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Why Ukraine to Arrange a Show Trial of the Former Owner of BTA Bank

Date of publication: 31 August 2015

Roman Marchenko, Attorney at Law, Senior Partner

Source: Delovaya Stolitsa

French courts resolved to extradite Mukhtar Ablyazov, a former owner of BTA Bank (Kazakhstan), accused of embezzlement of billion-dollar amounts. However, it does not mean that the fraudster will appear before the court in Ukraine rather than anywhere else

Roman Marchenko,  Senior partner at Ilyashev & Partners Law Firm, who has been engaged in the BTA case for 6 years, told “DS” what can prevent it and why the case is so important to Ukraine.

DS” Will the suspect be extradited to Ukraine?

R.M. Indeed, the Supreme Court of France upheld the decision of the Court of Appeal of Lyon on extradition of Mukhtar Ablyazov, who is suspected of fraud and embezzlement on a large scale. Thus,  the English courts have determined that Ablyazov stole more than $ 4.3 billion (!) from the bank and ordered him to return the stolen money. The London court also sentenced the fraudster to 22 months in prison, which Ablyazov escaped. Unfortunately, it is early to speak about extradition of the former oligarch to Ukraine.

DS” Why?

R.M. According to French law, in case of multiple extradition requests preference is given to the state which suffered greater damage. Both Ukraine and Russia demanded extradition of Ablyazov. The order of the French courts found that the Russian Federation had priority regarding extradition as the amount of damage caused by the suspect in this country was several times more than in Ukraine. However, the final order on extradition to Ukraine or Russia is being approved by the Government of France.

DS” What are the chances that the suspect is extradited to Ukraine? What should be done by the state?

R.M. In this case, nothing more depends on the Ukrainian authorities. During the pre-trial investigation Ukraine has proven inconvertible facts of fraud, forgery and embezzlement by members of the Ablyazov’s organized criminal group and filed a request for extradition to France. The French courts upheld extradition and passed the baton to the French Government. They will choose the country in which the fail banker will be brought before the criminal court. It should be understood that the Government’s decision to extradite Ablyazov may be appealed to the Council of State and then to the ECtHR by his attorneys.

DS” What is the fate of Syrym Shalabayev – Mukhtar Ablyazov’s accomplice?

Syrrym Shalabayev is a relative of Mukhtar Ablyazov and an active member of a criminal gang. Shalabayev was sentenced by the London court to 18 months in prison for perjury in favor of Mr. Ablyazov, but just like his patron, escaped punishment. He was arrested by the law enforcement authorities of Lithuania a month ago, his extradition is demanded by Kazakhstan and Ukraine.

DS” When will he be extradited Ukraine?

R.M. Mukhtar Ablyazov has been waiting for extradition for the third year in the pretrial detention facility in France. In Lithuania the procedure is quicker, but again, I think, takes at least a year. Much will depend on the willingness of Mr. Shalabayev’s attorneys to delay the process.

DS” Will extradition of the people, who misappropriated money of BTA Bank, be a positive signal for the Ukrainian banking sector?

R.M. Absolutely. The example of Ablyazov’s organized criminal group is generally very revealing. To steal from the bank he set up a transnational network and now more than a dozen states have to deal with the crimes committed. Let me give just one figure: the English court found that the money of the bank were stolen through more than 1300 (!) specially created offshore companies. For any country, it is important that every fraudster felt the inevitability of punishment for crimes committed. Thus, the trial of Ablyazov in Ukraine would be an important lesson also for our bankers, who sometimes confuse money their money with the money that investors put in the bank for safekeeping. It is also important that in case of judgments of conviction in Ukraine regarding Ablyazov, Shalabayev and other members of organized criminal group their funds will be confiscated to the Ukrainian budget.

DC” In recent years tens of banks burst in Ukraine. How the interests of depositors can be protected?

R.M. The monitoring of banks is entrusted with the National Bank of Ukraine. The monitoring will be conducted on a daily basis. If a bank accepts deposits under the fabulous interest rates and gives credit funds to affiliated companies, thus, creating a banking pyramid, it means only one thing such financial institution will collapse soon. Unfortunately, earlier the NBU was not only a silent observer, but sometimes participated in the creation of such pyramids. For example, Ilyashev & Partners has already received the court decision in the interests of the client (and it became effective), which found that the former composition of the National Bank is directly responsible for improper supervision of activities of Brokbiznesbank. Fortunately today the composition of the regulator has become more professional and changed its policy in the direction of tightening control over banks, which has a positive impact on the banking sector.

DS” How do you assess the law on liability of the founders of banks approved upon submission of the NBU?

R.M. Very positively. We all understand that the top managers of the banks violate the rules of law not without the approval of the owners of financial institutions. As a result, the companies close to the bank move out funds abroad, investors lose their money, because the Deposit Guarantee Fund compensates only UAH 200 thousand. At the same time people who created the problem bank and appointed the fail head bear no responsibility, on the contrary, continue to operate under a new guise. The adopted law toughens responsibility of bank owners, which together with other active actions of the regulator doubtlessly reduces the number of abuses on the part of bankers. Among useful initiatives of lawmakers in this regard I would mention the proposals of faction of the political party “Samopomіch”, e.g. to double payments to depositors of troubled banks.

DS” Do you support the idea of increasing payments of the Deposit Guarantee Fund?

R.M. The current payment amounting to less than $ 9 thousand taking into account devaluation, does not allow many investors to compensate the funds that are stuck in troubled banks. However, the amount of compensation paid by the Deposit Guarantee Fund cannot be increased “suddenly” dozens of times. The system works well when the number of troubled banks is small. Even now, when the number of bankrupt banks numbers in dozens, no funds accumulated in the Deposit Guarantee Fund will be enough. So the first thing the NBU should avoid is bank “stuffing” when the financial institution “vacuums” money in the market and “falls down”. It is worth noting that currently the regulator is trying to do it. I would repeat that in general policy of a new composition of the National Bank of Ukraine in this aspect has changed for the better. The history of the Kazakh Ostap Bender – Mukhtar Ablyazov – is a great lesson for the entire banking sector of the CIS for the future.