Too good to be true: a Russian case study

The shift from good custom to business fraud can be a subtle one, especially when dealing with Russia. Dr Mark Galeotti shares an example from his own consultancy experience.

Dr Mark Galeotti is Director of the Organised Russian and Eurasian Crime Research Unit at Keele University, and a former adviser to the Foreign & Commonwealth Office. This example is a real one, but names have been removed and a few details changed to protect the anonymity of his client.

A UK-based firm engaged in the production of luxury goods, call it “A”, was happy to receive in 1993 the first orders from “X”, a Russian company that owned a series of shops catering for the rarefied elite of the wealthy “New Russians”. They proved good customers, with regular repeat orders and paying promptly and in full. From the first, there were irregularities. Invoices were dispatched to an address in Germany and payments arrived through a variety of routes and, indeed, in a range of currencies. However, this was presented, not unreasonably, as part of the nature of dealing with modern Russia, still only just beginning to develop a capitalist economy. Due diligence revealed no skeletons in X’s closets, just a few budding entrepreneurs trying to start a business. While unusual, there was nothing inappropriate about the payments, all the paperwork was complete and in many ways the Russians proved model, if quirky clients.