As Russia continues its massive offensive to subjugate Ukraine’s democracy, Russian financial interests are desperately working to protect their interests from U.S. sanctions.
One such interest is Sovcombank. The bank wants U.S. senators to believe it is absolutely committed to the rule of law and anti-corruption efforts and that it provides no support to Vladimir Putin’s power.
The truth is quite different.
Sovcombank is particularly concerned by Senate legislation that would sanction it and other major Russian banks in response to Putin’s invasion. In turn, Sovcombank is pulling out all the stops to get its name removed from the target list.
As part of that effort, the bank reached a Jan. 27 agreement with Mercury Public Affairs to lobby Congress on its behalf. The lucrative six-month contract is valued at $90,000 per month for a total of $540,000. Mercury has previously represented another pro-Putin oligarch, Oleg Deripaska. Deripaska’s residences in New York and Washington, D.C., were raided by the FBI last October (though there are no unsealed court records to suggest he has been charged with any federal offenses).
Facing the Senate, Sovcombank’s first tactic has been to whitewash its image. In a letter to Mercury, likely requested by Mercury for its lobbying efforts, Sovcombank says that there are “only five individuals with total funds exceeding $10 million each deposited with Sovcombank. All these individuals are owners of private businesses/entrepreneurs with a track record in private business.” The bank also says none of these people are under U.S. sanctions.
Translation: We’re just another major bank.
This is not accurate.
In 2013 and 2014, regulators from the Central Bank of Russia (equivalent to the U.S. Federal Reserve bank) fined Sovcombank for a “malicious” failure to conform with money laundering reporting requirements. The Central Bank of Russia now offers a dead link where its original reporting on the fines was present. But Russian banking records indicate that the Khotimsky brothers, Sergey and Dmitry, remain major shareholders in Sovcombank via their SovCo Capital Partners entity. Banking records also list a smaller Sovcombank shareholder, Andrey Suzdaltsev, whose name appears in the “Offshore Leaks” on aggressive tax offshoring.
What more do we know of the Khotimsky brothers behind the Sovcombank throne?
According to the RusCriminal investigative journalism website, Sergey Khotimsky found early business success in the late 1990s, establishing a law firm with connections to money laundering interests. RusCriminal has also reported on Khotimsky’s links to Nikolai Zhuravlev, a sitting Russian senator for Putin’s United Russia party. Links between pro-Putin politicians and financial or corporate entities are part and parcel of the Russian corruption industry.
That’s not the only skeleton in Sovcombank’s closet.
A former Sovcombank deputy chairman engaged in a pyramid scheme in which he accepted deposits from high-value investors and then failed to pay them back. Sergei Peretrukhin then shielded Sovcombank by claiming that he was suffering from a drug and alcohol addiction at the time. There is also Sovcombank’s current management board chairman, Dmitry Gusev. Gusev’s passion for poker and associated debts have prompted media reporting as to whether Sovcombank has used client funds to cover his losses.
How has Mercury sought to shield Sovcombank from its less-than-auspicious history?
It has enlisted former Sen. David Vitter to lobby the Senate. Vitter recently implored his former colleagues, “I know you understand that Sovcombank even being named in final legislation as a possible target would have major negative market consequences.” Interestingly, Vitter also helps Mercury on its account in support of Hikvision (and a Chinese Communist Party delegate), which provides surveillance support for the genocide against China’s Uyghur population.
Other whitewashing efforts appear more literal.
Since the contract with Mercury was reached on Jan. 27, a Wikipedia user, “Vesan99,” has made nearly 50 positive edits to Sovcombank’s Wikipedia page. This effort culminated on Tuesday, with Vesan99’s creation of a section outlining Sovcombank’s “contribution to global initiatives.” The language used in this section closely matches that provided in a Feb. 1 letter by Mercury’s Peter Kucik to the National Security Council. Kucik lamented Sovcombank’s inclusion on the sanctions list. Pointing to the bank’s humanitarian and gender initiatives, Kucik requested a meeting with the National Security Council’s Peter Harrell. It is unlikely that the NSC would accept such a meeting.
But, as eloquent as it is, Kucik’s letter isn’t entirely forthcoming with the facts. Consider the former Treasury Department official’s noting of Sovcombank’s various “multinational institutional equity investors in the bank include sovereign wealth funds of Saudi Arabia, Kuwait, Qatar, Bahrain and UAE, Japan Bank for International Cooperation, and SBI Holdings, a Tokyo-listed Japanese public investment group.”
Kucik’s words are designed to present any sanctioning of Sovcombank as equally damaging to U.S. allies. Left out of Kucik’s foreign investor list, however, is the Russia-China investment fund. That fund is an investor in Sovcombank and even holds an observer seat on the bank’s supervisory board. This bears note, considering Xi Jinping’s support for Vladimir Putin’s strategy toward Europe. The China-Russia investment fund’s explicit purpose is to “advance bilateral economic cooperation between Russia and China.”
In short, senators may wish to consider the full record before considering whether to give Sovcombank a sanctions pass. Russian banks form a centerpiece of Putin’s patronage-cronyism networks at home and abroad. If the United States is serious about imposing costs on Putin for his imperial aggression, banks must be part of the target list.
Sen. Bob Menendez’s office, which is sponsoring the relevant sanctions, did not respond to multiple requests for comment as to whether Sovcombank would continue to be included on the bill’s sanctions list.
