Terzyan & Grochiaskij For a pair of international criminals, the
effort to pocket millions in laundered British pounds started years before COVID-19.
Still, the global health crisis gave them new opportunities to pull off their daring
series of scams.
Russian native Artem Terzyan and Deivis Grochiatskij (Grok-ee-yat-ski-j) of Lithuania were on the
radar of U.K. investigators as far back as 2017, and a continuing criminal probe revealed
the extent of a scheme that netted them roughly £70 million in total.
The investigation spanned four years and involved officials from the Metro Police and the National
Crime Agency.
It all started when officers spotted a man dropping off a large sum of money in a car
parked outside a house they were watching.
Police believed the house was a front for a London-based money counting operation.
The suspect was later identified as Auriel Zylyfi, and he was in the sights of authorities
again just one month later.
At that time, police say he received a payment of £40,000 from Terzyan.
Both men were arrested, convicted, and sentenced to a year behind bars after the investigation.
Upon searching Zylyfi’s residence, police reportedly found evidence of a scheme to launder
roughly £7 million over four months.
More evidence surfaced that implicated Zylyfi, Terzyan, and others in a massive criminal
scheme.
Investigation After uncovering evidence of a much larger
illegal enterprise, police soon began zeroing in on Grochiatskij, who lived in the same
building as Terzyan.
An Audi – the same car in which Zylyfi left a bag of cash – was a central component
of the case against the scammers.
Authorities determined that it had been used to deliver a staggering sum of money to different
entities throughout a seven-month period in which Terzyan and Grochiatskij were neighbors.
That money was reportedly funneled through shell companies set up by the pair and was
laundered through numerous international transactions.
Deposits regularly traveled through Germany, Hong Kong, the United Arab Emirates, the Czech
Republic, and Singapore before finally ending up in the criminals’ pockets.
Both men were arrested in 2018, and police began sorting through the mountain of evidence
they’d collected.
After combing through the contents of a computer, an encrypted cell phone, handwritten receipts,
and bank transactions, authorities estimated that the group was responsible for laundering
the equivalent of $50 million.
Almost half of that amount was transferred via cash deposits.
Brazen Scamming Terzyan and Grochiatskij were released from
prison on bail as they awaited trial in the case.
The courts' supposed restraints didn’t stop them from returning to their old ways, though.
The pair hatched another plan while facing charges related to the massive money-laundering
scheme.
They decided to target Britain’s Bounce Back program, which was established to provide
loans to companies struggling to make it through the pandemic and widespread lockdowns.
Authorities say the two men raked in over $13 million in payouts for falsified loan
applications through this plan.
Investigators quickly caught on to their scheme and arrested them in late 2020.
After reviewing the latest evidence in the continuing case against them, authorities
determined that Terzyan and Grochiatskij laundered roughly $45 million starting in mid-2018.
As for the Bounce Back loans, police say the pair submitted a series of claims for £50,000
loans and received £10 million altogether.
Reports indicate a single bank was responsible for providing more than £3 million of that
sum.
Much like programs in the United States and elsewhere around the world, the U.K. established
its Bounce Back program and the Coronavirus Business Interruption Loan to provide cash
assistance to struggling businesses throughout the pandemic-related shutdowns.
The British government served as underwriter for 80% of the CBIL program and 100% of the
Bounce Back loans.
Fraud Alert Also, like similar initiatives in other countries,
scammers saw these British assistance programs as easy targets.
In fact, the government spent £100 million and assigned about 1,000 investigators to
a specialized task force designed to uncover and expose the amount of fraud involving these
programs.
As it turned out, the scams perpetrated by Terzyan and Grochiatskij represented just
the tip of the iceberg.
Investigators determined that billions of pounds were misappropriated or otherwise stolen
through similar types of fraud.
An extensive audit found that there weren’t enough safeguards against misuse of the funding
and that the government dragged its feet when conducting reviews of suspicious applications.
Officials must have known that fraud was a real concern, especially when hundreds of
millions in “free” money was involved.
Many of them determined that a certain level of theft was a price they’d have to pay
for delivering money to struggling people during the pandemic's peak.
The review confirmed that loans were being granted for at least a month before authorities
devised a method for determining whether single companies were applying for multiple loans.
By the time they developed a system,more than 60% of all the loans funded by these programs
were gone.
In late 2020, the government started to get a bit more serious about preventing fraud,
but plenty of damage had already been done.
One early estimate indicated that 7.5% of all loans approved might have been fraudulent.
That number grew dramatically when the task force released its investigative report finding
that as much as 11% of the cash paid out through these government loans went to scammers.
In real terms, that makes this a widespread scheme that cost taxpayers nearly £5 billion.
Rushed Response With the economy forced to remain closed for
weeks, the United Kingdom’s government prioritized quick action over fiscal accountability.
For some, the money didn’t come through as quickly as some small business owners might
have preferred.
Meanwhile, plenty of people received loans they didn’t deserve.
The Bounce Back loan program was introduced after the CBILS to streamline the process
and get money to struggling business owners as quickly as possible.
The relief programs handed out a combined £80 billion in loans between March 2020 and
June 2021.
Bounce Back accounted for the largest number of those loans, with £47 billion sent out
to about 1.6 million individuals – sometimes within a day of filing the application.
Banking Difference Most financial institutions perform extensive
reviews to determine the likelihood that an applicant can repay a loan.
However, when the government rolled out the Bounce Back initiative, officials mandated
that banks forgo such efforts.
One banking executive recalled that the banks were prohibited from performing credit checks
in the program's early days.
Most experts agreed that getting money out to businesses as quickly as possible via the
British banking system.
However, in the aftermath, taxpayers were on the hook for billions of pounds sent out
in fraudulent loans.
Applicants were given a list of requirements for receiving a guaranteed loan.
Specifically, they had to affirm that the pandemic negatively impacted their businesses.
Of course, many fraudsters simply lied on the forms with no intention of repaying the
loan.
Banks were expected to do their best to reclaim the money, but most of those efforts fell
flat.
That means the government passed off its losses to the British citizenry.
One banking insider explained why many in the industry felt that “they’ve done what
they were asked to do” and decided to just drop the pursuit of many fraudulent claims.
It’s not surprising that banks aren’t eager to exert money and other resources to
track down borrowers who are likely perpetrating a fraudulent scheme.
After all, the government will reimburse these institutions whether or not the loan is paid.
Regulators require that banks show that they’ve made some effort to collect on the loans,
though it’s clear that many of them are content to do the bare minimum while taking
comfort in the knowledge that they won’t lose any money.
Many banking executives attempted to warn the government of the inherent vulnerabilities
in each of these programs.
Two days before the first loan applications were accepted, the ex-head of the British
Business Bank sent a letter to the nation’s business secretary to sound the alarms about
“abuse by individuals and by participants in organized crime.”
Just weeks later, three anti-corruption organizations joined forces to send their own warning.
They requested that those who receive funds through the program be made public.
That plea fell on deaf ears within the British government.
Since the loans lacked the transparency that many experts said would be necessary to combat
fraud, many details remained cloaked in mystery.
Subsequent reviews found that some of the money was gambled away or traded for foreign
currency, making it unlikely that the government would recover its losses.
Much of the stolen cash went to pay for personal expenses and lavish purchases by the scammers
behind various fraudulent schemes.
New Measures When investigators separated the loans based
on the banks that issued them, they found a troubling trend.
Some institutions appeared to do their due diligence and signaled potentially fraudulent
loan applications.
However, a handful of banks were responsible for approving the lion’s share of loans
that ended up going to scammers.
One report determined that just three banks were behind a whopping 87% of loans paid out
to companies that had already gone out of business.
Furthermore, two banks handled more than 8 in 10 loans for companies that didn’t even
exist before the outbreak of COVID-19.
It’s not entirely clear what the British government plans to do in its effort to recover
the lost money, though there are some signs that regulators are working on methods to
address fraud in the future.
For example, authorities will now perform a review on any business that goes out of
business to determine if any unpaid loans were taken out on its behalf.
The treasury bureau approved £32 million in additional funding for anti-fraud operations,
but some government officials are concerned that it won’t be enough.
With such an enormous amount of money missing, there’s a common perception that authorities
are offering too little, too late.
A representative from the treasury department attempted to quench concerns, insisting that
any amount of fraud “is totally unacceptable,” asserting that the agency is “taking action
on multiple fronts to crack down on anyone who has sought to exploit our schemes and
bring them to justice.”
Aftermath Although they were clearly not alone in perpetrating
fraud against the U.K. government, Terzyan and Grochiatskij could be seen as the poster
children for such financial crimes.
Their illegal enterprise was responsible for laundering a staggering amount of cash for
other criminals around the world.
Police say £10 million came from loans obtained through the pandemic relief program.
Upon conviction, they were both sentenced to what’s believed to be the longest prison
terms ever handed down in the United Kingdom for charges related to money laundering.
While they’re each looking at 33 years behind bars, their story only highlights a problem
plaguing governments in Covid’s wake.
One representative from an anti-corruption watchdog group accused the United Kingdom
of failing to take fraud and other white-collar crimes seriously.
A decades-long prison sentence for Terzyan and Grochiatskij is a step in the right direction,
but critics say there’s plenty more hard work to do.
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