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OL’ MAN RIVER AND THE DAM STATE: The secret life of ASAL river basins

In this final part of a three-part series, PAUL GOLDSMITH traces the rise and fall of the lowland-coastal regions of East Africa and the Horn and examines why water management in these regions exemplifies the imbalance between the centre and the periphery. He argues that the Kenyan government’s failure to adopt indigenous knowledge and technological innovations has resulted in white elephant projects that have done little to solve the country’s water crisis.

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OL’ MAN RIVER AND THE DAM STATE: The secret life of ASAL river basins
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Major river systems are intrinsic to the long economic histories of the regions they transect. However, although the Tana River basin covers 20 per cent of Kenya’s land mass, the river itself, in terms of water volume and vital economic functions, is not the kind of waterway one associates with the world’s famous rivers. This, however, does not diminish the Tana River’s historical importance, which is critical to understanding the larger background against which the High Grand Falls Dam project is being framed.

Insofar as the three major rivers spanning the eastern highland-lowland gradient share the same highland water catchments and are also linked within the Vision 2030 policy framework, the case of the Tana cannot be examined in isolation from the Athi-Galana and Waso Nyiro North systems. The Athi-Galana takes a route similar to the Tana, skirting the contours of Kenya’s eastern highland-lowland gradient, but is often only a trickle by the time it reaches Malindi. The flow has been further reduced following the establishment of the one-million-acre Galana irrigation scheme bordering Tsavo East National Park. For people depending on Malindi’s tourism sector, this is a positive development as the drop in volume reduces the siltation of local beaches, a problem that contributed to the rise of Watamu as an alternative beach holiday destination. Before the scheme started, tourism sector stakeholders were advocating a plan to reroute the river to an outlet north of Mambrui.

The historical evidence indicates that most of the seasonal streams of northern Kenya and the coastal hinterland were permanent rivers before Africa’s shift to the drier climatic regime that occurred around the middle of the 13th century. The Waso Nyiro was once this region’s mightiest river, judging by the large watercourses like the Malgis laga (Swahili for dry watercourse) descending from the highland areas of Samburu and Marsabit that fed into it and the channels it carved out north of Magogoni in Lamu. Both Magogoni and Dodori, both of which are next to the site of a proposed coal-powered plant, are much larger than the channel where the present-day Tana River meets the sea. This may also be due to the fact that some of the lower Tana’s waters disappear into the lakes and wetlands of the Tana Delta. The Delta is a uniquely varied ecosystem that supports a wide variety of habitats, including riverine forest, grassland, woodland, bushland, lakes, mangroves, dunes, beaches, estuaries and coastal waters.

The historical evidence indicates that most of the seasonal streams of northern Kenya and the coastal hinterland were permanent rivers before Africa’s shift to the drier climatic regime that occurred around the middle of the 13th century. The Waso Nyiro was once this region’s mightiest river…

The Waso Nyiro now terminates at the Lorian swamp near Modo Gashe, but this too has changed over the past three decades. Its water often fails to reach Lorian due to the expansion of commercial farms and small-scale irrigation upstream. During most years, it often ends at a small outpost called Gotu; during extended droughts the flow is so reduced that animals in Samburu, Shaba, and Buffalo Springs reserves upstream can be seen drinking from puddles along its banks. The 1000-kilometre-long Tana River’s greatest attribute, against this backdrop, may be that it continues as a permanent watercourse transecting a long stretch of semi-arid lowlands before reaching the coast.

The rise and fall of coastal settlements 

The current condition of the three rivers linking Kenya’s eastern gradient to the Indian Ocean and the current focus on exploiting them close to their highland sources distract both from their important role historically and equally critical contribution to the livelihoods of the diverse communities downstream.

A thousand years ago, the region these rivers bisect were connected to the Shungwaya economy, whose main hub was located at Bur Gao, now a small town across the Kenya-Somalia border. Although colonial historians described Shungwaya as a kingdom, later work established that it was actually a trade network that linked the early Swahili city-states to the African interior as far as Lake Turkana.

OL’ MAN RIVER AND THE DAM STATE: Kenya’s misguided Big Water policy

Read also: OL’ MAN RIVER AND THE DAM STATE: Kenya’s misguided Big Water policy

The volume of water these rivers carried was less important than their role as conveyors of people and their domestic animals, and trade. The Shungwaya economy catalysed the shift of coastal settlements to a maritime culture around a thousand years ago, when they became part of the growing Western Indian Ocean economy. All of this contributed to the process of creative syntheses giving rise to the Swahili language and culture, a distinctively African urban society characterised by its strong tradition of co-evolutionary interaction.

The decline of Shungwaya, attributed to the climatic shift mentioned above, coincided with the 13th century rise of the Ajuran Sultanate, a centralised state that exploited the Juba and Shebelle rivers to develop Africa’s only case of a hydraulic empire. The Ajuran presided over extensive irrigation works and constructed an extensive system of wells and cisterns that allowed them to control their nomadic Somali and Orma neighbours and a swathe of territory extending across much of southern Somalia to eastern Ethiopia. The Sultanate, whose capital was located at Afgoye, collapsed during the 17th century, but the system of agricultural production and taxation remained in place until the 19th century.

The large volume of agricultural produce and other commodities supported the rise of Swahili port towns like Mogadishu, Merca, and Barawa on the Benadir coast. The inland networks that expanded through the influence of Shungwaya and the Ajuran Sultanate funneled a range of products to coastal towns that were exported to metropolitan hubs like Baghdad and Cairo; before long the commodities began reaching India, and eventually found their way to Venice and Lisbon. The codification of mercantile capitalism under Islam was an important enabling factor in both cases.

The wealth and reputation accompanying the growth of coastal settlements arising across the eastern Africa littoral between Mogadishu in the north and the Rovuma River in the south attracted the interest of the Chinese. The forty-ship fleets of large vessels commanded by the famous Admiral Zheng He, who led two expeditions between 1417 and 1422 to the region the Arabs dubbed the Land of Zinj, was significant even by today’s standards.

The large volume of agricultural produce and other commodities supported the rise of Swahili port towns like Mogadishu, Merca, and Barawa on the Benadir coast. The inland networks that expanded through the influence of Shungwaya and the Ajuran Sultanate funneled a range of products to coastal towns that were exported to metropolitan hubs like Baghdad and Cairo; before long the commodities began reaching India, and eventually found their way to Venice and Lisbon. The codification of mercantile capitalism under Islam was an important enabling factor in both cases.

The rivers also played a role in the migrations of the proto-Meru, who abandoned their settlement on Manda Island following the onset of Portuguese hegemony. Their migration up the Tana covering several generations, and the interactions en route and after their crossing of the Tana into what is now Tharaka, underpinned their own process of creative syntheses, leading to the development of what is arguably Africa’s most sophisticated agro-permaculture system based on a multigenerational concept of environmental resource management that predated the Western embrace of sustainability by over two hundred years.

In his insightful 1989 book, Identities on the Move, Gunter Schlee documents how similar dynamics influenced pastoralist clans and niche adaptations in northern Kenya. Herders in the Lake Turkana area established contacts with the coast centuries ago, and following a large environmental calamity overtaking present-day Marsabit County over five hundred years ago, a number of clans sought refuge on the coast. This interaction left an imprint on the indigenous orientation of coastal Islam, which in turn is reflected in the religious practices of the Gabra and Rendille, who integrated the five daily Islamic prayer cycle into their own monotheistic belief system. There are three Bajuni clans of northern Kenya origin, and the Bajuni sorio purification ritual is a variation of the Rendille ceremony known by the same name, even though there has been no contact between the two communities for several hundred years. By the same measure, when Meru miraa traders began showing up in Lamu after independence, the Bajuni welcomed them as watu wa Pwani in recognition of their coastal origins.

The false Kenya A-Kenya B dichotomy

The details of these historical interactions preserved in the traditions of these communities are indicative of the dynamic qualities of the cultural ecologies and pre-colonial political economy that developed in the river basins linking the coast to the mainland. The coast-mainland divide instilled during the colonial interlude is a false dichotomy in contrast, and these examples are also cited in order to posit that there is an alternative developmental model to the top-down planning imported by the colonial state.

The Tana River inscribes a long arc defining the border separating modern Kenya from the vast lowland expanses of “Kenya B” (a terminology used by the inhabitants living north of the river to describe themselves when making a distinction between them and “Kenya A” inhabitants south of the river). The region’s diverse cultural groups formed an economic mosaic that was beginning to enter a phase of proto-state formation during the late pre-colonial era. Similar developments were beginning to gather speed across much of what is modern day Kenya during the latter half of the 19th century. Imperial intervention short-circuited these processes, and with far-reaching ramifications for the inhabitants of Kenya B.

In the case of the coast and the lower Tana River hinterland, the unremarkable village of Kipini is emblematic of the lower Tana hinterland’s decline following the destruction of the Witu Sultanate and its satellite settlements in 1895 by a British expeditionary force. The population living within Witu’s fortified town walls was more than 50,000 at the time. The prosperous Sultanate welcomed slaves running away from the plantations run by the pro-Busaidi Lamu elite, and minted its own currency and postage stamps.

The irony of the Sultanate’s fall is that its demolition was triggered by the death of German loggers during an altercation that broke out after they racially abused their Swahili co-workers. The British were not happy that Witu had engaged their imperial competitors, but the killing of Europeans was a precedent they could not allow to go unpunished. Eliminating the Witu Sultanate solved two problems: it eliminated opposition to their imperial intrusion, while the agricultural collapse that followed allowed the British to annex the Lamu mainland as Crown Land.

The reduction of Witu’s population to just a few thousand people a century after its destruction is indicative of the malaise that spread across the larger region following the imposition of colonial rule. Decades of stasis became the basis for the region’s post-colonial marginalisation and social exclusion.

A similar trend overtook the ecologically and historically similar Juba River basin to the north in Somalia, with the exception of the commercial banana production that became Somalia’s only agricultural export industry. While traditional pastoralism dominated the large expanse between the Tana River and northern Somalia, these island ecologies contributed to the symbiotic relationships sustaining the livestock economy.

Prioritising dam building and state irrigation schemes over the livelihoods of communities long present in the region is a variation on the mono-culture developmental model Syad Barre attempted to implement in Somalia’s Juba River basin. Michael Maren elucidated the resulting conflicts in his book, The Road to Hell: The Ravaging Effects of Foreign Aid and International Charity, and things went further downhill after its publication in 1997.

The current highland-lowland division symbolised by the Kenya A-Kenya B dichotomy is an anomaly in regards to the socio-economic dynamics illuminating the historical record. It manifests in the problematic record of large-scale projects and other planned interventions across the region. The simple fact of the matter is that the larger lowland-coastal economic landscape discussed here once attracted settlers and refugees from across the seas rather than being an incubator for famines, clan warfare, and political turbulence. This explains one observer’s speculations that life in southern Somalia may have better four hundred years ago than it is now.

There are indications that the larger region bordering the Ethiopian and Kenyan highlands is recovering its mojo. However, many of the problems and historical injustices addressed by Kenya’s new constitution could have been avoided if the policy prioritising investment in high potential areas had been extended to the high potential economic sectors in Kenya’s neglected regions. But they were not, and if the Vision 2030 Big Water policy dominates the template for the area falling north of the Tana River, it may turn out to be a case of the worst is yet to come.

The current highland-lowland division symbolised by the Kenya A-Kenya B dichotomy is an anomaly in regards to the socio-economic dynamics illuminating the historical record…The simple fact of the matter is that the larger lowland-coastal economic landscape discussed here once attracted settlers and refugees from across the seas rather than being an incubator for famines, clan warfare, and political turbulence. This explains one observer’s speculations that life in southern Somalia may have better four hundred years ago than it is now.

We can only imagine the counterfactual scenarios that may have occurred if the local societies were in a position to manage the transition on their own terms.

Hydraulic states and rain-based social organisation

Water has been used as a mechanism of control since the rise of the earliest state systems. In a book called Oriental Despotism, Karl August Wittfogel developed the concept of hydraulic empires, which were expansionary states that flourished in the ancient world. Hydraulic states emerged in ancient Mespotamia, the Indus Valley, pre-Columbian Mexico and Peru, and Egypt. These states’ power was based on their control of water. Hydraulic states gave rise to impressive public works and statuaries that remain up to this time, and transformed kings into demi-gods and pharaohs.

OL’ MAN RIVER AND THE DAM STATE: Kenya’s misguided Big Water policy

Read also: OL’ MAN RIVER AND THE DAM STATE: Why the High Grand Falls Dam project is a bad idea

The hydraulic state is best understood as an ideal type based on environmental determinism. Debates generated by the concept led critics to argue that the hydraulic empires of antiquity were based on pre-existing central political organisation that enabled the rulers to expand their power through irrigation and water infrastructure. Marx and Engels’ Asiatic Mode of Production is another variation on the theme that emphasises a rigid and impersonal state’s monopoly of land ownership, political and military power, or control over irrigation systems.

Water has been used as a mechanism of control since the rise of the earliest state systems. In a book called Oriental Despotism, Karl August Wittfogel developed the concept of hydraulic empires, which were expansionary states that flourished in the ancient world. Hydraulic states emerged in ancient Mespotamia, the Indus Valley, pre-Columbian Mexico and Peru, and Egypt. These states’ power was based on their control of water.

Regardless of the order of events, domination through the control of water is a recurring idea that has resurfaced in science fiction like the Dune series and post-Apocalypse scenarios like Mad Max: Fury Road and contributes to the growing genre of eco-disaster films and other works of fiction.

Areas dependent on rain, in contrast to these examples, tended to give rise to decentralised social structures based on clans, segmentary lineages, age-set organisation, local councils, and other horizontal structures. This kind of organisation supported mobility, resilience, and the sharing of risk-spreading and coping strategies across diverse communities. Range scientists have associated the problem of unpredictable rainfall and high levels of uncertainty with the opportunistic exploitation of natural resources—a proclivity that comes with an obligation to share and redistribute. While this opportunism is embedded in pastoralist societies, variations on the same “make hay while the sun is shining” meme, is also observable among their neighbours, and in discussions with civil servants and politicians.

Economies conditioned by rainfall dominated across most of eastern Africa and the Horn, the exception being the secondary states represented by the intra-lacustrine kingdoms. The configuration of small states in present-day Uganda, Rwanda, and Burundi were the product of agro-pastoralist syntheses that, consistent with our discussion, were enabled by stable environmental conditions and plentiful water.

Areas dependent on rain..tended to give rise to decentralised social structures based on clans, segmentary lineages, age-set organisation, local councils, and other horizontal structures. This kind of organisation supported mobility, resilience, and the sharing of risk-spreading and coping strategies across diverse communities.

Such variations highlight the influence of environmental forces and shared social orientations on regional political economies. Hard-nosed planners and developmental experts will dismiss the narrative presented here as a historical fairy tale with no relevance for the present. There are, however, multiple examples of how the forces of nature and historical pathways reassert themselves during periods of system transitions, and there are multiple signs from all over the region that the region’s periphery is entering a phase transition that will render many of their plans and projects irrelevant.

Gunnar Myrdal released his influential book, Economic Theory and Under-developed Regions, around the same time Wittfogel published Oriental Despotism. In his analysis, the same elements of resource control central to hydraulic empire also guided Europe’s colonisation of much of the global South. Colonies were resource-rich areas located on the periphery, and the imperial project focused on the extraction and control of these resources. This was accomplished through a type of agro-managerial despotism that parallels the example of hydraulic empires.

The post-colonial states in this part of the world have become vehicles for a maladaptive combination of the opportunism embedded in rain-fed systems and the rigidity of hydraulic states. Kenya’s water management is symptomatic of the larger imbalance between the center and the periphery. This helps explain the militarisation of northern Kenya and why the Tana Delta became one of the primary incubators for the Mombasa Republican Council’s secessionist agenda.

Following the present state-based pathway is likely to lead to more of the same – not a good idea when alternatives exist.

Post-colonial water hangover

During the late 1970s, the Government of Kenya announced that it was committed to delivering potable water to every Kenyan household by the year 2000. This goal proved elusive and the target date passed without comment or controversy. The task appeared simpler than it actually was, and acknowledgement of this now comes with the awareness that management of water from above can also be a source of disease, death, and regime change.

The designation of water as a basic human right guaranteed by Article 43(1) of Kenya’s 2010 Constitution replaced that ambitious technocratic objective with a lofty principle but one that will not be attained because the operationalisation of water rights is a function of four factors: availability of the resource; investment in delivery and distribution systems; technological innovation; and the policy and planning process.

During the late 1970s, the Government of Kenya announced that it was committed to delivering potable water to every Kenyan household by the year 2000. This goal proved elusive and the target date passed without comment or controversy. The task appeared simpler than it actually was, and acknowledgement of this now comes with the awareness that management of water from above can also be a source of disease, death, and regime change.

Nailing the process should be the easy part, but this has not been the case as the first two installments of this series documented. Lessons learned for developing water resources cited in one USAID case study highlight the importance of exposing decision makers to alternative institutional arrangements and successful models of service delivery involving local stakeholders, embedding frameworks for mediating conflicts, and devolving management to local institutions.

The Kenya government’s US$25-billion LAPSSET corridor scheme, whose objectives include the transformation of the lower Tana River basin, is a product of the exact opposite mentality. The problem is not the roads and the infrastructure, but the hegemonic policies that have long treated the larger region as an unproductive expanse requiring developmental planning from both without and above.

The High Grand Falls Dams project on the Tana River reinforces this assumption by minimising the import of the project’s impact on the communities downstream, and failing to acknowledge the value of livelihood strategies fine-tuned to the region’s environmental and infrastructural conditions. The lack of consultation with minority communities appears to be standard procedure, even for non-controversial projects, like the expansion of geothermal electricity generation at Ol Karia.

Unlike electricity, water cannot be generated, only conserved. In the case of Kenya, the water is there. Developing the delivery and distribution infrastructure and maintenance is the hard part. Constructing local dams where appropriate is obviously an important option; to this end, the government identified a number of Arid and Semi Arid (ASAL) sites for water storage development.

Marsabit is an important highland island in the middle of a large desert. Residents suffer from protracted water shortages aggravated by degradation of the mountain’s cloud forest. The Badassa Dam was initiated in 2009 to alleviate the problem. It is an example of a worthy project that enjoyed the full support of the local community, especially after some 1,000 goats keeled over and died after drinking water from an old well. Like in the recent case where eleven rhinos died after being moved to the Tsavo, the problem was due to seasonally high concentrations of minerals, according to subsequent analyses. The dam became another case study of how badly things can go wrong.

Construction of the Badassa Dam, which is designed to hold 5 million cubic metres of water, stalled in 2011. Design flaws and the shoddy work of the government-appointed contractor led to a court case in 2013. Contrary to the ruling of one of several court cases, the wealthy Marsabit businessman who filed the suit ended up taking over the project. Things went badly again, resulting in major losses for the new contractor, who was forced to sell property in Nairobi to survive after being forced to go into hiding. In another stroke of irony reminiscent of the Tana River’s shift away from the Hola Irrigation Scheme, The Standard reported in 2014 that Badassa Dam’s source of water had dried up.

These finance-draining dam stories continue to pile up across the country. The Crocodile Jaws Dam in Isiolo presents another variation on the same theme. There’s no need to describe it – just watch the Oscar-winning animated film Rango. The movie shares the same water-grabbing plot line – the diversion of precious water away from the town to support the big money resort, or the LAPSSET tourist city in this case, but probably without the Hollywood-style ending.

Meanwhile, the flooding of the towns next to the Tana River earlier this year was not due to the heavy rains, but due to the siltation of the Masinga dam that has proceeded at a rate six times the level anticipated when the dam was built.

Smart technology and precision agriculture

The problem remains. A 2017 study reports the proportion of Kenyans with access to clean water is declining, in part due to population growth outstripping the government’s capacity to provide. This highlights the array of small-scale water catchment solutions now taking root in places like Makueni, Isiolo, Samburu, and even in Kusa along the shores of Lake Victoria that feature enhanced rocky outcrop water catchments, sand dams, and home water storage tanks and dams. Such scale- appropriate developments and growing pace of technological innovations across the world are revising path-dependent approaches to water.

The Slingshot water purifier can turn the water from Lake Turkana or the from the polluted Nairobi River into super purified medical quality water. The machine, which is the size of a crate of soda, can purify 1,000 litres per day and costs US $35. There are inexpensive nano filters for water bottles with pores small enough to catch viruses. This tech is the best bet for eliminating the ubiquitous plastic water bottles that actually do not guarantee safe water and are choking the oceans. Even the traditional toilet, a water wasting device that has not changed for 130 years, is being redesigned to recycle the water and to use the waste to recharge your mobile phone while sitting on the thrown.

Agriculture consumes 70 per cent of the world’s water. Experts predict a range of innovations from smart grids and self-repairing pipes to high-tech irrigation systems that will reduce the water used by over 30 per cent. These developments are fast tracking the growth of precision agriculture, an approach to production that utilises an array of components ranging from sensors to soil surveys and variable rate fertilization. The future of Kenya’s food security is precision agriculture, not large irrigation schemes. Large farms on the slopes of Mt Kenya are implementing precision agricultural methods, enabled by the growth of companies offering the requisite support services. Players in the contract-farming sector are introducing precision agricultural practices to medium-sized growers in the lower zones, and it is only a matter of time before this spreads to areas like the lower Tana River with its untapped potential for small- and medium-scale agro-pastoral development.

Agriculture consumes 70 per cent of the world’s water. Experts predict a range of innovations from smart grids and self-repairing pipes to high-tech irrigation systems that will reduce the water used by over 30 per cent. These developments are fast tracking the growth of precision agriculture, an approach to production that utilises an array of components ranging from sensors to soil surveys and variable rate fertilization.

Ari.Farm is an exemplar of developments of the new economy emerging in war-torn areas after decades of stasis and conflict. Using a very original business model based on subscriptions from the community, the firm is a magnet for diaspora capital that has established greenhouse farms and camel dairies in Somalia’s riverine area to supply Mogadishu. Ari.Farm also has a farm in Kenya that is delivering camel milk to Nairobi. The ubiquitous goat, which is resistant to capital-intensive mass production, is becoming the high-end animal protein of the future, and Ari.Farm just may turn out to be the dryland’s version of Eastleigh’s Garissa Lodge phenomenon.

Fourteen counties on Kenya’s periphery have come together to form The Frontier County Development Council, predicated on a “holistic and integrated approach to promote and strengthen inter-regional linkages”. The Council is one example of developments behind the region’s shifting system state. Human capital investment and provision of basic infrastructure in these high potential but historically marginalised zones, together with symbiotic linkages to pastoralist capital, can transform the larger region. The lower Tana and its invisible stakeholders should be given the chance to become part of the process leading over time to a new diversified river valley economy, and a sanctuary where all the bird watchers of the world will congregate.

This is only the beginning. The road will be difficult, but a dynamic confluence of capital, culture, and technology will see the influence of the post-post-colonial African mode of production in the former Shungwaya region become water under the bridge. This is the point in the process when the stakeholders can determine what form of upstream water management should be undertaken.

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Mr. Goldsmith is an American researcher and writer who has lived in Kenya for over 40 years.

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Black Votes Don’t Matter: The Shrinking Civic Space of African Immigrants in the US

It is a difficult time to be an immigrant in the US. For those of African descent, theirs is a rare combination of challenges, not only in becoming part of a new nation but also in carrying the baggage that comes with being black in America.

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Black Votes Don’t Matter: The Shrinking Civic Space of African Immigrants in the US
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The United States of America has excelled in projecting an extraordinary image of itself as a free nation with a thriving democracy, where anyone can come and work their way towards a better life through civic participation. However, what the past few years in particular have peeled away betrays a somewhat different truth: that voting in the United States is hard and getting steadily more so. And there’s one group of people who face a particular set of difficulties when seeking to cast their ballot: African immigrants.

Some historic context is needed regarding voting issues within the US. First and foremost, there is a historic precedent of voter suppression in the US that is unequaled within the modern Western world. Much of the targeting of such efforts has directly affected African Americans and people of colour. After slavery was abolished, states would go to incredible lengths to suppress the black vote, including implementing taxes on voting, forcing black people to produce extraneous forms of personal and family identification and making would-be black voters pass vaguely worded and lengthy “literacy tests” in order to cast their ballot. These systems, a part of the infamous Jim Crow laws, were struck down as illegal in 1965 when the country passed the Voting Rights Act.

In the years that followed, those who sought to seek the vote sought out ways to circumvent the law and keep the voter turnout low. Since the latter half of the 20th century, high voter turnout translated to a more liberal result. Take, for example, that a Republican presidential candidate has won the popular vote once since 1988 (George W. Bush in 2004). In the cases of the victories of Donald J. Trump in 2016 and George W. Bush, they skated to victory through the electoral college; a system that traces its roots to suppress the popular vote.

When looking at US politics, it isn’t as much a matter of high voter turnout as it is who comprise the voters that are showing up to vote. The most telling demographic, the group with the highest disparity of aligning with Democrats over Republicans, is African Americans. Hillary Clinton carried the black vote by an 80 point margin – 88 per cent to 8 per cent over Trump in the 2016 election. This margin, coupled with the United States becoming more, not less, diverse has left those seeking to suppress the vote scrambling for answers.

In 2013, efforts to suppress voters gained a major boost when the US Supreme Court overturned section 4(b) of the Voting Rights Act, which outlined that states and districts that had previously been involved in voting discrimination needed pre-clearance of the validity of their electoral processes. The conservative judges ruled this as unconstitutional, that the section “punished” states for past mistakes, not for possible future successes. Justice Ruth Bader Ginsberg dissented strongly, stating that “throwing out preclearance when it has worked and is continuing to work to stop discriminatory changes is like throwing away your umbrella in a rainstorm because you are not getting wet.”

The Voting Rights Act had been brought before court in the wake of a series of issues across the US, primarily having to do with controversial voting ID laws, reports of voter suppression and other forms of disenfranchisement. In a theme that runs across America’s election process, the black community was disproportionately affected.

This brings the issue to focus on African immigrants in the United States. The issue of immigration in the United States has currently brought the federal government to a shutdown for over a month. There is constant rhetoric from the Trump administration targeting illegal immigrants as a major obstacle to the security and economic future of the United States. The issues of building a border wall with Mexico and continuing to provide guaranteed safeties (such as the Deferred Action for Childhood Arrivals programme, which offers protections to the children of illegal immigrants into the US) are being used as bargaining chips at the government level.

A difficult time

It is a difficult time to be an immigrant in the US. For those of African descent, theirs is a rare combination of challenges, not only in becoming part of a new nation, but also in carrying the baggage that comes with being black in America.

African immigrants in the US are a small but rapidly rising group. The increase has been marked since 1970, especially amongst sub-Saharan Africans. According to the Pew Research Center, the number of African-born individuals heading to the US increased nearly 250 per cent between 2000 and 2015, from 881,000 up to 2,060,000. Africans are also the fastest growing demographic among black immigrants, increasing by 137 per cent between 2000 and 2013.

It is a difficult time to be an immigrant in the US. For those of African descent, theirs is a rare combination of challenges, not only in becoming part of a new nation, but also in carrying the baggage that comes with being black in America.

In the US, a major aspect of any voting rights issue is where in the US you’re living. Different states hold different standards, different regulations and varying requirements. When examining how voting standards impacts African immigrants, there needs to be a brief examination of where African immigrants live.

The five states with the highest African immigrant population are California, New York, Texas, Maryland and Virginia. Cities such as Atlanta, Georgia and Minneapolis also have high numbers of such migrants. This is where context becomes even more important; California and New York are known as more immigrant-friendly destinations, and their major metropolitan areas are regarded as “sanctuary cities” for illegal immigrants. New York and Minnesota don’t require a photo ID whereas California may require one for a first-time voter (newly-naturalised US citizens are always first-time voters). Maryland holds a similar policy.

Texas, Virginia and Georgia, on the other hand, are a different matter entirely. Virginia requires a valid photo ID in order for an individual to vote in person. Texas and Georgia are both mired in controversy over the stringent regulations put in place regarding the standards for voter IDs. The state of Texas is currently mired in litigation over the voter ID laws, with opponents arguing that it disproportionately impacts minorities.

In Georgia, where over 70,000 African immigrants reside in the Atlanta metropolitan area, the man who was presiding as the Secretary of State (the office which controls the conducting of elections, a possible conflict of interest) won narrowly and controversially over Stacey Abrams, who would have been the first black woman elected to be a state governor in the US. Abrams repeatedly made claims that there was voter interference, particularly amongst black precincts, where electronic voting was in disarray and reports of voter suppression were rampant. These claims had much of their basis in and around Atlanta, Georgia.

Why does voter ID matter and how does it affect Africans living in America? For starters, the path to US citizenship (which is needed to vote in America) is extremely arduous, long and difficult. The paperwork hoops to jump through are staggering. On average, it takes an immigrant a minimum of five years of continuous residency to become a naturalised US citizen. In cases that need further legal counsel, it can take even longer as the legal side of American immigration courts have become steadily more choked and congested in the new millennium.

Why does voter ID matter and how does it affect Africans living in America? For starters, the path to US citizenship (which is needed to vote in America) is extremely arduous, long and difficult.

For immigrants, the issues surrounding voter ID can often be much murkier. For instance, immigrants can gain driver’s licenses within the United States, which is one of the key forms of identification needed in states with more stringent regulations. This doesn’t mean that immigrants have the appropriate information explained to them regarding the IDs being obtained. The African Advocacy Network of California notes that although driver’s licenses are applied for successfully by immigrants who aren’t naturalised, the fact that they are still unable to vote due to their status isn’t explained to them. This can lead to immigrants attempting to vote, unknowingly engaging in an illegal act of fraud. The penalties for such fraud in the US are harsh. Both illegal and legal immigrants can face deportation if found to be involved in fraudulent voting. Cases of actual voter fraud involving illegal immigrants are incredibly rare, but that doesn’t stop Trump from repeatedly claiming that Hillary Clinton won the popular vote because of millions of “illegals” somehow managing to cast ballots.

Illegal immigrants in Trump’s America

The Obama administration was noted for its strict approach to illegal immigration, deporting hundreds of thousands between 2009 and 2017. That same administration, however, did focus on expanding a programme called the H1-B visa, which encouraged workers from outside of the United States to enter the country to work. Many prominent corporations, including Amazon, Google and Microsoft, heavily leaned on the programme as it eased the transition for professionals to gain a foothold in the US workforce. In addition, the H1-B programme made the path to a Green Card visa (an initial step towards US citizenship) markedly smoother, encouraging immigrants to engage in the process of becoming a citizen.

The Trump administration, on the other hand, has taken a significantly different approach. The current White House passed an executive order titled “Buy American, Hire American” that directly encourages American companies to hire only the most skilled workers from outside of the United States. This will have a long-term impact on the number of H-1B applicants who can head down the path of gaining citizenship.

The Obama administration had an unfortunate track record of harshness regarding immigration, including reopening and examining case files of naturalised citizens (immigrants who gained their citizenship in the US). The Trump White House has, of course, seized on this idea and expanded it. Under this administration, the U.S. Citizenship and Immigration Service (U.S.C.I.S.) has created a new task force to look into cases and possibly “denaturalise” citizens for often muddied reasons, such as making a clerical mistake on a form. In essence, this leaves millions of naturalised United States citizens’ status at the discretion of officials appointed under the Trump administration, one noted for its blatantly anti-immigrant rhetoric.

A prominent path to Green Card visas for African immigrants is the Diversity Lottery programme, which grants visas to citizens from all over the world. Given the administration’s track record, it comes as little surprise that the White House has looked repeatedly into cutting the programme entirely. As egregious as this is, perhaps the repeated ransom holding of the so-called “dreamers” (children of illegal immigrants born in the United States and granted legal protections) is even more insidious. Trump has made a repeated talking point of ending protections for the dreamers, even going so far as to offer continued protection as a bargaining chip for $5.7 billion of funding for a border wall in January of this year.

The Obama administration had an unfortunate track record of harshness regarding immigration, including reopening and examining case files of naturalised citizens (immigrants who gained their citizenship in the US). The Trump White House has, of course, seized on this idea and expanded it.

So how does this apply to African immigrants, specifically? The numbers indicate that immigrants from sub-Saharan Africa are the fastest growing group, and that the vast majority of this immigration has occurred after 1960. This translates into African immigrants having less of an established civic network than other immigrant groups in the US.

Less civic engagement

Less network means less community engagement and less protection for Africans now calling the US their home. This, in turn, translates into issues surrounding social integration facing Africans in America. Those in questionable status are likely to eschew anything to do with getting on the record, including engaging in civic discourse. One example saw the city of San Francisco engaging with members of the African immigrant community to get involved with the local school board elections, despite many holding illegal immigrant status. Illegal immigrants worry about what will happen to their information and whether it will end up in the hands of Immigration and Customs Enforcement (ICE).

This is compounded by the constant shifting and swirling of regulations surrounding immigration within the US. Frankly put, in America, thing currently seem extremely uncertain. Those who would have gained the path to citizenship by being granted immigration visas are suddenly on the outside looking in. Immigrants from Libya, Sudan and Somalia (the three African nations affected under the Trump administration’s travel ban targeting Muslim-majority nations) are suddenly unsure of their status.

Noticeably, despite all of his talk of walls and increased military presence, Trump has not issued a travel ban to a Latin American country. The current administration is seemingly preoccupied with all things immigration, how to stop it, how to grandstand from it, how to flex political muscle by stopping it. In fact, in 2017, despite overall numbers of deportations falling, ICE deported a record number of African immigrants, more than double of the total from 2016. There were reported instances of poor treatment and abuse of deportees by ICE agents. While the numbers are comparatively small, increases in deportation can push African immigrant communities even farther outside of the democratic process. What was the number one country for African immigrant deportations from the US? Somalia.

Less network means less community engagement and less protection for Africans now calling the US their home. This, in turn, translates into issues surrounding social integration facing Africans in America. Those in questionable status are likely to eschew anything to do with getting on the record, including engaging in civic discourse.

Ilhan Omar, herself a Somali immigrant to the US, is now a first-term Congresswoman from Minneapolis, Minnesota. Her election is an indication of a potential future of US politics: that African immigrants can find a voice in politics, in part due to the rallying of their communities. She’s become an outspoken advocate for the Somali community in Minnesota while continually deriding the Trump administration’s anti-immigration policies.

Since her election, Omar has been a frequent target of scathing criticism from the conservative media and the Republican Party, who have even claimed that some of her pro-Palestine comments are blatantly anti-Semitic. While her election to the US Congress is historically significant (she’s the first African-born refugee in the history of the United States Congress), Omar is still just one member of Congress, one voice for an ever-growing population that seems ever-more targeted by executive orders of the Trump administration. Think of it this way: Omar wouldn’t be able to enter the US under the travel ban of Muslim majority countries passed down by Trump.

In essence, this message to newcomers to the US is: DON’T BOTHER GETTING ENGAGED BECAUSE THE CONSEQUENCES COULD OUTWEIGH YOUR EFFORTS. To those emigrating to the US from Africa, this messaging can appear even more insidious, as Adoubou Traore (who himself emigrated from the Ivory Coast), the director of the African Advocacy Network in San Francisco outlines: “Many Africans have inherent doubts about the legitimacy of elections, they’re a headache, their experience makes them not believe that their voices matter. When there is no guarantee that their information won’t be subject to being exploited, from their view: what’s the point?” There isn’t much that would prevent them from holding such views in America. It becomes a community question of why organise if doing so can only lead to more headache?

With issues surrounding racism against black people in America being dissected and moved further towards prominence in national dialogue, it would, at least on the surface, seem as though the communities of African Americans would provide a steady ally for Africans adjusting to life in America. Unfortunately, this is often not the case. There is a noted divide between Africans and black Americans, one that many coming to the US find difficult to bridge. Some of this gap is historically entrenched, some of it is due to the truly lacking breadth of coverage in the US education system regarding African history and culture. The awkward truth is: Africa as a topic in the US is regarded as a monolithic punch line to a bad joke, and is hardly rendered an after-thought in terms of democratic engagement.

In terms of vulnerability to less-than-democratic interests, there are myriad of groups in the United States that could use additional legal and outreach protections. Practically anywhere in America that can’t be categorised as white and suburban finds itself victim to voter suppression efforts. In the US context, the black community is systematically targeted the most.

Laws are seemingly rolled out in force yearly in dozens of states, implementing further restrictions and using scare tactics, lies and intimidation to influence local and national elections with a conservative slant.

The unavoidable truth is that Africans in the US find themselves at an ugly modern crossroads: the centuries of subversive efforts to reduce the so-called “urban” vote at a crossroads with the modern iteration of all-American xenophobic fervour. Though growing fast in population, the democratic influence has not kept stride.

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Death in Vienna: The Death of Erich Rebasso

In the last days of 2008, Erich Rebasso, an Austrian lawyer, sent a letter to the main Vienna headquarters of the Federal Criminal Police, the country’s top law enforcement agency. Its purpose was unusual — the father of four young children was blowing the whistle on himself.

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In the last days of 2008, Erich Rebasso, an Austrian lawyer, sent a letter to the main Vienna headquarters of the Federal Criminal Police, the country’s top law enforcement agency.

Its purpose was unusual — the father of four young children was blowing the whistle on himself.

“I deeply regret having been used for criminal purposes and I am willing to submit the matter to the required criminal review,” Rebasso’s five-page confession concluded.

But it had all come apart. Rebasso admitted he had been used to launder tens of millions of dollars. He explained that, for over a year, he had been accepting payments from Russian criminals and had sent the funds to other bank accounts at their instruction. Then 45, Rebasso specialized in advising Russian clients on how to do business in the West. He had an excellent reputation as a fast, reliable, and discreet partner, and he spoke Russian fluently.

As it turns out, those criminals were using companies that were part of the Troika Laundromat. The massive financial scheme revealed in OCCRP’s latest Laundromat investigation had been put together by Troika Dialog, then Russia’s largest private investment bank. Some of the accounts Rebasso wired to belonged to two of the system’s core offshore companies: Industrial Trade Corp. and Nixford Capital Corp.

Between December 2006 and February 2008, Rebasso used 150 individual transactions to send almost US$ 96 million to laundromat accounts at Ukio Bankas, a Lithuanian bank.

Many of the reasons specified for the transfers made little sense for a law firm. Along with trades involving “fruits and vegetables,” “consumer goods,” and “electronic goods,” Rebasso is even listed as buying “frozen herring” from companies with Ukio bank accounts. More likely, the description was a red herring aimed at Ukio’s compliance department.

Rebasso’s own Austrian bank accounts were held at Raiffeisenlandesbank Niederösterreich-Wien (RLB). Though the bank investigated his large transfers, it appeared to take no further action for two years — at which point it finally pressed him to stop.

The massive financial scheme revealed in OCCRP’s latest Laundromat investigation had been put together by Troika Dialog, then Russia’s largest private investment bank

Rebasso’s confessional letter had little effect. While police looked into the matter, it was two years later when they informed him that they had stopped the proceedings because they believed any potential crime had happened outside their jurisdiction and been committed by foreigners.

Two years after that, Rebasso was dead.

The Sheremetyevo Fraud

According to his statement, Rebasso’s involvement in the money laundering scheme began on a visit to Moscow in November 2006 where he was introduced to Viatcheslav Dremin, a Russian businessman. Dremin told him that he provided financial services to Russians who needed to transfer funds abroad. But the official system for sending money across borders was very bureaucratic, he said, and he needed to speed up the process. He wanted Rebasso to act as his trustee in Vienna to help him move the money faster.

The lawyer accepted. Soon, two Vienna bank accounts belonging to his Austrian company, Schulhof Investigation (later renamed Sostegno), began receiving large sums from companies Dremin represented, along with instructions on where to send them. In every instance, he received his directions via an anonymized email address.

Rebasso worked on behalf of three insurance companies registered in Dagestan, a troubled North Caucasus republic within the Russian Federation.

At least some of the money appeared to be of criminal origin.

One of the companies Dremin represented, National Insurance, was directed by Russian businessman Maxim Vedenin. In 2011, Vedenin would be sentenced to 19 years in prison for robbery and the murders of two prostitutes.

Prior to that, Vedenin’s company had received money from a widely-known fraudulent scheme involving fuel at Moscow’s Sheremetyevo airport that OCCRP uncovered in 2012.

Between 2003 and 2008, Moscow’s busiest airport bought fuel through a long chain of intermediaries that grossly inflated its cost. According to court documents, phantom companies earned at least $200 million in unnecessary markups in 2006 and 2007 alone. The Russian government lost more than 1 billion rubles ($40 million) in tax revenue from the scheme. The higher fuel costs also meant higher airplane ticket prices for the travelling public.

A portion of the money generated by the scheme was laundered through the Troika Laundromat. Vedenin’s company, National Insurance, received some of the proceeds, and then sent them on to Rebasso’s company.

The Austrian lawyer then sent the funds into the Troika Laundromat, using it as a money laundering system. Over the same period, between December 2006 and March 2007, he sent $19.4 million to the accounts of Nixford and Industrial Trade Corp. To justify the transfers to the bank, he provided false invoices indicating he had bought “consumer goods” from the Troika Laundromat companies, or was simply paying “for bills.”

All but one of Dremin’s companies have been dissolved, and he couldn’t be reached for comment.

Raiffeisen Looks In

Despite Rebasso’s efforts to mask his money transfers as legitimate trade deals, his own bank began to investigate the financial activity in the spring of 2007.

On March 15, Rebasso’s office received a letter from his bank’s legal department inquiring about a “sharp increase in transaction amounts” on one of his accounts. The bank wanted to know on whose behalf Rebasso was acting.

A few days later, Rebasso responded in a letter, explaining that he was handling “foreign payments” for three Russian insurance companies. He also provided their names, their information from the Russian commercial register, and evidence of his business relationship with them.

The bank appears to have been satisfied with Rebasso’s explanation, because afterward, his transfers continued.

(A representative of RLB said the bank could not comment on its clients and that it had complied with all anti-money-laundering obligations.)

A Last Client

In mid-2007, Rebasso’s statement to police says, Alfis Mirgunov, one of the Russian partners in his arrangement with Dremin, got in touch. Mirgunov planned to start his own financial enterprise and wanted Rebasso to open bank accounts in Austria on his behalf. Once again, the lawyer agreed.

He opened three new RLB accounts for his company, Schulhof, to handle the anticipated load. The accounts were denominated in U.S. dollars, euros, and Russian rubles and soon, more money started to pour in. Once again, Rebasso received his instructions from an anonymous e-mail address, this time identified only by a sequence of digits.

In mid-2007, Rebasso’s statement to police says, Alfis Mirgunov, one of the Russian partners in his arrangement with Dremin, got in touch. Mirgunov planned to start his own financial enterprise and wanted Rebasso to open bank accounts in Austria on his behalf. Once again, the lawyer agreed.

Over two months near the beginning of 2008, Rebasso wired $68.3 million in 106 individual transfers to a bank account owned by Vantrel Invest Ltd., a New Zealand–registered shelf company.

Vantrel doesn’t appear to be a Troika Laundromat company; rather it is an intermediary that sent millions on to the Laundromat. (Vantrel’s bank account was held at Ukio Bankas, where many Laundromat companies held their accounts.) Documents related to the transactions said they were to buy mobile phones, though this explanation is almost certainly another fiction.

In his confessional letter, Rebasso told the Austrian police that he stopped working for the Russians in 2008. It isn’t known how much money he took for his services.

“I ended this activity at the end of February,” he wrote. “Among other reasons, primarily because the scope overwhelmed my control options.”

His hesitation appeared to be only part of the truth.

In fact, that month, Rebasso’s Austrian bank, RLB, had had enough. His transactions had apparently triggered another serious review, and senior executives told Rebasso he would need his own banking license to continue such large transfers.

The Finlist Fraud

Though he had stopped working with his Russian partners, Rebasso’s troubles were just beginning. He appeared to have become an unwitting facilitator of a fraudulent investment scheme.

According to his letter, in June 2008, Rebasso started receiving emailed complaints from ordinary Russians who said their savings had been stolen.

Rebasso described the correspondents as “rather simple-minded, not very wealthy people who were baited with internet ads.”

Apparently, the victims of the scheme had been offered what appeared to be lucrative investment opportunities through a platform called Finlist Forex Found. Then, without Rebasso’s knowledge, they were instructed to send their money to the accounts of his Austrian company, Sostegno.

Rebasso said the Russian fraudsters provided the investors with fake documents bearing his forged signature (some of these were shared with him by the angry correspondents). When the money arrived in his accounts, Rebasso sent it on without being aware of its origins.

Now the victims were furious, demanding repayment of money he had already sent on to the Laundromat.

Rebasso said the Russian fraudsters provided the investors with fake documents bearing his forged signature (some of these were shared with him by the angry correspondents). When the money arrived in his accounts, Rebasso sent it on without being aware of its origins

Rebasso got in touch with Mirgunov and asked what was happening. The Russian told him he would fix the problem and reimburse anyone who had lost money. But he never did, and by the end of the year, Rebasso sent his letter to the Federal Criminal police.

The Beginning of the End

The police forwarded the case to the public prosecutor’s office in Vienna. Nothing appeared to happen. On Dec. 3, 2010, two years after his complaint, Rebasso was notified that police had ended their case. It had been dismissed because the public prosecutor decided the case was outside Austrian jurisdiction. “Foreign acts of foreigners,” the statement read.

Rebasso’s own story was nearing its end.

In late July 2012, as he walked from his office to his Mercedes SUV in an underground parking lot, he was ambushed by two men. His car was later found empty in a different location, and shortly after his disappearance, his family received a demand: The kidnappers wanted a 435,000–euro ransom. After no deal was reached, Rebasso’s body was found three weeks later in a forest near Vienna. Austrian authorities concluded that he had been suffocated, probably while he was taken into a headlock.

Soon afterward, two former Moscow police officers were arrested and charged in connection with the ransom demand — but not for Rebasso’s kidnapping and murder. They were sentenced to eight and nine years in prison, respectively.

It’s still unclear who ordered Rebasso’s murder and why, though media and police speculated that victims of the investment fraud had hired the officers to recover the money.

More than six years later, the exact circumstances of Rebasso’s death are still unclear.

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The Troika Laundromat: How Vast Offshore Network Moved Billions With Help From Major Russian Bank

The Laundromat wasn’t just a money laundering system. It was also a hidden investment vehicle, a slush fund, a tax evasion scheme, and much more.

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The Troika Laundromat: How Vast Offshore Network Moved Billions With Help From Major Russian Bank
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At first blush, Ruben Vardanyan and Armen Ustyan have nothing in common beyond their Armenian roots.

Vardanyan is a wealthy Russian banker who once led Troika Dialog, the country’s largest private investment bank. He’s spoken at the World Economic Forum in Davos and spent tens of millions of dollars on philanthropic projects in his native Armenia. Ustyan is a seasonal construction worker who shares a chilly apartment with his wife and parents in northern Armenia when he isn’t renovating flats in Moscow.

Ustyan’s name and a copy of his passport appear in the bank documents for an offshore shell company that played a role in Troika’s system. The company was one of at least 75 that formed the complex financial web, which functioned from 2006 to early 2013. Over that period, Troika enabled the flow of US$ 4.6 billion into the system and directed the flow of $4.8 billion out. Among the counterparties on these transactions were major Western banks such as Citigroup Inc., Raiffeisen, and Deutsche Bank. The dozens of companies in the system also generated $8.8 billion of internal transactions to obscure the origin of the cash.But Ustyan’s signatures on documents he says he’s never seen draw a direct line to Troika — and to a financial Laundromat that shuffled billions of dollars through offshore companies on behalf of the bank’s clients, many of whom were members of Russia’s elite. The system enabled people to channel money out of Russia, sidestep restrictions in place at the time, hide their assets abroad, and launder money. It also supplied cash to Russian President Vladimir Putin’s friends and powerful oligarchs, and enabled criminals to mask the illicit origins of their cash.

(Citigroup didn’t respond to a request for comment on this story; Raiffeisen declined to comment, citing client confidentiality; and Deutsche Bank said it had “limited access” to information about Troika client transactions and couldn’t comment on specific businesses for legal reasons.)

At the time, Vardanyan was Troika’s president, chief executive officer, and principal partner. He enjoyed a reputation as a Western-friendly representative of Russian capitalism, known for working to improve the country’s business environment and for co-founding the Moscow School of Management Skolko

As with the previous Laundromats, many of the large transactions were made on the back of fictitious trade deals. The bogus deals were invoiced variously as “goods,” “food goods,” “metal goods,” “bills,” and “auto parts.” All the invoices included in the leak were signed by proxies and sent from Troika.ru email addresses. Meanwhile, employees at Troika were setting up the opaque financial system — dubbed here the Troika Laundromat because of its resemblance to previous money laundering schemes uncovered by OCCRP.

This portrait of the operation emerges from a trove of leaked banking transactions and other documents obtained by OCCRP and the Lithuanian news site 15min.lt, and shared with 21 media partners.

As a whole, the data set includes over 1.3 million banking transactions from 238,000 companies and people, as well as thousands of emails, contracts, and company registration forms. This analysis of Troika’s network is based on a subset of the data.

In an interview, Vardanyan said his bank did nothing wrong and that it acted as other investment banks did at the time. He stressed that he couldn’t have known about every deal his enormous bank facilitated for its clients. Reporters found no evidence that he was ever investigated or accused of any wrongdoing by authorities. His signature was found on only one document in the entire scheme, in which he gives a loan to a Troika Laundromat company.

Vardanyan described the system as a private wealth management service.

Referring to the constellation of offshore companies that comprised the Laundromat, he said: “Those are technical service companies of Troika Dialog clients, among them, mine.”

“It could be called a ‘multi-family office,’” he said. “A similar practice still exists at foreign banks. Most of their clients work through international companies. I repeat: We always acted according to the rules of the world financial market of that time … Obviously, rules change, but measuring a market in the past by today’s laws is like applying modern compliance standards to the time of the Great Depression. You’ll agree that this distorts the true situation.”

Asked about the fictitious trade deals, Vardanyan said Troika Dialog’s revenue topped 2 trillion rubles from 2006–2010 ($63–85 billion, depending on currency fluctuations) and that he “couldn’t possibly know about all the deals in a company of this size.”

Though such practices were considered business as usual in Russia at the time, specialists note that systems like the Troika Laundromat can have serious repercussions.

The schemes stunt national economic development, undermine human security, and diminish the quality of life for people left behind, said Louise Shelley, director and founder of George Mason University’s Terrorism, Transnational Crime, and Corruption Center and author of the book “Dark Commerce.”

“Money laundering countries, particularly in the developing world, are losing enormous amounts of capital that are needed for infrastructure development, education, health, [and] the development of new businesses, of entrepreneurship,” Shelley said. “With this much money lying overseas, you can do all sorts of malicious things. You can interfere in electoral processes. You can help pay for fake news.”

Criminal Services

The Laundromat wasn’t just a money laundering system. It was also a hidden investment vehicle, a slush fund, a tax evasion scheme, and much more.

Troika’s clients also used it to buy properties in Great Britain, Spain, and Montenegro; to acquire luxury yachts and artwork; to pay for medical services and World Cup tickets; to cover tuition at prestigious Western schools for their children, and even to make donations to churches.

In addition, the Troika Laundromat enabled organized criminal groups and fraudsters to launder the proceeds of their crimes. OCCRP and partners have identified several high-level frauds perpetrated in Russia that used Laundromat companies to hide the origins of their money.

Troika’s clients also used it to buy properties in Great Britain, Spain, and Montenegro; to acquire luxury yachts and artwork; to pay for medical services and World Cup tickets; to cover tuition at prestigious Western schools for their children, and even to make donations to churches.

One of these schemes, known as the Sheremetyevo Airport fuel fraud, took place from 2003 to 2008 and artificially inflated aviation fuel prices while depriving the Russian state of more than $40 million in tax revenue. The scheme led to a hike in plane ticket prices. More than $27 million was sent by companies involved in the fraud to Troika Laundromat accounts. Vardanyan has not been implicated in the scheme and said he had no knowledge of it. In 2010, two years after the fraud ended, Troika Dialog began consulting for the airport along with Credit Suisse.

A second significant criminal inquiry tied to the Laundromat, from which $17 million ended up in the system, involves a tax avoidance scheme allegedly perpetrated by several Russian insurance companies. A man named Sergei Tikhomirov was accused of concluding false service contracts with the insurers as a pretext for having them send him large sums of money, which his accusers say he cycled through several accounts before depositing it abroad or cashing in. A portion of the money ended up in the Laundromat. (Tikhomirov did not respond to phone calls seeking comment.)

Roldugin didn’t respond to an email requesting comment, and Vardanyan said that he knew of the cellist, but was not aware that he had any business dealings with Troika.In a third case, at least $69 million went to companies associated with Sergei Roldugin, a Russian cellist and one of Putin’s best friends, who became famous after his vast unexplained wealth was revealed by OCCRP, the International Consortium of Investigative Journalists, and other media partners in the Panama Papers project. Some of the money that Roldugin’s companies received from the Laundromat originated in a massive Russian tax fraud exposed by Sergei Magnitsky, a Russian lawyer who died in jail after revealing it.

The Troika Laundromat enabled organized criminal groups and fraudsters to launder the proceeds of their crimes. OCCRP and partners have identified several high-level frauds perpetrated in Russia that used Laundromat companies to hide the origins of their money.

Companies involved in the fraud exposed by Magnitsky moved more than $130 million through the Troika Laundromat. In fact, hundreds of millions of dollars went into and out of the Laundromat for unknown purposes.

Vardanyan said he was not aware of any of these transactions.

“Understand, I’m no angel,” he said. “In Russia, you have three paths: Be a revolutionary, leave the country, or be a conformist. So I’m a conformist. But I have my own internal restraints: I never participated in loans-for-shares schemes, I never worked with criminals, I’m not a member of any political party. That’s why, even in the ’90s, I went around with no security guards. … I’m trying to preserve myself and my principles.”

Vardanyan and his family were among those who received money from the Laundromat. More than $3.2 million was used to pay for his American Express card, went to accounts belonging to his wife and family, and paid school fees for his three children in Great Britain.

Asked about these sums, Vardanyan said the offshore companies Troika created serviced his own companies in addition to the bank’s clients.

Troika as Capstone

The Troika Laundromat is unique among the Laundromats that have been uncovered in recent years in that it was created by a prestigious financial institution.

Like all investment banks, Troika handled stock and bond issuance, initial public offerings, and acted as an underwriting agent. It also had a strong relationship with the local office of Citibank Inc., with up to 20 percent of Troika’s new investors coming via the American behemoth. That made New York-based Citibank Troika’s biggest “external agent,” according to a 2006 interview with Troika co-founder Pavel Teplukhin. (Citibank didn’t respond to requests for comment.)Established in the early 1990s, Troika Dialog became Russia’s largest private investment bank. It operated under Vardanyan’s leadership until 2012, when it was purchased by Sberbank, the nation’s largest state-owned lender.

The Troika Laundromat is unique among the Laundromats that have been uncovered in recent years in that it was created by a prestigious financial institution.

Other major international banks, including Credit Suisse and Standard Bank Group, did significant business with Troika as well.

Starting in 2006, Troika employees began putting together the pieces of the Troika Laundromat.

Four essential elements are needed to build a functioning Laundromat: a bank with low anti-money laundering compliance standards; a maze of secretive offshore companies to hold accounts at the bank; proxy directors and shareholders for both the companies and the accounts; and the so-called formation agents that can quickly create, maintain, and dissolve the offshore companies as needed.

The bank orchestrated all of these components of the Troika Laundromat, in addition to directing the money flows and fake trade deals that made up its operations.

The pivotal mechanism was based on trade: Shell companies created bogus invoices for non-existent goods and services to be purchased by other companies in the system. The practice provides a fig leaf of legitimate economic activity that makes the transactions appear less suspicious to regulators.

Al-Qaida founder Osama bin Laden used a similar system to move money around the Middle East, she said.“You’re disguising an illegal payment by pretending that it is linked to a shipment of goods,” said Shelley, the George Mason corruption expert. “The trade-based system is one of the most central parts of money laundering in the world today.”

If Troika was the capstone of the Laundromat, its cornerstones were three British Virgin Islands-based shell companies: Brightwell Capital Inc., Gotland Industrial Inc., and Quantus Division Ltd. Brightwell’s first known transaction was on April 12, 2005. Gotland was established on Feb. 17, 2006, and Quantus followed six months later on Aug. 23.

An analysis of these companies’ banking records reveals how they put the Laundromat together: Starting in 2006, they made numerous small payments to a formation agent called IOS Group Inc. to create the dozens of companies that comprised the complete Laundromat. IOS didn’t respond to requests for comment.

The three cornerstone companies then continued making payments to IOS ranging from 40 to almost 5,000 euros over almost six years to keep the entire network operating. Over that span, the total reached over 143,000 euros.

Quantus, for example, paid formation and maintenance fees for the British Virgin Islands-based Kentway SA. This company was later used, among many others, to send millions of dollars to Sandalwood Continental Ltd., a company connected to Sergei Roldugin, the cellist, and one of Vladimir Putin’s oldest friends.

Quantus’ involvement with Kentway demonstrates the many ways in which the Laundromat companies were interconnected. In this case, after first helping establish Kentway, Quantus then funded it with money that Kentway forwarded to Roldugin’s company.

The Bank

To direct the flow of funds through the Laundromat, Troika needed a commercial bank to host accounts for the companies involved. And it needed that bank to avoid looking too closely at the contracts and trades Laundromat businesses used to justify moving money from one offshore company to another.

Troika chose Lithuania’s Ukio Bankas for the job. (The Lithuanian lender would later be seized by the country’s National Bank in 2013 for engaging in risky deals and failing to follow regulators’ orders.) Ukio is known to have set up accounts for 35 companies used in the Troika Laundromat, and likely more.

Because Lithuania wasn’t yet using the euro, Ukio needed correspondent accounts at European banks, such as the Austrian Raiffeisen or the German Commerzbank AG, to handle euro-denominated transactions. Those two lenders and many other large European and U.S. financial institutions accepted Laundromat money, though they did sporadically inquire about the nature of some transactions. After prodding by one of the correspondent banks, for example, some Ukio compliance officers made inquiries about Laundromat payments that didn’t make commercial sense.

“What is the essence of this transaction? We have a contract (attached), but to be honest, I don’t really get what’s happening,” one officer wrote, adding an unhappy face, in relation to a payment that went to a company associated with Roldugin.

By this point, the money had already left Ukio’s accounts.

Asked why Ukio was chosen as the banker for the offshore companies Troika created, Vardanyan said it was just one of about 20 banks Troika used around the world.

The Armenian Proxies

A central figure in many of the transactions involving the Laundromat companies was Armen Ustyan. Far from being an investment banker, Ustyan, 34, works seasonally as a construction worker in Moscow.

Ustyan said he had never heard of Dino Capital SA, the Panama-based Laundromat company whose Ukio bank account was registered using his signature. A copy of his passport was attached, but Ustyan insisted he had no idea how it got there. Ustyan’s signature can be found on contracts and banking paperwork in the Troika Laundromat along with those of a few other Armenians. Wearing an old military jacket and hat, he sat down with reporters this January in his cold living room to answer questions about high finance.

At his mother’s request, he wrote his signature on a piece of paper and concluded that the one associated with Dino Capital had probably been forged.

The Armenian said he knew none of this, though he did recall a slim connection to Troika Dialog: While in Moscow looking for work, Ustyan stayed with a Russian Armenian whose brother he said worked for the investment bank and helped him find employment. In addition to having his signature associated with Dino Capital’s bank account, Ustyan is also listed as an attorney authorized to sign contracts on the company’s behalf, and his signature appears on at least $70 million worth of financial agreements.

The Moscow address is indeed that of Nerses Vagradyan, a Russian citizen of Armenian descent. Nerses’ brother, Samvel Vagradyan, is a director of a Russian company that received millions of dollars from Brightwell, a core Laundromat company. A Samvel Vagradyan is also mentioned on Vardanyan’s website as a donor to the banker’s charitable causes. It’s unknown whether Samvel really worked for Troika.

Neither of the Vagradyan brothers could be reached for comment. Ustyan said he doesn’t believe they used his identity.

Another Armenian front man in the Laundromat appears to be Edik Yeritsyan. His identity was used to register an account at Ukio for the Cyprus-based Popat Holdings Ltd. This company was involved in Laundromat transactions worth millions of dollars.

Yeritsyan told OCCRP that he lost his memory three years ago after a car accident and doesn’t remember some parts of his life. However, Ustyan said that he and Yeritsyan lived together in the same flat they were renovating in Moscow.

This article was first published by The Organized Crime and Corruption Reporting Project (OCCRP) a global network of investigative journalists.

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