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Dec. 20 (Bloomberg) -- Former executives at state-controlled OAO Russian Agricultural Bank are being investigated in the alleged embezzlement of 1.2 billion rubles ($40 million), the Interior Ministry said.

The money, granted as loans by the bank for buying agricultural raw materials and equipment in 2009, was allegedly funneled into bogus companies, the ministry said in a statement on its website today. It didn’t name any of those being investigated.

“These company borrowers, whose assets were used as collateral, have been declared bankrupt,” according to the statement. Police have seized documents from offices, residences in Moscow and Novosibirsk in Siberia, the ministry said.

Russian regulators are closing lenders as the government tackles money laundering that’s contributing to a net capital outflow forecast of $55 billion this year. The central bank’s decision to revoke the licenses of three small banks last week came three weeks after it pulled the license of OAO Master-Bank, whose board members included President Vladimir Putin’s cousin. It said the firm repeatedly breached anti-money laundering laws.

Russian Agricultural Bank is working with law enforcement agencies to provide “full support,” according to an e-mailed statement from its press office. The investigation followed the lender’s own internal audit, it said.

The state-owned bank provides financial services to the agricultural industry and Russia’s rural population.

To contact the reporters on this story: Jason Corcoran in Moscow at; Ekaterina Shatalova in Moscow at

To contact the editor responsible for this story: Frank Connelly at

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