The Beginning
The scam perpetrated by the Probusinessbank executives was neither one-of-a-kind nor even the largest ever. The 2000s and 2010s in Russia was a time when huge asset heists and money laundering schemes were being perpetrated on an unprecedented scale.
Schemes almost became a byword for the Russian economy. Using cash for tax evasion purposes was a regular business practice, as was creating shell firms that are essential to a shadow economy. At one point, such outfits accounted for almost 50 percent of a total number of Russian-registered businesses.
In 2012 alone, the official records estimated the amount of money transferred from the Russian economy abroad at $35 billion. At least 75 percent of the bank insolvency cases involved criminal foul play. In other words, it was not just that the banks misinvested their money—their executives were deliberately stealing the assets from the customers.
Some of the felonious schemes were truly mind-boggling. For instance, the Russian Laundromat scheme involved at least 18 Russian banks on top of the Latvian and Moldovan ones. Over the course of four years, the offenders stole, laundered, and withdrew an estimated total of a staggering $20 to $80 billion.
While that was unfolding, the regulator’s capabilities were rather limited. Back in the day, the Russian banks could not turn down a customer’s application for a new account if the required I.D. was in place. For Russian nationals, the only prerequisite was a Russian domestic passport. The banks were not allowed to shut down an account, even if its holder seemed too fishy. Even if the holder proved to be bogus, the bank could not stop servicing the account, and the holder would not face any charges.
Given the above, $1 billion stolen by Leontiev and Zheleznyak was nothing new. That being said, that fraud coming from Probusinessbank was a bit of a shocker. After all, the bank enjoyed a reputation as a decent and even creative outfit. Its customers had access to various perks and were happy with the service quality.
A Business-Friendly Bank
The bank was co-founded by Sergei Leontiev and Alexander Zheleznyak in 1993. In 2003, the co-owners used it as a basis for their LIFE. Financial Group. The idea was to create a holding group of banks with centralized standards, tailored to different kinds of customers.
The Group was developing a regional network. Its corporate values included loyalty to the customers, partnership, and teamwork. Probusinessbank earned a reputation as a financial institution with cutting-edge management tools. Long story short, it was an advanced bank run by open-minded individuals. The co-owners were pushing the boundaries. The customers found the bank reliable, while the bank employees enjoyed the informal executive leadership style.
Probusinessbank was a fairly large bank. Before it got delicensed, it had $200 million worth in net assets.
Probusinessbank also used to be ranked rather highly.
2010
— 9th in asset growth in Q1
— 11th largest consumer bank
2012
— Company of the Year Award in customer-oriented approach
But in 2011, the co-owners changed tack and began hatching an elaborate money heist scheme.