Dozens of banks around the globe, more than previously disclosed, were involved in transfers of money through Bank of New York accounts that appear to have served in part as a money-laundering operation for Russian organized crime and others, according to officials close to the investigation.
Using international electronic banking networks, financial institutions from Russia and as far afield as England, China and Australia sent or received funds totaling billions of dollars through business accounts run by Benex International Co. and nine or more other companies linked with the person who controls Benex, the officials said.
The breadth of contact with these suspicious accounts means that financial institutions around the world could be drawn into the unfolding probe as investigators search for clues about who was transferring the money and whether banks should have alerted authorities sooner, according to officials familiar with the case. It also raises questions as to whether all of the money flowing through the accounts originated in Russia.
"Sure, a lot of it was from Russia, but by no means was it all," said one official familiar with those records. "It's banks on both sides of the Bank of New York. . . . Are there a number of blue-chip banks? The answer is yes, and from around the world."
At the same time, the disclosure underscores the challenges investigators face in determining the original sources of the money--and proving that the Bank of New York accounts were used for illegal purposes. So far, federal investigators have not determined whether any of the transactions violate U.S. money-laundering laws, according to officials familiar with the case.
"Other than [the large sums involved], there's no evidence yet of a criminal violation in the U.S.," one government official said.
The accounts in question are linked to Russian native--now U.S. citizen--Peter Berlin, who opened them under a variety of company names, starting in the early 1990s, the officials said. The accounts are the focus of intense scrutiny from law enforcement officials, here and abroad, who are investigating whether the bank was used in a scheme to hide $10 billion or more over the last two years, including $6 billion between last September and August.
Berlin's wife, Lucy Edwards, a vice president at the Bank of New York who handled operations in Eastern Europe, was fired Friday. Bank officials said an internal inquiry turned up evidence that she had falsified bank records, violated internal policies and failed to cooperate with in-house investigators. But it's not clear whether the bank found evidence that Edwards was involved in money laundering. Berlin and Edwards have not made any statement on the probe and could not be reached for comment.
Although the probe is focused primarily on the links between Bank of New York accounts and Russian interests, bank records turned over to investigators indicate that banks all over the world transfered money in and out at an accelerating pace of activity that ended when the accounts closed last month.
Money laundering has become an increasingly urgent concern for law enforcement officials, who worry that electronic networks have made tracking the trail of ill-gotten funds more difficult in recent years. It involves sending money through a variety of accounts to obscure its origins.
Government and private banking specialists monitoring the investigation say the greater the number of banks involved in a chain of electronic transactions, the less likely it is that the government will find the evidence needed to successfully prosecute a case. To win a conviction under federal law, prosecutors would have to demonstrate that individuals ordering the transactions knew the money was first obtained from illegal activity. Then the prosecutors would have to prove that, with few exceptions, the illegal acts occurred in the United States.
An analysis of just one month's transactions "showed dozens of banks" sending or receiving money from the accounts, according to a person close to the investigation. While authorities declined to name other banks that had dealings with the Berlin accounts, this person said the banks include both prestigious and lesser-known operations in the United States, England, Russia, Japan, Australia and elsewhere.
Many of the transactions into the accounts were made using the global financial messaging system run by the Society for Worldwide Interbank Financial Telecommunications, or SWIFT. The system is routinely used by banks, securities brokers and others for international fund transfers.
It's not clear the extent to which two other major wire transfer systems were used. These are the Clearing House Interbank Payments System, a New York-based network used primarily for international transfers, and the Federal Reserve system known as Fedwire, which is used for money transfers within the United States.
For several years, authorities in the United States and Britain have been investigating allegations of money laundering and other criminal activity by Russian organized-crime groups. The investigation involving the Bank of New York gained momentum after authorities saw evidence that growing amounts of money were moving through suspicious accounts.
Investigators believe Benex has ties to Semyon Mogilevich, a Russian native who authorities say is involved in arms dealing, extortion and other criminal activity, and who was the focus of earlier probes in England and the Brighton Beach section of Brooklyn, that helped lead investigators to the Bank of New York.
Mogilevich, who denies the allegations, was involved with a Pennsylvania firm named YBM Magnex International Inc., which prosecutors alleged in June was behind an elaborate stock fraud, according to an informed U.S. official. Benex was involved in financial transactions with YBM Magnex, the official said, and also tried to arrange U.S. visas for several figures associated with Mogilevich.
But because as much as $6 billion or more went through the suspicious accounts in a 10-month period, some officials involved in the investigation believe that it could not have all come from organized crime.
"This is too much, perhaps exponentially too much, for just organized crime," said one official, who spoke on the condition of anonymity.
The Bank of New York has not been accused of any wrongdoing, and no one has been charged. Bank officials have stressed they are assisting investigators. But investigators have not ruled out the possibility that other bank employees helped engineer the alleged scheme.
The Federal Reserve Board, which regulates the Bank of New York, has begun its own inquiry into whether bank officials did enough to identify and report suspicious activity, as required by Fed rules and other regulations.