Mirror trades, Russia, Money Laundering, Rogue Trader

[nitro]

A Russian Tragedy: How Deutsche Bank’s “Wiz” Kid Fell to Earth

Mastermind or scapegoat, Tim Wiswell was at the heart of the bank’s $10 billion mirror-trade scandal.
By Liam Vaughan, Jake Rudnitsky, and Ambereen Choudhury | October 3, 2016

Just off the Connecticut shoreline where he grew up, Tim Wiswell leaned forward in the cockpit of his sleek, all-white 50-foot yacht. It was Aug. 9, 2015, and, dressed in shorts, a polo shirt, and mirrored shades, his hair tousled by the breeze, the 36-year-old was a picture of health and happiness. Natalia, the Russian artist he’d married five years earlier, lay by his side. Their two small children played nearby.

Nothing in the scene, captured in photographs uploaded to Facebook, hinted at the turmoil surrounding Wiswell, the clean-cut trader at the center of Deutsche Bank AG’s $10 billion Russian scandal. Four months earlier he’d been summoned into a roomful of lawyers and told he was being suspended from his job as head of equities for Deutsche Bank in Moscow. An internal investigation dubbed Project Square had determined Wiswell’s desk helped Russians divert billions of dollars out of the country using transactions known as mirror trades. Now, the U.S. Justice Department and the U.K.’s Financial Conduct Authority are investigating whether trades that flowed through Wiswell’s desk violated anti-money-laundering rules, according to people with knowledge of the matter. Wiswell hasn’t been charged, and both agencies declined to comment...

https://www.bloomberg.com/features/2016-tim-wiswell-deutsche-bank/

 

[stevegee58]

There was a fairly in-depth article in The New Yorker back in August too:
http://www.newyorker.com/magazine/2016/08/29/deutsche-banks-10-billion-scandal

The mechanics of how this co-called "mirror trading" moved money from Russian Rubles to USD in another account still eludes me:

Vlad wants to move his Rubles from a Russian brokerage account to US Dollars in a British Virgin Islands account to evade Russian capital controls. So he buys Russian stock X with Rubles and simultaneously sells the same stock X for a USD credit in the BVI account.

Does Vlad hold both the long and short positions forever with 0 Rubles in the Russian account and N USD in the BVI account? If so, it's not like Vlad can actually *spend* the USD in the BVI account since it's all margin.

What am I missing?

 

[qxr1011]

oes Vlad hold both the long and short positions forever with 0 Rubles in the Russian account and N USD in the BVI account?

he does not have short position

he sold in BVI the same stock he bought in Russia

so effectively in Russian account he has 0 rubles in BVI he has N dollars after two transactions

 

[stevegee58]

he does not have short position

he sold in BVI the same stock he bought in Russia

so effectively in Russian account he has 0 rubles in BVI he has N dollars after two transactions

But to sell it in BVI he had to have owned it first. If he already had N USD to buy the stock originally he would just get his money back after selling it.

Did he fly to the BVI with stock certificates in his briefcase?

 

[qxr1011]

But to sell it in BVI he had to have owned it first.

he just bought those shares in Russian account (accounts linked), and simultaneously sells them in BVI account

 

[wintergasp]

he just bought those shares in Russian account (accounts linked), and simultaneously sells them in BVI account

No the accounts are not linked.

He buys a share in Russia.

Goes short the same share in the BVI.

He hopes the share in Russia will lose value. The money he loses in Russia, he makes in the BVI.

There's no "linked account" that would be way too easy.

 

[qxr1011]

there are linked accounts ...

its is very easy
he-he

 

[qxr1011]

A Reporter at Large
August 29, 2016 Issue
Deutsche Bank’s $10-Billion Scandal
How a scheme to help Russians secretly funnel money offshore unravelled.
By Ed Caesar

• 
  

The bank, beset by scandals and mismanagement, is in a precarious state. Illustration by Anna Parini
Almost every weekday between the fall of 2011 and early 2015, a Russian broker named Igor Volkov called the equities desk of Deutsche Bank’s Moscow headquarters. Volkov would speak to a sales trader—often, a young woman named Dina Maksutova—and ask her to place two trades simultaneously. In one, he would use Russian rubles to buy a blue-chip Russian stock, such as Lukoil, for a Russian company that he represented. Usually, the order was for about ten million dollars’ worth of the stock. In the second trade, Volkov—acting on behalf of a different company, which typically was registered in an offshore territory, such as the British Virgin Islands—would sell the same Russian stock, in the same quantity, in London, in exchange for dollars, pounds, or euros. Both the Russian company and the offshore company had the same owner. Deutsche Bank was helping the client to buy and sell to himself.


http://www.newyorker.com/magazine/2016/08/29/deutsche-banks-10-billion-scandal

 

[stevegee58]

Jesus no wonder I went into engineering instead of finance.

 

[qxr1011]

me too

ha-ha