s history.
Master-Bank had negative capital of 2 billion rubles, Nabiullina said today. The lender said on its website that it had 3.4 billion rubles in capital, more than 1,100 ATMs and It had correspondent banking relationships with European lenders including Standard Chartered Bank, Deutsche Bank AG, UniCredit SpA and Commerzbank AG. The website later stopped working, redirecting viewers to the Deposit Insurance Agency’s site.
Master-Bank is the 17th bank to lose its license since Nabiullina took the helm at the regulator, raising the total number to 23 this year, according to central bank data. During 2012, 23 licenses were pulled.
Questionable 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 net private capital outflow in 2012, former central bank Chairman Sergey Ignatiev said in June. That was about 70 percent of the total.
Master-Bank is the biggest in Russia to have its license revoked since 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.
An operator who didn’t give her name when answering the number on the lender’s number said the bank was closed and the press service wasn’t available.
Igor Putin, a cousin of the president, was hired in 2010 as the lender sought to expand and become a top 50 bank. He left and was later appointed to its board. Igor Putin is a distant relative of the president, and they don’t have any business ties, Kremlin spokesman Dmitry Peskov said today.
The attempt to bolster government relations “is a classic touch by Russian businesses but it didn’t help in this case,” David Nangle, head of research at Renaissance Capital, said by phone from London. “I am a big fan of the Central Bank’s push to reduce the number of banks to a more manageable number. It’s a prolonged process by Nabiullina which requires the shutting of smaller banks with questionable practices.”