The trail of one of Ukraine’s notorious ploshchadki – money laundering organisations involved in customs fraud – leads from China via Odesa to a provincial boxing club – and from there to the Seychelles Islands.

“The total turnover of this [kind of] scheme in Ukraine has been around $20bn per year,” claims former top Ukrainian banker Boris Timonkin. The ploshchadki are large and intricate financial schemes that allow Ukrainian importers to hugely understate the customs value of their cargo by making hidden off-the-books payments to foreign suppliers, thus generating massive international illicit financial flows.

Timonkin served for a decade as the widely respected head of one Ukraine’s top five banks, Ukrsotsbank, a subsidiary of the Italian banking giant Unicredit. In 2013, he controversially chose to head the banking business of a shadowy young oligarch, Serhii Kurchenko, alleged to be the money-launderer-in-chief for embezzlement in the energy sector under Ukraine’s former president Viktor Yanukovych. Kurchenko, who has refused to return from Moscow to face criminal charges, denies any wrongdoing.

 

Timonkin is now in Berlin battling extradition to Ukraine on organised crime charges, and ready to take on the role of whistleblower regarding the dark side of Ukraine’s financial system.

“The typical scheme is: you have a cargo from China and you declare to the customs that its value is $50,000, although its real value is $350,000. Officially you pay to the Chinese producers this $50,000, but of course in fact you have pay the producer the full price of $350,000. This means you have to find a way to pay another $300,000 illegally to the producer - and the ploshchadki have standardised a payment system in Ukraine for these illegal payments, totalling billions per year,” says Timonkin.

“It is a full service - you don’t have to worry about how the money gets there - they do it all themselves using fake companies and fake contracts. They move the money to their offshore companies abroad as first station, and then they move the money to your offshore companies or to the real producers of the goods,” he says.

All this creates a powerful standardised channel for illicit capital outflows, which is also used to move black money – revenues from corruption and organised crime – out of the country. “All platforms have two main lines – one is supporting illegal import, the second is the illegal export of capital,” he adds.

Customs fraud leads to further forms of tax evasion in Ukraine. “By reducing the declared value of goods, you reduce customs payments, but then you also reduce all the corporate tax payments by understating the profit you receive from realisation of the goods. Officially you sell the $50,000 cargo for $60,000, but in reality you are selling the $350,000 cargo for $430,000,” explains Timonkin. Handling these sums off the books requires extensive use of ‘fictitious’ or ‘one-day’ firms domestically, adding to the shenanigans.

As to who runs the ploshchadki, of which he estimates there are 7-8 different operations at work in Ukraine at any one time, Timonkin denies it is the preserve of organised crime. “It is bankers, businessmen and law enforcement officials who organise it,” he says.

Strange customs

Whereas from a banker’s viewpoint the work of ploshchadki consists in the illegal export of funds, from the point of view of ex-head of the Odesa customs authority, 28-year-old Julia Marushevska, they are monopolistic intermediaries that control the massive import of cheap consumer goods from China and Turkey to Ukraine.

While Timonkin fled Ukraine after the 2014 Euromaidan revolution, Marushevska was catapulted to power by the revolution – only to find the ploshchadka system still going strong under new protectors.

Marushevska’s attempts to reform the Odesa customs and stamp out corruption led to an open conflict with head of Ukraine’s fiscal service Roman Nasirov, and ultimately with President Petro Poroshenko himself. She resigned from the post in November 2016, following the resignation of her main political ally, former Georgian president and governor of Odesa Mikheil Saakashvili, from his post in the same month.

 

Cargoes from China and Turkey usually use pro-forma invoices with reduced prices or outright faked invoices to declare a risibly low value for the cargoes, Marushevska explains in an interview conducted before her resignation. “It’s almost impossible to find real invoices for Chinese and also Turkish cargoes,” she adds. “Sometimes the Chinese suppliers agree with the Ukrainian importers to provide invoices with lowered prices, often enough the invoices are simply faked by the importers using the paperwork of the Chinese firms.”

Marushevska recalls stopping a consignment of four containers of Viper motor bikes from Chinese manufacturers – with a declared customs invoice of $70 per bike. “It was easy to establish that the real price of the motorbikes is around $1000 – meaning the politically influential importer would pay only UAH150,000 instead of UAH2mn in customs on the container,” she says, adding that the disparity between declared and real price example is quite typical.

According to Marushevska, attempts to set up an information exchange with China to access real producer prices proved futile. The situation nearly prompted her to halt all imports from China and Turkey. But since importers are free to choose where they clear customs, customs revenues would simply have been diverted to other regions, she explains.

Chasing Chabanyuk

bne IntelliNews' investigation of one ploshchadka shows how the network of such schemes can reach right to the top of Ukrainian politics.

The investigation obtained a cache of documents relating to one ploshchadka, around 1GB of invoices, contracts and payment documents centred on the activities of four firms registered in the Seychelles. All four firms were established in the months immediately following the Euromaidan revolution – and from October 2014 to around April 2015, an estimated $50mn passed through their accounts.

Amid talk of billions, that may not sound like a lot. But given a threefold devaluation of the national currency during that period and the imposition of tight capital controls, it was indeed a significant sum. The scale of the activity prompted an investigation by Ukraine’s SBU, the security service which specialises in fighting corruption and organised crime,  alongside responsiblities for counter-intelligence and national security.

Much of the money coursing through the accounts was paid through to importers, for apparel and electronics from China, textiles from Turkey, flowers from Ecuador, watches from Italy, iPhones from Poland. At the same time, officials and politicians used the offshores to buy foreign real estate, pay fees for elite schools and universities for their children, and pay for travel. Payments flowed to numerous other offshore accounts, the owners of which could not be identified.

Amongst the one gigabyte of documents was an ownership document for one of the four core offshores, a Seychelles company called Berly Trade. The document included the owner’s date of birth, enabling his precise identification. No ownership information was available for the three sister companies.

 

Tracing the man who owned one of the core businesses establishes the name Yury Chabanyuk, an obscure lawyer and businessman in Ukraine’s Vinnytsia region, the stronghold of President Petro Poroshenko and his current prime minister Volodymyr Groysman. Groysman was mayor of Vinnitsya from 2006 until joining the government in 2014 as regional development and construction minister, and then serving as speaker of parliament until he was appointed premier in April 2016.

Examination of corporate registers shows Chabanyuk, besides owning the offshore, to have been director of local firms Vinnitsya Budivilna Kampaniya (VVK) and Skif-Ukraina, both of which are involved in the import of used vehicles from the EU. The name VVK differs only in one letter from the name of a large local construction company, a suspicious sign.

Customs records show that both these firms import mostly minivans of the sort used throughout Ukraine by private operators for public transport, the so-called marshrutki. The only trading partner of both VVK and its successor company in the business, Skif Ukraine, is a UK shell firm called Madison Motor Factor Limited, which is owned by another Seychelles offshore, and has an account at Latvia’s Norvikbank.

According to a criminal case opened in 2014 against VVK, the company was part of a contraband scheme for evading import tariffs on vehicles. Customs records show that the declared value of the second-hand vans acquired from Madison Motor is often as low as $2,000, while a used Mercedes Sprinter retails in Ukraine for over $10,000.

This means that Chabanyuk’s onshore activities in Ukraine are alleged to be linked to contraband just as much as his offshore presence in the Seychelles.

But Chabanyuk denies any relationship to offshores – despite the fact that the UK partner firm Madison is owned by such. “There could be nothing with offshores there [in UK] – the laws are very strict,” he says in an interview (photograph by Vinnytsia Agency of Investigative Journalism).

 

Chabanyuk denies anything illegal about his business. “We are one of the largest importers of used vehicles, second largest in Ukraine,” he said. “We are the biggest tax payers in Vinnytsia region in the automotive branch after [President Petro] Poroshenko,” he adds, saying the business had an annual turnover of around $12mn.

According to Chabanyuk, all criminal and other cases connected with the business have since been resolved in favour of the company. “They claimed we hadn’t paid taxes but we proved otherwise,” he says, without identifying the owner of the business. Examination of court records shows that investigation of the case indeed stopped in 2014. 

Friends in high places

Besides the vehicle import business, Chabanyuk is also currently director of a local construction company, Osobnyak-K, which is building two apartment blocks in Vinnytsia.

Osobnyak-K mysteriously shares a public telephone number with the Vinnytsia Boxing Federation (VBF), which not only organises the sport locally, but runs its own sports arena and ‘fight club’.

Head of the VBF is a deputy of the Vinnytsia municipal council, Oleh Aleksa. In an interview, Aleksa acknowledges that he knows Chabanyuk. “I know him, he is a lawyer … who has provided legal and consulting services to the VBF,” Aleksa says, adding that Chabanyuk had helped make changes to the federation’s statute. “I don’t know anything about his offshores,” Aleksa adds.

Chabanyuk’s colleague at Osobnyak-K, lawyer Maksim Pavlyuk, signed himself as representative of VBF in a text sent to journalists, underlining Osobnyak-K’s ties to the organisation.

Aleksa is a low-profile local businessman, but with good connections thanks to Vinnytsia’s role in the new post-revolution national elite. For instance, a co-founder of the Podolsk Union of Entrepreneurs, a regional business lobby, is fellow municipal deputy Igor Tkachuk. Having started business as operator of marshrutki, in 2014 Tkachuk became acting CEO of Ukraine’s national post service. Since September 2016 he is acting CEO of Odesa Maritime Trade Port, one of Ukraine’s largest.

In April 2015, then head of Vinnytsia tax and customs service Miroslav Prodan chose Aleksa’s deputy at the VBF, Serhiy Kapusta to represent the local business community at a one-to-one meeting publicised with a photo opp. In February 2017, Prodan was appointed acting head of Ukraine’s national tax and customs service.

Boxing ring

But primarily Aleksa is connected to an influential Vinnytsia businessman and former MP, Volodymyr Prodivus. Prodivus, twice boxing champion of Ukraine, is head of Ukraine’s national Federation of Boxing - and thus the main sponsor of the VBF.  Prodivus also owns Ukraine’s main bridge-building company, Mostobud.

Chabanyuk’s vehicle importer VVK has a direct connection to Prodivus’s local business structures. According to court documents relating to the criminal investigation of VVK, tax police identified the real headquarters of VVK to be at Stetsenka Street 75a in Vinnytsia. Here they expected to find the ‘black accounts’ of the company, they said in a petition to a court to raid the premises.

This is the address of a former bus station, where a company owned by Prodivus is based. Stetsenka 75a is also the address of a Ukrainian customs post – where imported goods can clear customs after entering the country. The territory of the customs post is owned by a customs broker – a private agent who facilitates the customs clearance of imports, according to data provided by the state fiscal service. The customs broker is a certain Serhii Knazhyuk – who is CEO of one of Prodivus’ local firms.

Prodivus, who left parliament after the October 2014, told bne IntelliNews: "I do not know Chabanyuk, and regarding the address Stetsenka 75-a, any number of companies could be registered there without having any connection to me." 

In 2016, video footage showed Prodivus commanding an irregular unit of armed men, who fired a live salvo over the head of unarmed villagers in West Ukraine’s Rivne region. The clash arose from a dispute over rights to informal mining of amber. Prodivus later claimed he had only been trying to enforce the law.

This report was realised with the support of n-vestigate, an investigative journalism project run by N-Ost and funded by the Robert Bosch Stiftung and the German Federal Ministry for Economic Development and Cooperation.