Latvian bank being used to collect cash destined for Donetsk 'republic'

In the latest scandal to hit the Latvian banking sector, it appears a home-grown Latvian bank is being used to help send cash into the Russia-backed regime in Donetsk, eastern Ukraine, with the illegally-constituted local authorities having a say in how it is spent.  

The connection was spotted by Latvian researcher and historian Una Bergmane who took to Twitter after she noticed that a website purporting to belong to the "official representation in France of the People's Republic of Donetsk" was soliciting donations by giving the details of an account held at Rietumu bank in Riga.

The account name is not that of any entity in Donetsk but a British company, PSI-Pay Limited which says it "has been in operation since 2007, providing payment solutions to businesses globally. We pride ourselves on transparency, efficiency and clarity."  

"As a leading alternative payment provider, we at PSI-Pay don’t just respond to the news, we help to make it happen," PSI proudly says on its website, perhaps closer to the truth than it realises.

PSI-Pay clients can deposit and withdraw funds from the local banking network in 44 currencies across 173 countries according to the company's claim, which presumably explains the appeal of using it to get money into Donetsk via Latvia.

PSI says it is regulated by the UK's Financial Conduct Authority (FCA) and while its website lists various of its British employees, the ultimate beneficial owner is one Avraham Shaked, a Cypriot national who appears as director of around a dozen British and Cypriot companies.

Meanwhile, on the French website, the signatory asking for donations is one Erwan Castel, a self-styled "volunteer in Novorossiya". Here he is in 2015 explaining why he is fighting in Ukraine.

The money, he says, will be used to cover his living expenses of around 10,000 rubles per month with any surplus given to deserving locals "in coordination with the civil authorities", adding that this has already been the case in the Oktyabrsky district.

This is an important point, establishing that the illegal government of Donetsk is having a say in how the money is being spent.

"Financial reports and actions will be carried out regularly," Castel promises.

Castel promotes himself as a journalist as well as a volunteer. A link to a recent report he filed, apparently hosted on a Czech blog site, again repeats the invitation to fill up his Rietumu Bank account. (Note: we removed the last digits of the account number but the bank reference codes are clearly visible)

Rietumu bank account used to send money to Donetsk

It appears Castel's switch to Rietumu bank is relatively recent. In June 2017 he was asking for donations via another international payment client, Compte Nickel (and gave his monthly expenses as a mere 8,000 rubles) as this blog post shows

Compte Nickel payment for Erwan Castel

That appears to have been a stop-gap measure, as earlier appeals for aid cited a bank account at French bank Caisse d'Epargne.

Erwan Castel French bank account

According to links provided from the French site, the Donetsk regime appears to be trying to increase its presence in France. As well as publishing a French-language journal, a video shows another "representative office" being opened in Marseille on September 25. Ukraine's ambassador to France described the event as "a pathetic attempt to legalize a terrorist organization in the hands of pro-Russian puppets.

The illegal Donetsk regime also claims to have similar representation offices in Greece, Italy, Finland and the Czech Republic. On September 25 the Finnish organization, headed by notorious Kremlin propagandist Johan Backman, was organizing a bizarre 'stratcom' conference in Helsinki with such topics as "NATO as hatespeech".

Meanwhile similar "Friends of Russian Crimea" associations are being formed in Germany, Belgium, Spain and Norway, according to the in-house news agency of the Donetsk regime.

 

If Rietumu is being used to help fund the illegal republic, it raises the possibility that Latvia is again playing a role in the circumvention of international sanctions, as was recently the case with North Korean nuclear sanctions which was reported by LSM previously.

Nor is it the first time French links have been problematic for Rietumu. In July French courts handed the bank a massive 80 million euro fine for its role helping a company called France Offshore to enable tax-dodging.

LSM asked both Rietumu bank and PSI Pay for comment on the matter. 

Latvia's financial regulator the Financial and Capital Markets Commission (FKTK) told LSM it was taking the matter seriously.

"Before giving more extensive comments in this case, FKTK must verify the information that it has been made aware of in the public space, so enquiries are being conducted at Rietumu bank," FKTK said in a statement to LSM.

Bearing in mind that PSI Pay Limited is regulated in the UK, "there will probably be a need for international cooperation," the regulator added, saying it would refrain from further comment until its checks had been completed. 

Rietumu gave LSM a statement saying its attention had been brought to "a potential violation of the European sanctions regime" and had conducted a speedy internal enquiry as a result.

It found that its British client met all necessary regulatory requirements under international law, including its identification of clients and the fight against money laundering.

"The Bank contacted its customer, who provided all necessary information regarding the owner of the electronic account and its declared economic activity.
The bank has also received from its British customer information that none of the transactions associated with this electronic purse indicates a violation of regulatory requirements. However, our client has blocked a given electronic account until all the circumstances have been clarified. Our client also addressed the website holder with the request to remove the account details specified therein," Rietumu said.
 

 

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