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The Vienna Bank Job
by johan

    The Vienna bank job employed a form of international financing called back-to-back loans, through correspondent accounts other banks set up at Meinl. Such accounts are mainly used to facilitate international trade and make payments in different currencies fast and simple. But at Meinl, some accounts were allegedly set up to benefit the banks’ owners.

    Typically, banks in places like Ukraine would guarantee a Meinl loan to an offshore company with opaque ownership or a direct tie to the banks’ owners. The “borrower” would then default, prompting Meinl to invoke the guarantee and recoup the money from the originating bank.

    Left to pay the bill were ordinary bank customers and, ultimately, states with national deposit guarantee systems. Ukraine, where some 100 banks were placed under state supervision and closed in 2014 and 2015 due to questionable accounting practices and suspected money laundering, was hit particularly hard.

    The Ukrainian Deposit Guarantee Fund (DGF) estimates that 14 banks used corresponding accounts at Meinl to move US$385.6 million and 75.7 million euros that disappeared during the Ukrainian financial crisis.

    Banks in Lithuania and Latvia, meanwhile, lost some 54 million euros that went offshore via Meinl Bank.

    While Ukrainian banks lost more money, the Baltic banks present the clearest record of how the Vienna bank job worked.