Cannabis — Knowing Your Customer

The recently ran an article about Russian money pouring into the burgeoning American cannabis industry and it raises some significant questions. The writers made the point that other than one notable venture in Nevada that some Rudy Giuliani allies screwed up and got themselves indicted, “investors with Russian backgrounds have been public about their involvement in the cannabis industry and law enforcement officials do not appear to have raised questions.”

Is that true? Why is that?

The Times noted that “Federal law still treats cannabis as an illegal substance and traditional banks have been wary of getting involved. Wealthy financiers have moved in to fill the void — including a growing cast of investors from Russia … who have helped shape the industry’s growth.”

requires American banks to implement ‘Know Your Customer”(KYC) anti-money laundering(AML) programs that prohibit banks from facilitating financial transactions by their clients that are derived from the proceeds of specified unlawful activities e.g. Narcotics. DEA still lists Marijuana as a . So the owner of a thriving cannabis company that attempts to deposit monies derived from the sale of Pot will be denied by the bank from completing the transaction on penalty of potential criminal prosecution and asset forfeiture. The bank is required to know their customers and what his/her business is in order to comply with both the Money Laundering laws but also the Bank Secrecy Act laws involving the reporting of cash transactions.

These AML regulations have successfully assisted Federal Law enforcement in limiting dope dealers from the use of the American banking system to promote and conceal the source of their revenue as well as the movement of their ill-gotten gains. When shady characters have attempted to conceal their illicit financial activities Suspicious Activity Reports(SARs) are supposed to be filed by financial institutions with FinCEN that are then shared with various Federal and State law enforcement agencies.

But what happens when multiple(11) states e.g. Nevada, Colorado, Maine, and Oregon, for example, legalize cannabis but the Feds do not? Such states obviously will require licenses to be issued to deal with marijuana but Banks are regulated by the Federal government and will be loath to transact in pot proceeds.

By prohibiting banks from doing business with cannabis companies law enforcement is losing a valuable partner and source of information. There is regulatory value in having financial institutions enforce KYC rules regarding their clients and sharing that information with their law-enforcement associates. Monies can be monitored. A frame of reference is available to the banking industry with regard to financing information and the IRS can track revenues via bank deposits.

Our current legal system lends itself to corruption and offshore banking maneuvers. Witness the recent indictment wherein a mysterious unnamed Russian identified by the NY Times as Andrey Muraviev provided the financing to Lev Parnas, Igor Fruman, David Correia, and Andrey Kukushkin — who were attempting to develop a multistate cannabis business plan and needed money by hook or by crook to obtain the necessary licenses. The indictment stated that the Russian arranged two wire transfers from a foreign bank account amounting to $500k apiece to an American corporate account maintained by Igor Fruman.

Some of these monies were intended to be donated to Republican candidates running for Governor and Attorney General respectively in Nevada. Since the deadline had passed for obtaining the necessary cannabis operating license some part of the contributed monies were designed to obtain a result that would cure the issue. Both candidates lost and both candidates receiving the contributions indicated that they returned the contributions. But some mystery remains.

Mr. Kukushkin, according to the indictment, said he was trying to disguise the source of the Nevada venture’s money because of the financier’s “Russian roots and current political paranoia about it.”

Really?!?

The indictment further notes that Parnas, Fruman, Correia, and Kukushkin “took steps to hide” the Russian’s involvement in the venture and in any “political contributions associated” with the project. It is noted that foreign-sourced political contributions are prohibited by U.S. law.

Who is Andrey Muraviev?

According to the on Andrey Muravyov(Muraviev), our mysterious Russian investor headed up at one time one of the largest cement manufacturers in Russia called Sibir Cement or SibCem. He currently manages an investment company located in Moscow called Parus Capital Limited. Before getting involved with Parus, Muraviev partnered with Andrey Kirikov in running a construction company in Russia called RTM. Wikipedia further relates that Muraviev siphoned $100M and other liquid assets from RTM during the period 2008–2011.

Investment Funds LLC RTM management of allegedly intentionally not repaying loans totaling $500M received from such notable Russian banks as Sberbank, Alfa-Bank, Vnesheconobank(VEB), Uniastrum Bank, etc. These are some of the largest banks in Russia run by some of the wealthiest most connected oligarchs located there. German Greff is the main honcho at Sberbank. Greff is a Putin crony going back to the St. Petersburg days when Putin was first getting his corruption groove on as Deputy Mayor. VEB is for being infested with FSB types. Alfa-Bank is run by Mikhail Fridman, Peter Aven, and German Khan who is best known for making the Godfather movie series his life’s coda.

Russian bankers such as those referenced above are not known for allowing Construction company owners to rip them off. They have their own unique KYC program that when violated generally involves kneecapping at the very least. How does Andrey Muraviev survive when he allegedly owes so much while residing in Moscow and running an investment business there? Unless of course, he is fronting for some serious hidden investors. Maybe someone who has Kompromat on him. Who is his ‘Krysha’?

Besides running an investment firm, Muraviev became heavily — a Russian online payment platform that has been called the Russian PayPal. Muraviev was on the Board of Directors and was one of the largest shareholders. Notably, the 2013 Qiwi Nasdaq IPO involved Muraviev selling 1.9M shares for $32.3M which was the third-largest sale. Mail.Ru sold 3.05M shares for $51M which was obviously the most. The largest shareholder in Mail.Ru is Alisher Usmanov who was named the Russian internet entrepreneur by the Russian magazine Kommersant in 2012 and is the proud owner of a beautiful superyacht as well as an extensive offshore collection of shell companies.

A few short years later in 2016, Financial Tribune that Muravyev and his partner at Parus Capital — Boris Sinegubko — invested millions in leading Iranian e-commerce businesses Digikala, Divar, and Sheypoor. Muraviev certainly had to have had political support at the highest levels of the Russian government to navigate the tricky economic waters of Iran. A recent WSJ by Mengqi Sun regarding the blacklisting of Iran’s Minister of Information and Commerce Technology Mohammed Javad Azari Jahromi stated that the U.S. declared last month that Iran is a “jurisdiction of primary money laundering concern.” And how is that?

Naturally, some offshore shell companies can come in handy to grease the system — any system. We can witness a graphic of Muravyev’s offshore holdings via the ICIJ database. It is noted that Muravyev is connected to a Cyprus facilitator and a firm called Stratford Investing Corp. When we click on we note the connect — — a past Director of SibCem — who the earlier referenced NY Times article listed as the CFO of Parus Capital Limited. Further research indicates additional offshore Muravyev connects to companies and individuals in Malta.

It should go without saying that the U.S. government needs to have knowledge of the offshore holdings of any investors in the American cannabis industry for tax and regulatory purposes. If Muraviev or any cannabis investor were to be allowed to utilize American financial institutions, foreign financial transactions would necessarily be known to the banks and FinCEN. The IRS would be aware of foreign wires and bank transactions via the filing of — Foreign Bank Account Records and other available databases. By not legalizing cannabis, law enforcement is hamstrung in tracking financial transactions and ensuring that all income from the lucrative industry is reported both Federally and to the States involved.

We started by noting that many questions have been raised by the NY Times article. We have raised some more by noting the inherent dangers of allowing foreign investors, specifically Russian investors to invest in the fledgling American cannabis industry. Here are a couple of more questions — Why wasn’t Foreign National-1 Andrey Muraviev indicted? Who is his Krysha(protection)?

Are any of the American cannabis companies that potentially accepted investment from Muraviev aware that the source of Muraviev’s funds may have been derived from embezzlement or frauds? What about those financial institutions that facilitated the movement of Muraviev’s funding? Has it dawned on any of the above that Muraviev may be fronting for Kremlin approved oligarchs or officials who in turn may be operating in association with connected American individuals?

Russian media has listed one of Andrey Kukushkin’s past employers as Renaissance Investment Management(RIM) where he was alleged to be a past Vice-President. RIM is a subsidiary of Renaissance Capital a huge capital investment firm located in Moscow. .

While RIM has headquarters in Moscow that has not stopped them from operating a complex network of offshore entities centered in the Grand Cayman Islands according to the ICIJ database — .

One of the shell companies depicted in the above chart as associated with RIM is something called RenGaz Holdings Limited. This company was identified by Bill Browder as part and parcel of the Hermitage Tax Refund ripoff. Not surprising given the infiltration of Renaissance by ex Russian intelligence officers.

Michael Weiss delineated two individuals in particular. Vladimir Jabarov(aka Dzhabarov) was a First VP of Renaissance 2006–09. Prior to that, he was employed by the FSB Department K, or financial counterintelligence division. He later went on to become a Russian Senator and Deputy Chairman of the Foreign Affairs Committee of the Russian senate.

Yuri Sagaidak was Deputy CEO of the Renaissance Financial Products — a subsidiary of the Renaissance Group. Sagaidak was a former KGB General who was expelled from Great Britain in 1989 after being identified as a KGB spy attempting to recruit political VIPs.

The Times noted that the owner of the largest American cannabis outfit — Curaleaf is one Boris Jordan. Muraviev is the proverbial pimple on an elephant’s butt compared to Boris Jordan. Jordan is a Russian-American who in the mid-nineties co-founded the current largest Capital Investment firm in Russia called referenced above. His boss at the time was Vladimir Potanin who went on to become one of the largest of all the Russian oligarchs complete with all the trappings including multiple A more recent honcho of Renaissance is Mikhail Prokhorov best known in the States as the recent owner of the NBA franchise Brooklyn Nets, but also a valued pet of Putin and a fellow owner.

Boris Jordan was a financial whiz at Credit Suisse-First Boston before starting up Renaissance. Jordan and Potanin are alleged to have dreamt up the infamous scheme that Boris Yeltsin implemented in Russia in the mid-nineties as the difficult transformation to a capitalist economy was getting underway. This scheme effectively exploited all the major Russian industries — directing their revenues and capital into the hands of what became a few powerful oligarchs while economically displacing millions of ordinary Russians. Jordan has been quoted recently claiming that he is as excited by the potential of the budding American cannabis industry as he was with the business opportunities he exploited in Russia in 1992. Indeed!

Renaissance received and processed a large share of the purloined loot subsequently redirecting billions of dollars out of Russia into the hidden hands and safety of offshore shell companies and their avaricious financial institution facilitators. A quick trip to the ICIJ database reflects Renaissance connects going back two decades. A deeper dive into many offshore entities is simply disturbing in terms of the sheer quantity and global reach of these shells. Jordan launched a spinoff from Renaissance in 1998 called International Investment which he still heads.

Boris Jordan currently has a 31% stake in Curaleaf. Andrei Blokh — a Moscow businessman with a long association and partnership with Russian oligarch Roman Abramovich — owns a 28% interest in Curaleaf.

In 2008, The Times reported that Abramovich admitted he paid billions of dollars for political favors and protection fees to obtain a big share of Russia’s oil and aluminum assets. Wikipedia notes that Abramovich founded the offshore company Gibraltar registered Runicom Ltd. which he then leveraged into Sibneft with Eugene Markovich Shvidler before selling to Gazprom. Abramovich and Shvidler invested in three mountain mansions in Snowmass, Colorado for $62M to go along with their yachts and also provide a home base in legalized weed country.

Abramovich was the guy legend has it, who recommended to Boris Yeltsin that Vladimir Putin become Yeltsin’s political heir as President. Abramovich currently owns the second-largest and easily the most expensive superyacht in the world called Eclipse. Costing in excess of $1Bn to construct, Eclipse is just one of seven yachts associated with Abramovich referenced as ‘Abramovich’s navy.’ Roman allegedly gifted one of his smaller yachts — the 35M Euro ‘Graceful’ to Putin. Sort of like big brother handing down a used toy to his little brother.

Without changes in American drug and banking laws, the lucrative American cannabis industry is susceptible to investment by rich foreign investors and shady characters unconstrained by normal laws and regulations. The facile political corruption plot uncovered in Nevada by the SDNY indictment that did not even indict the main financier behind the scheme — may become the new norm if the will to take Federal legislative action is not undertaken quickly.

Something significant must happen soon as the whole country trends to pot!

Get with it or get over it. But know this. Next time you toke it you may be making a rich Russian even richer. And he will be laughing all the way to his offshore bank — probably by yacht.

Martin Sheil

martinsheil@protonmail.com

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Martin Sheil

Martin Sheil

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Retired Special Agent IRS Criminal Investigation; Federal Contractor Deloitte & DOJ OCDETF; Letters of Commendation from Directors FBI Louis Freeh & Comey