Links Between U.S. Bank, Yeltsin Relative Confirmed

The chairman of the Bank of New York stirred the ongoing controversy over alleged Russian money laundering Wednesday, acknowledging to a congressional committee that two accounts reportedly linked to the son-in-law of Russian President Boris N. Yeltsin “do exist at the Bank of New York.”

The Wall Street Journal reported Wednesday that investigators are looking into two accounts at the bank’s Cayman Islands branch that are connected to the son-in-law, Leonid Dyachenko. In another strand of a complex financial web, Swiss authorities are examining whether Yeltsin and his relatives had credit cards paid off by a Swiss construction company. However, investigators have not succeeded in linking Dyachenko’s accounts with other Bank of New York accounts they are focusing on, the Journal reported.

Bank Chairman Thomas A. Renyi provided no further details on the Dyachenko accounts to the House Banking Committee.

After the hearing, however, committee Chairman James A. Leach (R-Iowa) fired off a statement declaring: “The meaning of today’s testimony is that money laundering has gone to the top of the Russian political structure.”

In his testimony, Renyi also said that $3.7 billion in Russian funds flow through its accounts on a typical day, but pointed out that there was no significant increase at the time of a major international aid loan to Russia in 1998. That could be significant, because one of the questions in the Justice Department’s investigation of possible money laundering at the Bank of New York is whether Russian criminals stole the loan from the International Monetary Fund and cleansed the money at the bank.

Renyi conceded a lapse in the bank’s internal controls, but also defended its behavior and said it had cooperated with investigators for a year before the matter became a public controversy.

“Neither the bank nor any of its customers have lost any money as a result of the activities in question,” Renyi said.

Elaborating on the large flows of money from Russia through his bank, Renyi told lawmakers that accounts apparently controlled by Peter Berlin--a businessman with ties to Russia--moved $7.5 billion through the bank over the last three years. Ultimately, the wave of money was large enough to be noticed by bank employees, although no one stopped it.

“Allowing these accounts to remain open and active without sufficient questioning was a lapse on the part of the bank,” acknowledged Renyi, who also pointed out that the average daily flow of dollars through Berlin’s accounts was about $6 million--just a small percentage of the bank’s daily totals.

Renyi said bank employees relied too heavily on the fact that Berlin was married to a bank officer, Lucy Edwards. The Bank of New York fired Edwards in August.