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Proof that offshore banking is the key to embezzling billions

Alma Shalabayeva (L), the wife of exiled oligarch Mukhtar Ablyazov, arrives with her daughter Madina to lead a news conference in Rome December 27, 2013. Ablyazov was accused of embezzling millions of dollars from his former bank and as a result, Shalabayeva and Madina had been expelled from Rome, where they had been living, in a lightning operation in June. Shalabayeva thanked Italy on Tuesday for helping her to overturn the travel ban and persuade the Kazakh government to allow her return to Europe, the Italian foreign ministry said.
Reuters/Max Rossi
Mukhtar Ablyazov’s wife and daughter, who said her father “will become someone important, or he will die.”
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published This article is more than 2 years old.

The story of the day–complete with wolf-hunting accidents, private detectives and an angry dictator—is the Wall Street Journal’s rundown of Mukhtar Ablyazov’s alleged embezzlement of billions from a bank in Kazakhstan.

The tale of the oligarch-turned-dissident needs to be read to believed. Four countries’ legal systems are trying to recoup billions from Ablyazov, who used his position as chairman of the bank to make more than $1.7 billion in loans to holding companies in the British Virgin Islands that were never repaid. Those companies are allegedly controlled by Ablyazov, according to a British judge, though he denies this is the case.

These companies used nominee directors, lawyers and others who put their names on the corporate registry on behalf of the true, anonymous owner. It can be nearly impossible to trace beneficial ownership in these cases, but employees of Ablyazov’s former bank were able to find documents linking him to the shell companies using search warrants at storage facilities and offices; in one case, a receipt found in Cyprus led them to a hundred thousand documents saved by a company that shreds documents.

Absent that discovery, there might not have been any evidence to connect Abylazov with the shell companies. Despite pressure from the international community, the British Virgin Islands does not maintain a central database of the true owners of companies set up there, leaving plenty of opportunities for embezzlers—and anyone else interested in hiding money—to do so.

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