Russia/IMF (fwd)

[Robert Weissman <rob@essential.org>]

Reported Russian scandal sparks renewed criticism of IMF 

by Nathaniel Harrison 

WASHINGTON, Aug 31 (AFP) - The IMF, dragged into an alleged 
money-laundering scandal in Russia, is now engaged in a fresh campaign to 
defend its credibility following sharp criticism of its response to the 1997 
Asian financial crisis. 

Media reports in recent days have charged that some of the money loaned 
Moscow by the International Monetary Fund has been diverted through New York 
bank accounts by Russian organized crime figures as well as members of the 
country's political and business establishment. 

Fund officials have strenuously denied that IMF loans to Moscow have been 
misappropriated or are in any way linked to reports that up to 15 billion 
dollars may have been laundered through US banks. 

IMF managing director Michel Camdessus, in a French newspaper interview 
appearing Tuesday, gave vent to his discomfort over suggestions that funds 
supposed to have been closely monitored by the IMF had been criminally 
diverted. 

Camdessus told the newspaper Liberation that he did "not appreciate seeing 
the IMF cited alongside the Russian mafia or oligarchs." 

"We have better things to do than publish denials or correct false reports." 
The money-laundering accusations, also denied by the Russian government, 
have nonetheless revived criticism of the IMF in Congressional and academic 
circles here. 

A staff member of the US House of Representatives Banking Committee 
described the sums mentioned in press reports as "the tip of the iceberg" and 
said congressional hearings into the charges would be held next month. 

Committee chairman James Leach has warned that the scandal could justify 
the suspension of a second 640 million dollar installment in an IMF loan 
package for Russia approved in late July. 

At the Cato Institute, a libertarian think tank here, analyst Ian Vasquez 
noted that IMF support for Russia had been vigorously advocated by the US 
Treasury Department, in particular by current Treasury Secretary Lawrence 
Summers. 

"It's difficult to explain why the United States is pushing IMF aid to 
Russia (in the face of) evidence that reforms have not been made and people 
are misusing the money," he said. 

"That undermines the credibility of the IMF." 

With recoveries under way in much of southeast Asia, the IMF had been 
enjoying a respite from attacks by detractors who had denounced its handling 
of the 1997-1998 crises that shook Thailand, South Korea and Indonesia. 

Critics in the Republican-controlled US Congress faulted the Fund for its 
secrecy and charged that it had failed to predict the turmoil in the region 
and then botched its response. 

There were likewise calls for closer scrutiny of Fund operations. In April, 
the Treasury Department pressed the IMF to consider "further enhancements" of 
its ability to track the money it lends to client countries. 

In particular, the department called for more frequent and systematic use 
of independent central bank audits. 

In June, the Russian government commissioned the US firm 
PricewaterhouseCoopers to audit Russian central bank transactions. 

According to the Wall Street Journal, the probe concluded that the bank in 
1996 had funneled 1.2 billion dollars in IMF funds to an offshore firm called 
Financial Management Company (Fimaco). 

The IMF board called the Russian central bank practices "a serious 
violation of Russia's obligations to the Fund," notably as the transactions 
gave a "misleading" impression of the status of bank reserves. 

Camdessus on Tuesday accused Moscow of having "lied" to Fund officials on 
the state of government reserves. 

IMF spokesman Thomas Dawson earlier this week insisted that the Fund was 
being "open and transparent" in the current circumstances and said IMF 
officials would take the money-laundering accusations into account in deciding 
whether or not to approve a new loan installment for Russia. 

"We do in fact, through a variety of mechanisms, have a reasonable idea of 
the flow of funds ... not in a narrow, auditing sense but in a pretty good due 
diligence sense," he said. 
nh/rl