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Austria's RBI 'not worried' about money laundering in profitable Russian market

Raiffeisen Bank International AG is not worried about anti-money laundering breaches linked to Russia, and it remains committed to that market, CEO Johann Strobl said March 13.

A recent data leak linked RBI to a Europe-wide money-laundering scheme centered around Russian investment bank Troika Dialog. Revealed by the Organized Crime and Corruption Reporting Project on March 4, the scheme, dubbed the Troika Laundromat, helped launder billions through Europe between 2006 and 2013.

Troika Dialog was acquired by Russia's largest bank by assets, PAO Sberbank of Russia, in 2011.

A media report by the reporting consortium's Austrian site, Addendum, linked RBI to a recent complaint submitted by Hermitage Capital Management Ltd. with the Austrian Public Prosecutor's Office. Hermitage, co-founded by Kremlin critic Bill Browder, filed allegations about weak anti-money laundering controls. Money laundering activities linked to Russia have embroiled a string of northern European banks including Danske Bank A/S, ING Groep NV, Nordea Bank Abp and Swedbank AB (publ).

The reports saw RBI's share price drop more than 10% March 4, and since then the stock has lost more than 15% of its value, dropping from €22.84 on March 4 to close at €19.35 on March 13.

RBI is not directly implicated in the complaint and therefore had not been allowed to see the original filings, Strobl said during RBI's 2018 earnings presentation March 13. Nevertheless, the group has set up a task force to investigate "individual client relationships on a case-by-case basis with regard to the historic issues mentioned in the media," Strobl told analysts.

The internal probe will run for two to three months, but based on findings thus far, "[w]e have not found any activities which would be seen as a punishable offense," Strobl said. Therefore RBI does not expect any fines in relation to the recent revelations, he said.

Strong controls

The Russian central bank has developed strong controls for anti-money laundering, tax evasion, and other financial crime, Strobl said. "I'm not worried that the system in Russia would show any weakness."

The Russian central bank said in a report on March 13 that the value of illegal overseas money transfers dropped 24% and that of fraudulent cash-out transactions nearly halved in 2018 as compared with the previous year.

Strobl confirmed RBI's commitment to Russia, which was the group's fourth-largest market by loans in 2018 with €8.5 billion, and which accounts for about 10% of group assets — €14.09 billion out of €140.12 billion as of 2018-end.

The CEO also shrugged off concerns about the impact of U.S. sanctions against Russia on RBI's performance in that market. There is a difference between the administrative and economic impact of the sanctions, he said in the annual report March 13. While on an administrative level, this requires a "greater effort" because RBI wants to ensure it does not breach the sanctions, the economic impact is minuscule, according to Strobl.

"Our Russian subsidiary serves 2.8 million customers in a very large market, while a limited number of private individuals and companies are on the sanctions lists," he said. RBI's Russia-based arm generated €455 million profit after tax in 2018 despite the sanctions and "fairly weak" economic growth in the country, he noted.

RBI booked an after-tax profit of about €1.40 billion in 2018, up 12.2% on the prior year's €1.25 billion.