The EBRD holds shares in Moldovan banks through companies from Cyprus

The extended role of the European Bank for Reconstruction and Development (EBRD) in the Moldovan banking sector during the period in which bank fraud was being committed raises serious questions about this international financial institution (IFI), argue the authors of the “Offshore Republic” report of the Independent Anti-Corruption Advisory Committee (CCIA), writes mold-street.com.

“Being a shareholder in banks during critical periods, when large-scale bank fraud and money laundering occurred, is of particular concern,” states the report “Republica Offshore” by the Independent Advisory Committee Against Corruption (CCIA), dedicated to the analysis of the factors which contributed to systemic fraud and money laundering in the financial-banking and insurance sector of the Republic of Moldova.

According to the authors, it is hard to imagine that EBRD staff were not aware of some of the prevailing, highly dubious practices.

“The EBRD held shares in Victoriabank and had extended lending arrangements for the banks to lend to small and medium-sized enterprises. Some dispossessed shareholders consider the EBRD complicit in money laundering, after they purchased disputed shares from a company in Cyprus owned by Plahotniuc and Sor,” the report states.

This is the January 2018 transaction, when the EBRD and Banca Transilvania bought 39.2% of Victoriabank’s capital from the Cyprus company Insidown LTD, “owned by Vladimir Plahotniuc and Ilan Șor”.

Why do organizations like EBRD and IFC hold shares in Moldovan banks through companies from Cyprus?

The authors claim that the EBRD had invested in the capital of this bank since 2000 and was extensively involved in the Moldovan banking sector, providing millions of dollars in loans to Victoriabank, MAIB, Moldindconbank, Mobiasbancă and FinComBank to support loans to small and medium enterprises.

In this context, CCIA researchers claim that the EBRD together with the International Finance Corporation (IFC) of the World Bank Group preferred to enter Victoriabank’s capital in 2000 through companies from Cyprus.

“Given the increased risk of the respective region, the question arises: why do international organizations, such as the IFC and the EBRD, retain stakes in Moldovan banks through companies registered in Cyprus?”, the authors of the study ask.

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Investigating “possible contributions to fraud, money laundering and corruption”

According to the study, “it is not clear what checks or assessments were carried out on the specific loans that were made. Increased awareness of fraud and actions to investigate red flags could have led to more robust intervention by the EBRD.”

The authors argue that the EBRD should, within the next 12 months, review its practices in Moldova and recommend that the institution “fund an external evaluation of its past lending practices in Moldova and should investigate ways to mitigate possible contributions to fraud , money laundering and corruption”.

EBRD: Report does not objectively reflect IFI efforts to clean up banking sector

An EBRD official told Mold–Street.com that the institution he represents “has no comment, except that the commission did not request the EBRD’s participation or comment before publishing its findings.”

“The report does not objectively reflect the joint productive efforts of the international financial institutions, which helped the Moldovan authorities to clean up and revive the banking sector following the infamous bank fraud. We will contact the commission to contribute to an objective analysis of the historical role of the IFI, to draw substantiated conclusions and to make relevant and focused recommendations, which will really benefit the Moldovan economy”, the official predicted for Mold-Street.com BERD.

We mention that the EBRD is currently the majority shareholder in two banks from the Republic of Moldova: Maib and Victoriabank.