Russia’s largest bank, Sberbank, said that it can take over payments previously handled by Master Bank, a major processor of credit card payments and operator of cash machines that was shut down by the Central Bank of Russia (CBR) this week.
Master Bank lost its licence on 20 November over alleged ‘large-scale dubious operations’, as the CBR followed through on warnings by its new head, Elvira Nabiullina, that it will crack down on financially dubious practices. Master Bank is being investigated by the police for suspected money laundering.
According to the Interior Ministry Investigative Department, which received a warrant to investigate its activities, Master Bank is suspected of siphoning money through shadow banks and lenders which received up to 7% from each transaction.
In October 2012, the former vice president (VP) of the company, Evgeny Rogachev, was arrested. The following month, the Tver court of Moscow put two ex-Master Bank employees under house arrest on charges of illegally cashing US$61m. Andrey Orlov and Igor Babicheva were accused of setting up phony shell companies, illegally transferring cash, and charging between 3-7% in excess commission.
Although Master Bank ranked only 72nd in Russia based on total assets, its closing causes problems for employers, shops and restaurants because of its role in clearing credit card payments and managing salary payment schemes.
“Sberbank is prepared to support the payments of clients of commercial banks, the processing of which Master Bank secured,” the state-controlled bank confirmed. President Vladimir Putin’s cousin, Igor Putin, was on the board of Master Bank and is a former VP.
“The possibility is being considered for the transfer of servicing (of Master Bank payments) to one of the big commercial banks,” Georgy Luntovsky, first deputy chairman of the CBR, said on 21 November. “Some sort of decision will be taken by the end of the day.”
The withdrawal of Master Bank’s license means that its estimated US$1.5bn in private funds are now frozen, with Russia’s Deposit Insurance Agency (DIA) promising to pay out US$917m to bank customers by 4 December. Under the country’s deposit insurance system, each customer is insured up to US$21,800 by the state.
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