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Moldova: Money-Laundering Case Puts Judiciary on the Spot

A money-laundering scandal is casting Moldova’s judiciary in an unfavorable light and is raising concerns about the government’s commitment to reforms needed to keep European Union integration on track.
 
The money-laundering scandal broke back in August, when a non-profit investigative news organization, the Organized Crime and Corruption Reporting Project, published a story detailing how Russian criminal organizations and politicians used Moldovan banks between 2010 and 2014 to launder roughly $20 billion. Moldova was only a weigh-station for the illicit Russian funds, the final destination of which was primarily Latvia.
 
To give the scam the appearance of legality, “over 20” Moldovan judges allegedly issued more than 50 court orders for loan guarantors to pay off a string of fictitious bad debts. The cash was funneled from the privately owned Moldinconbank to Latvia’s Trasta Komercbanka, in the European Union.
 
A lack of transparency has marked the official response to the scandal. The Moldovan government reportedly started its own investigation in February into the judiciary’s role in the money-laundering scandal, well before the initial OCCRP report. But little information about that official probe has made its way into the public sphere.
 
More broadly, information about the fallout from the scandal has been spotty. An undefined number of judges have resigned, while others are said to remain under investigation. One judicial executor, a court-appointed individual charged with overseeing a ruling’s implementation, has been arrested, and another barred from leaving Moldova, according to Vasile Șarco, head of the government-run National Anti-Corruption Center’s Preventing and Combating Money Laundering Service. Șarco announced in late September that he was close to issuing arrest warrants for "four or five bankers.” But there has been no public comment from Șarco since then.
 
Top representatives of the judiciary have been circumspect throughout. After a public reprimand from Șarco this past May, Chief Justice Mihai Poalelungi has refused to talk with reporters.
 
Government officials and experts on Moldova’s judicial system either declined to be interviewed by EurasiaNet.org, or have done so only anonymously.
 
Arguably, the system’s politicization and corruption are underlying factors behind such reticence.
 
Moldovan courts’ independence from “the government and political interference” is nominal, according to an Investment Climate Statement issued by the US State Department in 2013. Moldova’s president appoints lower-court judges at the recommendation of a judicial council.
 
Corruption is widely believed to run rampant in the judiciary. In Transparency International’s 2013 Global Corruption Perceptions survey on Moldova, 80 percent of respondents described Moldova’s judicial system corrupt -- the highest percentage for any public institution.
 
Officials insist they are committed to reforming the judiciary in the wake of the money-laundering scandal. But, apparently, makeover attempts are not coming fast enough for the EU, which signed an association pact with Moldova in June.
 
This September, Brussels reduced the amount of financial assistance to Moldova for judicial reforms from an expected 15 million euros (about $19.06 million) to 13 million euros (roughly $16.52 million).
 
“There was a limited progress in fighting corruption. We need to address corruption as a national priority, and the priority of the relations between the EU and Moldova,” Pirkka Tapiola, who led an EU Delegation to Chişinau, said in September. As long as Moldova does not come to grips with corruption, added Tapiola, “the country will not experience European development.”
 
Justice Minister Oleg Efrim has acknowledged to reporters that more could have been done, but noted that “not everything turns out as you plan on paper.” Efrim cited the foundation of a National Integrity Commission, which oversees civil servants’ income declarations and checks for conflicts of interest, and the prosecution of two judges for bribery, as among the year’s accomplishments in the fight against judicial corruption. Judges this July also lost their immunity from prosecution in cases of alleged money laundering and embezzlement.
 
A draft law is currently under consideration in parliament to increase the independence of the prosecutor’s office from government pressure, a measure urged by the EU.
 
Political scientist Victor Juc cautioned that the money-laundering scandal indicates that Moldova is reluctant to wade deeply into judicial reform. "We can`t talk anymore about judicial reform,” he said. Other observers believe the government is similarly hesitant to undertake an in-depth investigation into the money-laundering scandal itself. In a surprise October 19 press statement, General Prosecutor Corneliu Gurin asserted that “there is no evidence” that the funds which passed through Moldovan banks were “obtained illegally.”
 
Not all of the judicial orders under scrutiny in the case have been canceled “as [some] are presumed to be legal,” Gurin added, without elaborating.
 
In response to criticism about the slow pace of the investigation, officials continue to cite the reluctance of Russian law enforcement agencies to provide information about the funds’ origin, as well as the need to obtain details from EU countries. Some observers, though, scoff at those explanations.
 
Ion Preașca, a reporter at the investigative-journalism collective RISE Moldova who worked on the OCCRP story, believes that some officials are purposely trying to downplay the scandal’s gravity. The laundered $20 billion, an amount more than twice the size of Moldova’s GDP in 2013, is just the tip of the iceberg, he contended. “I'm surprised that our authorities could not stop it [earlier],” said Preașca.
 
A former Russian Interior Ministry official, Ruslan Milchenko, now the head of a Moscow-based anti-corruption information service, Analysis and Security, with ties to the Russian government, told RFE/RL that Russia is not as big an obstacle as Moldovan officials are making it out to be. “If the Moldovan authorities would like to get more light on this case, they could do it without any problems and without the help of the Russian side,” Milchenko said.

Victoria Puiu is a journalist who writes for the weekly newspaper Timpul (Times) in Chișinău, Moldova.

Moldova: Money-Laundering Case Puts Judiciary on the Spot

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