In 2000 the funds transferred to Loro accounts (foreign banks’ accounts in Ukrainian banks —Ed.) from enterprises dodging the VAT have increased four to five-fold compared to last year. This was the subject of the press conference held last week by Anatoly Brezvin, deputy chairman of the Tax Administration of Ukraine. According to the National Bank of Ukraine, last year more than $1.6 billion was transferred to the Loro accounts of Latvian banks alone. Russian Banks show a similar picture. “Practice shows that 98% of all Loro account deposits are being made from the accounts of bogus firms. A contractor enterprise working under the pattern of genuine firm — bogus firm — Loro account loses not 20% (in VAT payments — Ed.) but only 4-5%, out of which 0.25-0.5% are used to finance the shadow services of bankers and the rest for the services of conversion centers and official payments for banking transfers,” Mr. Brezvin said.
“You can’t possibly carry off millions in suitcases, so you can’t do without commercial banks in this case,” Mr. Brezvin believes. He named Intercontinentbank as an example of such a bank, through which about UAH 2 billion were illegally converted in 2000. This left over UAH 400 million unpaid in VAT. The settlement account of Agralius Inc. in Intercontinentbank accumulated UAH 130 million for two months of the current year, which were transferred to foreign banks under the Loro pattern without paying UAH 26 million in VAT. The tax administration deputy chairman said one of the main ways to tackle the problem of capital export is to complement the Criminal Code with the article on illegal money laundering. “That our banks’ Loro accounts are being used for a legal laundering of money is vividly demonstrated by the fact that before 1994 the accounts of Lithuanian banks were also valid in Ukraine, along with the Loro accounts of Latvian banks. But when Lithuania imposed criminal liability for laundering shadow funds, all the Loro accounts of Lithuanian banks were frozen,” Mr. Brezvin said.
COMMENT
Stanislav ARZHEVITIN, chairman, board of governors, AGIO Bank:
“Under the latest Cabinet of Ministers resolution, if Ukrainian enterprises want to settle accounts with a nonresident for the products received, they must transfer funds onto a separate blocking account in a bank for five days. Following this, the entrepreneur goes to the tax inspection, gets a certificate, and only after this the bank is authorized to make payment. Obviously, these restrictions are connected with problems arising out of the Loro accounts. But, to start with, this creates problems for both the client and the bank. If the tax administration really wanted to look into a certain contract, it need not have made a decision to block funds for five days. It could simply introduce a rule that the bank has the right to effect payment only if it has a certificate from the tax inspection. Otherwise, this only makes clients pay additional visits. Today, commercial banks are the hard-currency control agents of the state and bear a very heavy financial liability for lawbreaking: an incorrectly-made payment entails a $10,000 fine. On the other hand, the tax inspection, which is trying to assume oversight functions, does not bear this kind of responsibility. A golden mean should be found to exercise hard-currency control. Moreover, I, as a banker, think it is rather strange to claim that 98% of all Loro account deposits come from the accounts of bogus firms. I believe this is a gross exaggeration.”
