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17 Sep, 2009 09:00

Out of court settlement ends Bank of New York money laundering lawsuit

Out of court settlement ends Bank of New York money laundering lawsuit

Russia and the Bank of New York have come to agreement over a money laundering lawsuit dating back to the 1990’s, which will see the American bank pay the Government’s $14 million legal fees.

Russian Finance Minister Aleksey Kudrin announced on Wednesday, to the State Duma, that an out of court settlement of Russia’s claim for $22.5 billion had been reached, with a signed agreement to follow shortly.

"The parties have arrived at the necessity to sign an amicable agreement, and to pay at least the same legal costs [$14 million) as to the U.S. government."

The Bank of New York reached an out of court settlement with the U.S. government in 2005 for $14 million.

In addition to the $14 million case settlement with Russia, the Bank of New York, in an act of ‘goodwill’ is expected to make a $4 billion discounted loan available to Russia. The Finance Minister stated the loan was not part of the case settlement, but was a testament to the banks intention to continue working with Russia. Press reports in Russia suggest the loan will be disbursed in $400 million tranches every 180 days, at a rate of LIBOR + 2.5% over several years.

The announcement brings to an end a 2 year old legal case in which Russian authorities had claimed for lost taxation revenues in the 1990s which stemmed from a Bank of New York Vice President and her husband having wired $7.5 billion worth of Russian funds into accounts at the bank. The bank had conceded that a rogue employee had laundered $7.5 billion from Russia through the bank in the 1990s, but said it had admitted no criminal wrongdoing.

Russia’s customs agency also claimed that it had lost tax revenue because of the money transfer scheme, which was used in part to import goods at below market rates.