08 Nov 2019
Prosecutors in Montenegro halted an investigation into nearly 22 million euros illegally paid to privileged clients of a failing financial institution while it was under the management of the Central Bank, even as smaller account holders lost their savings.
The state prosecutor’s office ended its probe into the Central Bank’s management of Atlas Bank, it said in response to a member of Parliament who requested an update on the investigation.
“We inform you that the decision was made in this case and that the criminal complaint was rejected,” prosecutors wrote in an Oct. 11 letter to parliamentarian Aleksandar Damjanovic.
Damjanovic, who confirmed the authenticity of the letter, which OCCRP obtained from a third party, said it was “unbelievable” that prosecutors had decided to stop investigating, and he vowed to raise the issue again in Parliament.
The brief letter to Damjanovic did not say why state prosecutors dropped the case. The state prosecutor’s office did not respond to requests by OCCRP for comment.
Questions about the investigation into Atlas Bank are just the latest surrounding the financial institution, which declared bankruptcy in April after years of mismanagement and questionable transactions.
The episode highlights Montenegro’s struggle with high-level corruption and crime, which the country has pledged to tackle as part of its process to join the European Union.
In June 2018, state prosecutors ordered Atlas to freeze about 63 million euros of funds suspected of being laundered through an e-commerce system. Publicly available data analyzed by OCCRP indicates that about 4.4 million euros of those frozen funds disappeared from Atlas’ books after the Central Bank imposed interim management.
Atlas was on the brink of collapse when the Central Bank took it over on Dec. 7, 2018 and managed it until April 5, when Atlas went into bankruptcy.
Montenegrin law requires financial institutions under interim management to cease almost all transactions. Account holders can be reimbursed a maximum of 50,000 euros covered by an insurance fund.
Yet analysts say the mismanagement continued under Central Bank administrators, who set up a scheme that allowed privileged clients to reclaim much larger amounts. People with smaller accounts and no connections were only able to reclaim 50,000 euros and lost the rest of their savings.
Damjanovic told OCCRP that, after hearing that some Atlas clients were reclaiming large sums, he put the question to two Central Bank officials who appeared with him on an April 15 program on Montenegro’s public broadcaster.
The officials, Tanja Teric and Dejan Vujacic, said 21.8 million euros had been transferred out of Atlas using a process called “netting.”
This practice is normally used by international banks for, among other reasons, settling accounts between companies by combining multiple invoices into a single payment. In this case, however, the definition was “stretched” beyond what is accepted, according to Mila Kasalica, an economist in Montenegro’s capital, Podgorica.
Kasalica said she was shocked when she watched officials admit to the practice on the live broadcast.
“I screamed at my television: you can’t say that!,” she said.
The actions at Atlas were both improper and illegal, said Kasalica, who works with the consultancy firm E-novativa.
It was applied to transfers between loan holders and depositors within Atlas, which is prohibited under international banking standards. Secondly, according to Montenegro’s banking law, no transfers should have been taking place at all during interim administration.
Kasalica said the transfers could only have occurred with oversight by Central Bank officials, and each transfer would have involved several transactions — leaving a trail of data that prosecutors could have requested as evidence.
While detailed data is not publicly available, Kasalica said that Atlas balance sheets posted to the Central Bank web site corroborate the admission the officials made on television. The balance sheets show that assets and loans held by clients decreased during the period of interim management by about 21.8 million euros.
Based on her research, Kasalica said, the illegal transfers appear to have occurred in two ways.
By Jared Ferrie, OCCRP, 7 November 2019
Read more at OCCRP
RiskScreen: Eliminating Financial Crime with Smart Technology
You can claim CPD minutes for this content, by signing up to our CPD WalletFREE CPD Wallet