Moldova struggles to reform economy hit by money laundering, theft

Europe’s poorest country Moldova — politically torn between former Soviet master Russia and the West — has seen its economy ravaged by rampant corruption and a string of money laundering and theft scandals.
As the country prepares for presidential elections on Sunday, observers from the Council of Europe recently issued an unflattering pre-vote report.
“One of the main reasons for the long-standing political crisis in Moldova is the lack of confidence in the state institutions resulting from multiple corruption scandals,” they said in a statement late September.
Just last month 15 judges were detained on suspicion of participating in “a criminal scheme that allowed the laundering of $20 billion from Russia bypassing the Moldovan banking system,” according to the Moldovan Anti-Corruption Center (CNA).
Between 2010 and 2014 the judgespassed about 50 rulings” that authorised repayment of nonexistent debts using fake documents, according to the agency tasked with fighting money laundering.
Several bankers including the former deputy governor of the central bank have also been targeted in the investigation.
The latest scandal comes 18 months after Moldovans discovered that $1 billion (915 million euros) — equivalent to 15 percent of the ex-Soviet republic’s GDP — had gone missing from three of the country’s banks in a massive fraud.
“Moldova has become the regional launderer for money of dubious origin,” said a recent report published by Transparency International Moldova.
The report’s author, former finance minister Veaceslav Negruta, describes a “complicity” between the banking and justice systems in giving a semblance of legality to fraudulent transactions.
This has incorporated legislative changes, including to the criminal code, and a “slackening of monitoring of accounts belonging to non-residents,” carried out by the very officials who are supposed to fight money laundering, Negruta told AFP.
He said the judges who have been arrested “did not act independently. They were given protection and coordination and they were mere cogs in this system.”
Igor Botan, an analyst with Moldovan think tank Adept, questioned the willingness of Chisinau to really tackle corruption, saying the recent arrests were only carried out to “impress the West to convince them to resume financial assistance.”
Council of Europe observers named “the lack of results in the fight against corruption” as one of the “long-standing serious concerns” which transcend Moldova’s political division between pro-Russia and pro-Europe groups.
Negruta called for both Moldovans and the West to pressure Chisinau to conduct a thorough investigation into the disappearance of the billion dollars, a scandal that has been dubbed the “theft of the century.”
He also denounced the recent decision by the authorities to treat this sum as public debt, which he sees as an attempt to ensure the whole affair is “forgotten.”
If the burden of the debt had not been placed on Moldovans, the central bank and bank monitoring authorities “would certainly be more motivated to try to recoup this billion,” he said.
In June, former prime minister Vlad Filat was sentenced to nine years in prison for receiving $260 million in bribes as part of this fraud scheme.
But according to an audit done by US firm Kroll, responsibilities lie elsewhere. A Moldovan billionaire, Ilan Shor, suspected to have been the brain behind this fraud, was briefly detained in May 2015 and placed under house arrest, but the case has not been sent to court so far.
The EU representative in Moldova Pirkka Tapiola reaffirmed that Brussels had suspended all financial support to Moldova after discovering the theft and will not resume giving money until an agreement is sealed with the International Monetary Fund over reforming the country’s financial system.
It has taken several months to negotiate the agreement and the IMF executive board will meet on November 7 to consider it.
Tapiola said the European Union has put together reform commitments to modernise Moldova and give it financial support.
“But there is one thing you cannot import: political will.”