Hun Sen Ally Buys London ‘Private Bank’ With Shady Ties

[geovalin]

 

Experts say the purchase of British payment services provider Connectum Limited should raise red flags for British financial regulators.

 

One of Cambodia’s wealthiest families with close ties to Prime Minister Hun Sen late last year acquired a British payment services provider, Connectum Limited. That company generates millions of dollars in revenue each year, serving as an intermediary between small businesses and major credit card firms like Visa and MasterCard.

 

Heng Sokha, wife of former Transport Ministry secretary of state Ing Bun Hoaw, took ownership of Connectum in November 2020. Experts say that should raise red flags for British financial regulators.

 

For one thing, Heng Sokha’s spouse is a former lawmaker and top official who should be subjected to additional scrutiny over the sources of wealth because of his links to the Cambodian government that date back decades. Bun Hoaw has previously leveraged government connections for profitable enterprises such as collecting tolls on the U.S.-government-funded Phnom Penh-Sihanoukville highway.

 

But that’s only half the story. The other half relates to the company they have acquired.

Connectum, which markets itself as a “private bank” although it is not licensed to operate as a bank, was set up seven years ago by a Latvian national who was an executive at two Latvian banks that have been implicated in money laundering scandals. The executive, Edgars Lasmanis – whose father has been on the run for years over unrelated bribery charges – briefly made an accused serial fraudster a partner in Connectum.

 

Making matters even murkier, clients of Connectum have included a Russian cryptocurrency outfit now facing trial in Russia for allegedly swindling its customers of hundreds of thousands of dollars.

 

To join the dots in this complex saga, Radio Free Asia has delved into the past of two families -- the Cambodian clan of Bun Hoaw and the Lasmanis family of Latvia. We then examine how their stories have intersected in the footloose world of British finance.

Ing Bun Hoaw and his wife Heng Sokha in a photo posted on Facebook by user Mao Moni Roath, April 23, 2021

Bun Hoaw's road to prosperity

Investing or parking money abroad is a well-trodden path for Cambodia’s monied elite with ties to Hun Sen and the ruling Cambodian People’s Party. It’s a trend that Radio Free Asia has documented in a series of investigative reports.

 

Bun Hoaw’s road to prosperity opened up after he established a trading company in Phnom Penh in 1993, around the time that Cambodia was holding its first democratic elections. That company would go on to be known as the AZ Group, which these days has holdings in India, Singapore, Myanmar and the United Kingdom. While there is little record of what the company’s early activities were, it was clearly successful at whatever it did. By 1996, Bun Hoaw was made an ‘oknha’ – a traditional honorific that from the mid-1990s became a way of formalising the patronage relationship between the CPP and the country’s emerging class of business tycoons.

 

In 2001, the AZ Group was granted the right to collect toll fees on Cambodia’s National Road 4. Covering the 140 miles between Phnom Penh and its main port city Sihanoukville, the road was originally constructed in the 1950s with the support of the U.S. government, which financed its renovation in the early 1990s.

 

Anti-corruption campaigners complained that the concession had been granted to the AZ Group behind closed doors without a competitive or open bidding process. Others noted wryly that it had been granted as a build-operate-transfer contract, despite the building of the road having been completed years earlier with funds from the U.S. government.

 

Bun Hoaw further formalized his relationship with Cambodia’s ruling party when in 2003 he was elected to the National Assembly as a CPP representative for Takeo province. His election heralded a flurry of favorable treatment by the government for the AZ Group.

 

A month before the 2003 elections, the AZ Group was awarded a multimillion-dollar government contract to establish a system for making international phone calls via the internet in Cambodia. In the summer of 2003, the government took out a $30 million loan from China on behalf of the AZ Group to bankroll the creation of a new mobile phone network.

 

The AZ Group introduced tolls for taxis and passenger vehicles on National Road 4 in late 2004. The move triggered protests by drivers that was brutally put down by police armed with assault rifles and cattle prods.

 

“The company did not renovate the road. It is the same since the Americans built it. The government should not allow the company to charge us money since the company didn’t do anything to the road,” one of the protesting taxi drivers told the Cambodia Daily at the time.

 

But the perks kept rolling in for the AZ Group, which was also granted a license to search for bauxite in Mondulkiri province. That license was subsequently transferred to Australian mining giant BHP Billiton, which left the country a few years later amid allegations it had paid $2.5 million in bribes to Cambodian government officials. Also in 2005, AZ Group subsidiary ING Holding was sold a 44 percent stake in the state-owned Foreign Trade Bank of Cambodia.

 

The bond between Bun Hoaw and the CPP’s top brass was cemented in 2006, when he was appointed as a member of the central committee of the Cambodian Red Cross. Presided over by Prime Minister Hun Sen’s wife Bun Rany, the Cambodian Red Cross has been described as the “humanitarian wing of the CPP.”

ING Holdings Co., Ltd, brochure posted at ing-holdings.com

A fall from grace?

In 2008, Bun Hoaw resigned his National Assembly seat, transferred ownership of the AZ Group of companies to his wife, and was appointed a secretary of state at the Ministry of Public Works and Transportation, which was responsible for supervising the AZ Group’s controversial management of National Road 4.

 

Bun Hoaw resigned as secretary of state in 2013 to compete in that year’s national elections. But like many CPP candidates, he lost out to a surprise surge by the opposition Cambodian National Rescue Party (CNRP) that came close to toppling the government. For a time the oknha appeared to fall out of favour with Hun Sen. In 2015, Bun Hoaw resigned from his position as an advisor to the government and the following year the prime minister personally ordered that AZ Group should be stripped of their license to charge tolls on National Road 4.

 

The family’s fortunes were far from dashed, however. Since 2005, AZ Group subsidiary ING Holdings has been filling in hundreds of hectares of wetland on the outskirts of Phnom Penh to make way for its gargantuan “ING City” development. For years, civil society groups have been sounding alarm over the project, noting that it will displace roughly 1,000 families and place one million Phnom Penh residents at heightened risk of flooding. Seemingly in response to these criticisms, in July 2020 the Cambodian government revoked 190 hectares of land titles issued to ING Holdings. However, as the company took pains to make clear at the time, the revoked titles would not prove a major obstacle to the development, accounting for less than 10 percent of the project’s 2,572 hectares.

 

Today, the AZ Group remains one of Cambodia’s leading conglomerates. While the AZ Group does not make the value of its assets or its accounts public, an RFA analysis of data scraped from the Ministry of Commerce by NGO Global Witness found that Cambodian companies presided over by Sokha and Bun Hoaw had a collective share value of $81.8 million in 2014. However, because the share price of private Cambodian companies is rarely an accurate reflection of their capitalization and because the family’s businesses have grown domestically and internationally over the last seven years, the true value of the AZ Group today is likely far higher.

Lasmanis: Patriarch on the run

Around the time Bun Hoaw was first making his way in Cambodian business, Leonids Lasmanis, the father of Connectum’s founder, was working his way up the leadership of the national border guard in the newly independent country of Latvia.

 

Like Cambodia, Latvia in 1993 held its first democratic elections following the end of the Cold War. Situated on the Baltic Sea and bordering Russia, Latvia was one of 15 successor states to the Soviet Union attempting to forge their own path following the collapse of communism.

 

But Leonids Lasmanis has faced more setbacks than Bun Hoaw during his country’s transition. He was fired as the national border guard commander by the president in June 1993 over a missing cache of automatic rifles. Leaving behind the military life to pursue a career in politics, Lasmanis next made headlines in 2000 when – by then a deputy in the Riga city assembly – he drunkenly shot himself with his service pistol.

 

The wound was not fatal, however, and he survived to face another round of ignominy in 2006, when prosecutors charged him over a March 2005 plot to bribe city councillors with tens of thousands of euros. Rather than face trial with his alleged co-conspirators – who were all convicted – Lasmanis fled, reportedly to Russia, and as recently as last year was on the most wanted list of the European Union's law enforcement agency, Europol.

Leonids Lasmanis could not be reached for comment and Latvian court officials told RFA that they were unable to comment on the case.

Leonids Lasmanis in a photo that was circulated by Europol

Like father, like son

While the father was running into trouble over bribery allegations, his eldest son, Edgars Lasmanis, was making his mark in the finance sector -- and facing unwanted media attention. At age 27, he was head of marketing at the Latvian bank Multibanka when in April 2005 it was designated by the US Treasury as “primary money laundering concern.”

 

The Treasury claimed Multibanka had allowed its confidential banking services and Swiss-style numbered accounts to be used by international criminals “to facilitate financial crime by allowing criminals to disguise illegal proceeds.”

 

As its de-facto spokesperson at the time, Edgars led the bank’s response to the press, denying that Multibanka was involved in money laundering or that it did not know the identities of many of its customers.

 

Fifteen months later, however, Multibanka had changed its tune. Following a review of its entire portfolio the bank informed the Treasury that it had terminated its relationship with more than 2,600 customers who were, according to a Treasury report, “unwilling or unable to comply with Multibanka’s enhanced information collection and verification standards.” Simply put, these were customers the bank could not properly identify.

 

The cull cost Multibanka 98 percent of its non-resident accounts and more than half of its resident accounts.

Edgars left Multibanka in 2008 to join another Latvian bank, Latvijas Pasta Banka, as its vice president. In 2012, Latvijas Pasta Banka (since renamed LPB) took on as clients a variety of offshore shell companies and individuals with ties to Moldovan political figures. Over the next two years the accounts opened with LPB on behalf of those shell companies would play a crucial role in an illegal scheme that saw $1 billion siphoned out of three major Moldovan financial institutions, according to a report commissioned by the National Bank of Moldova in 2015.

 

The Latvian financial regulator fined LPB 305,000 euros ($360,000) in July 2016 for failing to stop payments connected to the Moldovan fraud. Edgars left the bank in 2017, a year before it would be hit with a further penalty of 2.2 million euros ($2.6 million) for further violations of anti-money laundering rules.

A screenshot from an advertisement of Latvijas Pasta Banka

Director for a day

In March 2014, while still a vice president at LPB, Edgars Lasmanis founded Connectum Limited in London – the company that would be acquired by Bun Boaw’s wife in late 2020.

 

Within 12 months of setting up the company, Lasmanis had recruited as co-owner an Estonian by the name of Juri Paal. Paal was made a director of the company around the same time, on March 5, 2015. Mysteriously, on July 30 of the same year, the company filed documents stating that Paal no longer owned any shares in the company and that he had resigned his directorship retroactively, backdating his resignation to March 6.

 

“That’s not how normal firms work,” according to Graham Barrow, a financial crime expert who advises banks on compliance issues.

“It’s indicative of something not quite right. It’s really hard to say what that might be for sure,” Barrow added. “When I’m working with banks, on a bank-side investigation, you’re looking for anomalies and red flags – and change of control is one of those.”

 

It is not just Paal’s fleeting presence that would raise the eyebrows of compliance professionals, either. Just two years earlier he was doing business under his birth name: Juri Zitin.

 

In April 2013, Estonian daily newspaper Post Timees tied Zitin to what it described as “the largest money laundering case in Estonia.” The alleged scheme involved some $75 million worth of Russian rubles being transferred to bank accounts in Estonia, where the money would be converted into either euros or dollars and driven back across the border to Russia. The newspaper quoted a written statement by Zitin in which he confessed to having spread “negative information” about employees of Estonia’s anti-money laundering agency on the orders of the scheme’s alleged architect.

Screenshot from Companies House website

Kremlin-tied clients

In 2016, two years after Lasmanis established Connectum, it reported its first profit, albeit just £819 ($1,123). But that number was soon to increase exponentially. For the year leading up to March 2018, the company reported £2.3 million ($3.1 million) in profits and claimed to be holding £82 million ($112 million) in client funds. The company reported similar successes the following year.

 

In the year leading up to March 2020, the company’s annual profits doubled to £4.5 million ($6.1 million). In the early months of that financial year, in July 2019, Connectum had picked up a new client: CryptoUniverse.

 

The company offers facilities for customers to mine digital currencies, such as Bitcoin. Registered in Estonia in 2018, the bulk of CryptoUniverse’s physical operations are based in Russia, where criminal complaints were filed against it and its directors in the summer of 2020 following a raid of its offices by police. In March 2021, a St. Petersburg court ordered that the company must face trial over the allegations, which involve sums of hundreds of thousands of dollars.

 

Even before CryptoUniverse became the subject of a criminal investigation, there were red flags that anti-corruption experts say should have concerned compliance officials at Connectum.

 

CryptoUniverse’s website is described as being “operated by” a Scottish shell company called Miotech Impex LP. Established in 2017, Miotech’s registered partners are two Hungarian individuals whose names have been listed as the managers of shell companies implicated in fraud and corruption cases from Ukraine to Cyprus.

 

In October 2019, CryptoUniverse entered into a joint venture with Dmitry Marinichev, an aide to President Vladimir Putin. The venture converted into a Bitcoin mining facility an aluminium factory that had fallen into disuse after its owner, Putin-ally Oleg Deripaska, became the subject of U.S.

 

sanctions. The sanctions were lifted in January 2019, but the former aluminium plant has continued operating as a digital currency mining hub.

CryptoUniverse did not respond to a detailed request for comment, but these activities ought to have been raising some red flags for Connectum, according to Ben Cowdock, lead investigator at Transparency International UK.

 

“You'd have thought through the course of, firstly, their due diligence on this Bitcoin start-up in Russia, and then of subsequent transactions that they were seeing from that, there would have been some suspicious activity generated from that which they should have been able to spot,” Cowdock told RFA.

Red flags for regulators

While there is no evidence that Connectum has broken any laws, experts consulted by RFA said that a number of factors contribute to the company having a high risk profile – especially now that it has been acquired by a family linked to Cambodia’s ruling elite. At the minimum, they said, the banks dealing with the company and the regulators that oversee it should be keeping a close eye on Connectum’s activities.

 

As the wife of a former lawmaker and secretary of state, Heng Sokha is what is known as a politically exposed person, or PEP. Financial institutions are obliged to perform a higher level of due diligence on PEP clients and monitor their transactions for signs that they might be funded with the proceeds of crime or corruption.

 

“Whoever they bank with would be expected to identify those relationships and appropriately risk rate them,” Barrow told RFA. “And they’d have to be high risk. I can’t imagine a bank ever taking these people on, certainly not in the U.K.”

 

While neither Edgars Lasmanis nor Juri Paal responded to detailed requests for comment on the issues raised in this article, Barrow told RFA that their checkered pasts ought to have been noted by the Financial Conduct Authority, the British financial regulator.

 

All persons wishing to manage or own an FCA-regulated firm in the U.K. must first pass the regulator’s “fit and proper person” test. Among the criteria is “whether the person, or any business with which the person has been involved, has been investigated, disciplined, censured or suspended or criticised by a regulatory or professional body, a court or Tribunal, whether publicly or privately.”

 

Lasmanis’s senior position at Multibanka and Latvijas Pasta Banka during their run-ins with the U.S. Treasury and Latvian financial markets regulator appear problematic in this regard.

 

Barrow said that the adverse publicity generated by Lasmanis’s fugitive father and Paal’s various brushes with controversy should “absolutely” have been taken into account by the FCA when deciding to approve Connectum’s license application.

 

“It definitely has a bearing because one of the things you need to do is look at what they call ‘adverse media,’” Barrow said. “Does that affect your financial propriety, your ability to act with due care and diligence? And it’s a big deal.”

 

The company and its new owner are a curious pair in that it is hard to tell whether Heng Sokha’s Cambodian business ventures and political connections pose a greater risk to Connectum’s reputation or if the company’s past owners and activities pose a greater risk to hers. Since Connectum has not responded to multiple requests for comment on the issues raised in this article and has made no public statements about its change in ownership, what brought Sokha and her new venture together remains shrouded in mystery.

 

What is becoming increasingly clear, however, is that there is a definite pattern emerging of politically connected Cambodians making multimillion pound investments in British real estate and businesses.

 

https://www.rfa.org/english/news/cambodia/hunsen-bank-05062021154026.html

Copyright © 1998-2020, RFA. Used with the permission of Radio Free Asia, 2025 M St. NW, Suite 300, Washington DC 20036.

[kevinsan]

Thank you Hun Sen for having faith in Western currencies and assets. At least someone believes they still have value.

[zzzzz]

wealth begets MORE wealth

[Surelynot]

A corruption expert on TV last night said everywhere in the world, Cayman Islands, Panama etc, pales into insignificance in terms of corruption when compared to London.

[PETERTHEEATER]

Shocking! Thank goodness this could never happen in LoS......

[unblocktheplanet]

Govts are such sore losers when they don't get their end, eh! Checked your pockets for dirty money lately. This is Yanqui fiction for (more) world domination.

[Nojohndoe]

2 hours ago, unblocktheplanet said:

Govts are such sore losers when they don't get their end, eh! Checked your pockets for dirty money lately. This is Yanqui fiction for (more) world domination.

Or objection to not possessing the biggest piece of this pie?