The “miracle bank” of Central Asia, Asia Universal Bank in the Kyrgyz Republic has had an involuntary bankruptcy petition filed against it. The petition alleges that AUB illegally “froze” some US$11 million in order to cover its own liquidity problems. When questioned, AUB opined that it was required to freeze the funds under the anti-money laundering statute. Further investigation however, reveals that there was no such statute in effect at that time of the action, only a yet unenacted “draft”.
AUB was considered a prodigy in that it grew from an initial capital base of under US$100,000 to more than US$150 million in assets in a few short years. It is widely thought, however, that this phenomenal growth is almost totally from money laundering, and that the real owners of AUB are four major Moscow underworld figures.
In a separate, but linked action, criminal charges are being pursued against AUB’s Chairman.
It is believed that AUB had a secondary, more cosmetic reason for freezing these funds—it wanted to appear to be fighting money laundering and make an example of this one client. (Earlier this year it had a similar run-in with the central bank.) But it picked its target badly: the client had already cleared its activities with the government and central bank, was completely and properly organized under Kyrgyz law and had its tax status properly setup. Of all of its possible targets, AUB appears to have chosen the least vulnerable one. AUB is the largest private bank in the Kyrgyz Republic, and if it were to go under, the economic tidal wave might take down several of the other private banks. It has been reported to us that frantic negotiations are underway to solve the immediate issues and prevent a showdown in court.
While AUB’s growth was centered in the former Soviet Union, it had started to reach out beyond those frontiers to the wider offshore financial world. I have personally warned many people about the danger of dealing with this bank because of the “money-laundering” rumors, which, I still believe, will bring the bank down one day. With billions of dollars of legitimate private money looking for a good bank, it is the height of idiocy, or arrogance, to accept criminal deposits.
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