A UK-led operation uncovered a multibillion-dollar money laundering scheme from London, Moscow and Dubai that allowed Russian spies and European drug traffickers to evade sanctions using cryptocurrencies.
The U.K.’s National Crime Agency said Wednesday that its “Operation Destabilize” investigation focused on two companies — Smart and TGR — that acted as a financial hub for cash-rich global criminals and sanctioned individuals who relied on cryptocurrency outside the banking system.
The NCA said the network was used by clients including cartel kinahanIrish cocaine smugglers linked to a number of contract killings, as well as financing ransomware groups, and “Russian espionage operations” from late 2022 to summer 2023.
The illegal network, which operates in more than 30 countries, illustrates the growing interaction between hostile states and organized crime as economic sanctions have forced countries like Russia to find new ways of operating in the west. The case also shows the increasing use of cryptocurrencies by those cut off from the global banking system.
Rob Jones, chief operations officer at the NCA, said the investigation was “the most significant money laundering operation” the NCA had ever undertaken.
“The goal . . . is a laundromat that aggregates street cash and cryptocurrencies at scale,” he said. It “takes you from McMafiato Narcosto le Carré, where you have espionage, where you have transnational organized crime and you have elite money launderers and Russian-speaking cybercriminals”.
The network used couriers to collect physical money from criminals in a country such as the UK in exchange for cryptocurrency, with Tether being the most popular. The money would then be laundered through the companies and the equivalent value would be available in other countries.
This two-way, mutually beneficial trade meant that the cash-rich cocaine kingpins were simultaneously helping Russian cybercriminals and elites to launder stolen cryptocurrencies and get their hands on cash while avoiding Western sanctions.
Tether has replaced bitcoin to become the “cryptocurrency of the day”, according to NCA officials, as its link to the US dollar helps criminals ensure the money retains its value.
Cantor Fitzgerald, a Wall Street brokerage, has taken a 5 percent stake in Tether. Howard Lutnick, Cantor’s majority owner and longtime CEO, has become a prominent evangelist for the stablecoin, which has become a major client of his company. Lutnick, who is co-chairman of Donald Trump’s transition team, was nominated by the US president-elect last month to lead the trade department.
Britain’s sanctioned Russian state media group RT also used the Smart network to covertly move cash to support “the activities of a Russian-language media organization in the UK”, the NCA said. Other parts of the Russian-speaking network communicated with a crypto exchange used by Russia to procure Western technology for Moscow’s invasion of Ukraine.
According to NCA officers, more than £100bn is laundered in or through the UK each year, with up to £5bn of this being done through cryptocurrency. The use of cryptocurrency for money laundering has increased significantly in recent years, fueled by the Covid-19 pandemic when travel bans made it difficult to transfer cash.
TGR, which has an office near London’s Oxford Circus as well as in Dubai, cooperated with Smart by receiving large amounts of physical cash on behalf of its owner Ekaterina Zhdanova.
Zhdanova, a 38-year-old who lives in Moscow, has graced the covers of business magazines in Russia and was accuses the US Treasury Department of transferring more than 100 million dollars to the United Arab Emirates on behalf of an unnamed sanctioned oligarch. Ždanova was sanctioned by the USA last year and is currently in custody in France.
The NCA cited another example where Smart and Zhdanova worked with TGR to move more than £2m for a Russian client, helping them bypass “know your client” checks to buy UK properties.
Over just four months, the network raised money in 55 different locations across England, Scotland, Wales and the Channel Islands. At least 22 suspected criminal groups used the network.
As part of the investigation, the NCA arrested 84 people, many of whom are in prison, and seized £20 million in cash and cryptocurrency. Five individuals associated with the network and several companies have been placed under economic sanctions by the US Treasury Department. The American FBI and DEA, as well as the French and Irish police, were also involved in the action.
Wally Adeyemo, US Deputy Secretary of the Treasury, said earlier this year that “terrorist groups and other malign actors” have “used cryptocurrencies to try to circumvent our sanctions”. In October, Director General of MI5 Ken McCallum said that Russia and Iran were “widely used by criminals as proxies – from international drug traffickers to low-level crooks” to carry out sabotage, espionage and assassination operations in the UK.
TGR is led by George Rossi, his deputy Elena Chirkinyan and Andrejs Bradens, according to the NCA. All three directors of TGR were sanctioned by the US Treasury Department on Wednesday.
“Through the TGR Group, Russian elites have sought to use digital assets — particularly US dollar-backed stablecoins — to evade US and international sanctions, further enriching themselves and the Kremlin,” said Bradley T Smith, US Under Secretary for Terrorism and Financial Intelligence.
The NCA said Smart and TGR’s crypto wallet addresses show regular exposure to Garantex, a crypto exchange sanctioned by the UK and US in 2022 and linked “to payments to companies for weapons components used by Russia in its invasion of Ukraine.” . .
Money Laundering Illustration by Cleve Jones
