Mirror trades, Russia, Money Laundering, Rogue Trader

[stevegee58]

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.

I don't think this particular scheme was counting on a loss in one account and a gain in the other. It sounded like the whole transaction happened almost instantaneously and poof the money was transferred.

I'm starting to think the accounts were somehow linked where once the shares were bought in the Russian account the shares themselves were transferred to the BVI account electronically. Then they were sold for USD.

 

[qxr1011]

this story reminds me about another one

when during "Souz-Appolo" program Russian space agency and NASA first started cooperation, one American engineer explained to his Russian counterpart about how much efforts was spent to create the pressurized ballpoint pen to work in space, and then he asked the Russian how did they resolve the same problem , no problem said Russian, we just used the pencil

 

[dealmaker]

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

View attachment 166965

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/

He looks to be the sacrificial lamb just like Fabrice Tourre was at Goldman...

 

[wintergasp]

I don't think this particular scheme was counting on a loss in one account and a gain in the other. It sounded like the whole transaction happened almost instantaneously and poof the money was transferred.

I'm starting to think the accounts were somehow linked where once the shares were bought in the Russian account the shares themselves were transferred to the BVI account electronically. Then they were sold for USD.

No, the central bank in russia doesn't allow you to move money out like this.

Even the bank needs to justify money they take out and there's no way that the central bank would have allowed 10Bn like this.

The problem is similar in Ukraine, India, West Africa etc. etc. I've heard pitches about similar schemes since 2012 from clients of the fund I work for.

 

[zdreg]

Jesus no wonder I went into engineering instead of finance.

Columbia University offers a graduate degree in financial engineering,

 

[i960]

How is this not just a typical wash trade scheme?

 

[MoreLeverage]

I didn't find a clear explanation of the way they were moving cash, but my best guess is the bank was deliberately marking up the Russian side and marking down the USD side so the money, less their fees, ended up in the USD account. Just being long in one current and short the same stock in another will move currency as the stock moves, but it could just as easily move it the wrong way.

 

[wintergasp]

I didn't find a clear explanation of the way they were moving cash, but my best guess is the bank was deliberately marking up the Russian side and marking down the USD side so the money, less their fees, ended up in the USD account. Just being long in one current and short the same stock in another will move currency as the stock moves, but it could just as easily move it the wrong way.

My understanding of the russian currency issue is that the central bank of russia needs to approve any money that leaves the country. That also applies to banks. So Deutsche need to tell the central bank "we have a linked account that's selling for 10m$ and that's why we need to transfer 10m$ of Deutshe's money outside of the country".

Otherwise, Deutsche doesn't have the money in the BVI, technically, there's no SWIFT or whatever.