A Cyprus-based financial entity was reportedly used as one of the channels through which funds were routed in controversial Gazprombank transactions involving four former senior executives of Gazprombank Luxembourg.
The transactions are at the centre of an investigation by the Financial Times. According to the report, the four bankers used Swiss financial intermediary Compagnie Bancaire Helvétique (CBH), while funds were also routed through Cyprus-based Veles International.
There is no indication from the available information that the Cyprus-based company has been accused of illegal activity or that any breach of European sanctions was established. Its involvement relates to its reported role in the flow of funds used for the transactions.
More than 50 transactions
The four former Gazprombank Luxembourg executives reportedly carried out more than 50 personal transactions involving undervalued Gazprom bonds, potentially generating combined profits of more than €9 million.
Documents reviewed by the Financial Times show that, between July and November 2022, the executives received transfers of more than €17 million after converting amounts from roubles. The funds were used to purchase Gazprom bonds that had lost significant value following the imposition of Western sanctions on Russia.
The bonds were subsequently exchanged in Russia for new securities recognised at their full face value and tradable in roubles.
Questions over privileged information
The four bankers reportedly bought equal amounts of the same bonds on the same day, often before Gazprom officially announced that the securities were eligible for replacement.
This raised questions over the possible use of privileged information, as the window for completing the exchanges was limited and it was not widely known which securities would qualify for the mechanism.
Dmitry Derkach, the former head of Gazprombank Luxembourg who reportedly began the transactions first, categorically denied any wrongdoing. He said Luxembourg’s financial regulator had found no significant irregularities during its investigation.
Russian entity under EU sanctions
Questions have also been raised over the involvement of Russia’s National Settlement Depository (NSD) in the bond replacement process. The organisation, which handles the safekeeping and settlement of securities in Russia, is subject to EU sanctions.
European officials and legal experts have said it should be examined whether the transactions resulted in direct or indirect payments to the NSD. So far, however, there has been no public finding that sanctions were breached.
What the regulator found
Luxembourg’s financial regulator, the CSSF, inspected Gazprombank Luxembourg in March 2023 following a complaint.
The investigation found breaches of the bank’s internal rules, as employees were not permitted to maintain personal accounts with the bank. It also found that the four executives had not undergone the required checks despite being considered high-risk clients.
The CSSF found no other wrongdoing, did not conclude that European sanctions had been breached and did not impose a financial penalty.
Gazprombank Luxembourg denied any wrongdoing, saying it had fully complied with European Union and Luxembourg law.
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