Azerbaijan: The World's Laundromat for Dirty Money

Author:
Rupert Taylor
Updated:
Apr 26, 2024

Rinse and repeat for soiled money.
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Corruption and the Aliyev Family

The former Soviet republic Azerbaijan became a centre for very rich people who wanted to hide the sources of their money.

Foremost among the clients with resources of dodgy provenance was the Aliyev family, whose members have been ruling the country since it became independent in the early 1990s.

The cash flow was handled by several Western businesses and banks that avoided inquiring too deeply into where the money came from.

Others with money from grubby sources noted how the "Azerbaijani Laundromat" made soiled cash appear fresh and sparkly, so they joined the fun.

Despite its wealth and increased influence in the wider region, poverty and corruption continue to overshadow the country's development. The formal political opposition has been weakened by years of persecution and Baku has carried out an extensive crackdown on civil liberties in recent years, says Freedom House.

— BBC on oil-rich Azerbaijan

The Outing of Javad Marandi

For 19 months, U.K. national broadcaster BBC fought a legal battle to identify Javad Marandi as a central figure in a money-laundering scheme. In May 2023, the news organization got a favourable court ruling and Marandi's name was revealed.

Born in Iran and raised in Britain, Marandi is described as an “international businessman.” The BBC reports that “He owns the iconic design brand, The Conran Shop, a stake in Anya Hindmarch Ltd, the luxury handbag firm, and an exclusive private members' club and hotel in Oxfordshire.”

Marandi also has investments in France, Belgium, Switzerland, Azerbaijan, and elsewhere.

Marandi moved in the upper echelons of British society. Over a six-year period up to 2020, he donated £756,300 ($940,000) to Britain's Conservative Party. This gave him access to high government officials, including former Prime Minister Boris Johnson.

Marandi's money helps fund charities run by the Prince and Princess of Wales. His business acumen and philanthropy earned him the title of Officer of the Order of the British Empire.

In 2022, Britain's National Crime Agency found that some of Marandi's businesses were involved in the Azerbaijani Laundromat scheme.

Duncan Hames is with the anti-corruption organization Transparency International. He has written that the Javad Marandi case “raises serious questions about the relationship between money and power in our democracy. This isn’t just a Westminster storm in a teacup, it is a national security issue.”

And it's an issue that goes beyond the shoreline of the British Isles.

The Azerbaijani Laundromat

The Guardian describes the plot as “a scheme to curry influence, pay lobbyists, apologists and European politicians, and to launder cash. The $2.9bn (£2.2bn) operation ran between 2012 and 2014—meaning that on average $3m was channelled out of Azerbaijan every day.”

The money belonged to the people of Azerbaijan and was siphoned off by the ruling Aliyev family and friends. Bankers were involved—of course they were.

Much of the stolen loot started its journey through the International Bank of Azerbaijan (IBA). A few keystrokes on a computer by someone in the IBA and the money turned up in the Estonian branch of Denmark's Danske Bank A/S.

A few more clicks and the money, looking a lot less grubby than it did earlier, arrived in the accounts of companies in the United Kingdom that were managed by offshore entities. Polux Management, Hilux Services, and LCM Alliance were among those named.

Danske Bank was also handling huge quantities of money from clients in Russia and other countries. In total, about $212 billion passed through its Estonian branch.

The bank's top brass, who knew about the transactions in 2014, decided not to take action. The official line amounted to "We've notified the authorities and it's up to them to hand out prosecutions if they see fit."

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About $160 billion of this money flowed into the United States.

Once regarded as a financial house with integrity, Moody's Investors Services downgraded Danske Bank's debt ratings over its involvement in the Azerbaijani Laundromat.
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Some of the companies receiving deposits from Danske Bank were Scottish limited partnerships (SLPs). These were set up under a law that legally allowed them to hide the details of their activities and company officers.

Transparency International reported that the number of SLPs more than quadrupled between 2007 and 2016 as they became popular tools for criminal networks wishing to conceal the nature of their activities.

All of these nefarious activities were uncovered by the Organized Crime and Corruption Reporting Project, a network of investigative journalists that operates around the world. The crooked dealing should have been revealed by the many government agencies charged with regulating the financial services industry, but it wasn't.

Gleaming new towers in the Azerbaijani capital, Baku. The United Nations ranks the country as 91st on its list of desirable places to live.
Niyaz Bakılı on Flickr

Where Did the Money Go?

Secrecy surrounds the eventual destinations of the money that came from corrupt and criminal activity.

Some of it was used to buy prime real estate in such places as England, France, and Switzerland.
Some of it went to buy the must-have items of billionaires, such as private planes and super yachts.
Some sits in bank accounts in places where pesky inquiries are never answered, such as the British Virgin Islands, Malta, and Monaco.
And some of it went to grease the wheels of democratic institutions.

This is where we meet the former German politician Eduard Lintner. Elections in Azerbaijan have a well-earned reputation of being rigged. So in 2013, President Ilham Aliyev invited Lintner to head up an election monitoring group.

Tasked with putting lipstick on a pig, Lintner came through and declared that the re-election of Aliyev, with 85 percent of the ballots cast, was the equal of “German standards.” Two weeks later, Lintner's foundation received a gift of €61,000 ($65,800). Guess where it came from? That's right—Azerbaijan, via a U.K. shell company.

The German broadcaster Deutsche Welle reported

“The payment was one of 19 adding up to 819,500 euros ($883,500) made between 2012 and 2014 to Lintner, who after leaving politics in 2009 founded the Society for Promoting German-Azerbaijani Relations (GEFDAB), a lobby group.”

While Lintner was bestowing his seal of approval on the Azerbaijan election, the Organization for Security and Cooperation in Europe described it as seriously flawed.

Italy's Luca Volontè is another European parliamentarian who has received slush-fund money from Azerbaijan. There are others whose support has been bought in an influence-peddling scheme aimed at polishing up the image of the authoritarian regime.

When the Organized Crime and Corruption Reporting Project unveiled the Azerbaijani Laundromat in September 2017, the swindle was shut down. However, it would be naïve to think the people with vast sums of money to launder haven't found another way of doing so.

More billions laundered.
Images Money on Flickr

Where Are the Crooks Now?

Scottish limited partnerships: Belatedly, the Scottish government tightened the rules surrounding the 30,000 entities in its jurisdiction, forcing them to reveal the identities of their beneficial owners.
Denmark's Danske Bank: In December 2022, the bank entered a guilty plea to U.S. Department of Justice charges and agreed to a $2 billion settlement.
Eduard Lintner: He has been banned for life from the Council of Europe and is under investigation by German authorities.
Luca Volontè: In January 2021, he was handed a four-year sentence for taking bribes.
Javad Marandi: In British court proceedings looking into the Azerbaijani Laundromat scheme, a judge has named Marandi “a person of interest.”
Ilham Aliyev: In a vote seen as fraudulent by independent observers, Aliyev claimed victory in the 2018 presidential election with 86.02% of the ballots.

Bonus Factoids

According to the Organized Crime and Corruption Reporting Project, the Alexandria, Virginia lobbying firm Bob Lawrence & Associates was paid $1.5 million “to orchestrate praise for Azerbaijan and had its representatives make thousands of dollars in campaign donations, including to Senators and Representatives who sat on committees that determine foreign aid budgets.” The Bob Lawrence company is permanently closed.
Transparency International's Global Corruption Barometer found that 76 percent of people in a survey believe that wealthy people have influence over governments and that they use this to further their own interests.
The so-called Russian Laundromat moved billions of dollars through its operations using offshore companies. Among those involved were Russian banks under the part ownership of Igor Putin, a cousin of Russian President Vladimir Putin.
The Mammadov family is one of the most powerful in Azerbaijan and an investor in Baku's Trump Tower development.
In 2009, the G20 group of countries pledged to close down the world's tax havens that make schemes such as the Azerbaijani Laundromat possible. According to The Guardian newspaper, Britain's then-Prime Minister Gordon Brown “hailed the agreement as he issued a blunt warning to individuals and corporations that invest in renegade tax havens that their money will be unsafe.” Tax havens such as the Cayman Islands, the Seychelles, and the Isle of Man continue to operate as before.