Will Alliance Bank follow Nadra Bank’s fate? How Firtash’s financial institution ended up on the brink of collapse with billion-hryvnia liabilities to customers

19 липня 2022 р., 17:10

Олена Юрченко 686 0

There is growing media speculation regarding the financial stability of Alliance Bank, with widespread reports suggesting a potential risk of insolvency. This narrative is further fueled by intensified interest from law enforcement agencies regarding the bank’s operational practices. While these developments have created significant negative publicity, it is important to note that the regulatory authorities have not yet issued any official declarations regarding the bank’s solvency. Continued monitoring of the situation is advised.

The publication Luxembourg Herald published an investigation regarding "Alliance Bank" and one of Ukraine’s wealthiest Ukrainians, Dmytro Firtash. The material states that the bank is allegedly on the brink of bankruptcy due to multi-billion-dollar manipulations and embezzlement of funds, including state funds.

"Today, the bank is not fulfilling its obligations to clients. According to a source in the financial institution, the volume of unpaid client payment orders has exceeded UAH 1 billion. Neither private enterprises nor state institutions can withdraw money from the bank," the investigation states.

However, the bank refuted these accusations. And not only on its official website, but also separately in advertising texts on news sites.

"The Alliance Bank team considers such news a sign of ordered aggression against the Bank’s strategic growth. We urge you to read verified sources and trust official data. Relevant information on monitoring and financial institutions is regularly updated on the official website of the NBU," quoted the words of Yulia Frolova, Chairwoman of the Management Board of Alliance Bank.

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We decided to look into the accusations.

"Today, there is no money in the bank, it is practically empty and lives solely on NBU refinancing," the investigation says.

It should be noted that the National Bank website describes the financial institution as solvent. According to the results of 2021, the bank’s net profit for the year amounted to UAH 331 million, and the amount of regulatory capital increased from UAH 0.6 to UAH 1.0 billion. You don’t need to be a financier to distinguish growth from reduction. But back in March last year, Alliance Bank was among the institutions with the lowest capitalization.

This may not be a bad thing, but in the event of unforeseen circumstances, the bank may urgently need additional funds. And so it happened: Alliance Bank received a refinancing loan at the end of February 2022 - after the full-scale invasion in the amount of UAH 510 million. In March of this year, there was another loan of UAH 250 million.

In addition, in August 2019, the banking regulator fined the bank UAH 2.6 million.

"The nature and consequences of these financial transactions give grounds to believe that their purpose may be the legalization of criminal proceeds, the conversion of non-cash funds into cash, - the statement of the National Bank says. - Alliance Bank (broker) is involved in criminal proceedings. According to the court ruling, officials of JSC "BANK ALLIANCE", acting in collusion with officials, in particular, of two other banks, two stock exchanges, brokers, individual legal entities and individuals, carried out transactions for the purchase and sale of domestic government bonds in the so-called "group report" mode.

That is, the bank regularly conducted transactions for the purchase and sale of the same domestic government bonds for its clients. As a result, clients received artificial investment profits, and companies received investment losses.

16 bank clients, including a people’s deputy, his assistant, and individual employees of Alliance Bank, received artificial profits of UAH 57.7 million. Of which UAH 56.4 million was received in cash at the bank’s cash desk. That is, the regulator officially announced the possible legalization of criminal proceeds through Alliance and the bank’s participation in proceedings regarding the concealment of the illegal origin of funds in the amount of more than UAH 86 million.

The case regarding the fine reached the court, in which the National Bank initially lost. Due to the fact that some court decisions were prohibited from publication, it can be assumed from available reports that the regulator proved its case.

"The Prosecutor General’s Office believes that Alliance helped Firtash’s structures steal more than UAH 4 billion from Naftogaz of Ukraine National Joint-Stock Company," the investigation says.

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The materials of criminal proceedings No. 42017000000000445 dated February 17, 2017, state that it is likely that through the bank in 2017-2018, the management of Firtash’s regional gas companies could illegally withdraw funds, which led to a significant increase in debt to Naftogaz. Hence the connection between the bank and the wealthy Ukrainian.

"The Prosecutor General’s Office of Ukraine is conducting a pre-trial investigation in criminal proceedings No. 42017000000000445 dated 17.02.2017 on the grounds of criminal offenses under Part 5 of Art. 191, Part 2 of Art. 211, Part 3 of Art. 212, Part 2 of Art. 364, Part 2 of Art. 367 of the Criminal Code of Ukraine, in particular, regarding the facts of illegal withdrawal of funds during 2017-2018 by officials of regional gas supply companies LLC "Kyivoblgaz Zbut", LLC "Vinnytsiagaz Zbut", LLC "Ivano-Frankivskgaz Zbut", LLC "Mykolaivgaz Zbut", LLC "Rivnegaz Zbut", LLC "Kharkivgaz Zbut", LLC "Zhytomyrgaz Zbut", LLC "Khmelnytskgaz Zbut", LLC "Chernihivgaz Zbut", LLC "Chernivtsigaz Zbut", LLC "Sumygaz Zbut", LLC "Zakarpattiagaz Zbut", LLC "Volynigaz Zbut", LLC "Zaporizhgaz Zbut" using an interconnected group of business entities PJSC "Agrarian Fund", LLC "Status - Trade", PJSC "Azot", PrJSC "Rivneazot", PrJSC "Severodonetsk Association Azot" and others, which led to a significant increase in debt to the state-owned PJSC "Naftogaz of Ukraine" in the amount of more than UAH 4 billion," the materials from the court register state.

"The real trump card of Alliance Bank was fraud with non-fulfillment of bank guarantees. A scheme that would have been impossible without serious connections in the National Bank, but has been flourishing for many years. Its essence is simple: the bank acts as a guarantor of the contractor’s fulfillment of the terms of the state tender, but when the contractor receives an advance payment and disappears, Alliance also refuses to compensate for the losses of state companies. As a result, the money is simply stolen by the participants of the scheme, and the state is left with nothing," the material says.

According to the public procurement website Prozorro, "BANK ALLIANCE" participated in competitions for the provision of guarantees. Of the latest procurements, in December 2021, the "LVIV SCIENTIFIC AND PRODUCTION CENTER FOR STANDARDIZATION, METROLOGY AND CERTIFICATION" signed a contract with the bank for guarantee services for UAH 1,000. Another procurement we found was for UAH 20,393.52 for similar services for the Municipal Enterprise "Kharkiv Repair and Construction Enterprise".

"In this regard, it is worth recalling the 2018 story with the purchase of fuel for the Armed Forces of Ukraine, the guarantor of which was Alliance Bank. The fuel was to be supplied by the company "Fideya" (part of the orbit of the scandalous "Trade Commodity" from the circle of Petro Poroshenko), but did not do so on time. When the Ministry of Defense tried to collect from the bank what it had guaranteed, Alliance refused to pay. As a result, the army was left without fuel and without money," the investigation says.

Such a case was indeed considered in court. In September 2018, the Commercial Court of Kyiv obliged the Ministry of Defense to return the bank guarantee to the Dnipro-based "Firma "Fideya". The Commercial Court of Appeal also did not side with the ministry, and the case reached the Supreme Court. But what decision was made is unknown.

The investigation also mentions the "State Innovative Credit and Financial Institution", which demanded that Alliance Bank return UAH 17.3 million. The bank recognized this debt and signed a settlement agreement.

Another "victim" was the "Administration of Sea Ports of Ukraine", which through the court tried to receive UAH 43.4 million in bank guarantees from Alliance. In February 2021, the court recognized the administration’s claims as justified, but the case is still being considered.

As we can see, not everything written in the investigation is untrue. But whether the bank really has problems and whether it violated the law should be decided by the National Bank and law enforcement agencies.