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#Amex reputation at stake due to a controversial Russian partner

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By any standards, Russian billionaire Roustam Tariko needs a stiff drink – no doubt a double vodka – if he is to ward off accusations of being a “fraudster”.
For the second time, the man who gave the world “Russian Standard Vodka” is accused of serving up a short measure. Once again, he’s defaulted on Eurobond payments.

And that could lead to his empire losing one of its best customers – American Express.

It was Tariko, 58, who brought the ubiquitous card to all Russians.
At the height of his pomp he told Forbes Magazine:
"I have one of the best vodka brands in the world and one of the biggest retail banks in Russia.
"If I just maintain what I have and grow it, that will already be enough to be proud of myself."
But pride goes before a fall…

Roustam Tariko

Roustam Tariko

Tariko’s problems started when his Russian Standard Bank (RSB) did not cough up $400 million in 2017.
RSB was the collateral on the loan.
Now, international bondholders are planning to claim a 49% stake in the bank.
They called in the Center for Financial Investigations and Forensic Expertise (CFIFE) to go through the RSB books.
Although confidential, the analysis was later shown in documents lodged with the Moscow Arbitration Court.
And it makes for uncomfortable reading for Tariko.
Investigators say the full sum of Tariko’s debts are more than $800 million.
And, they are convinced that cash and assets are being stripped from the bank.
According to the CFIFE these fears are “not unfounded”.
Last month (July) the creditors started an action to collect its collateral.
The Center reports more than $300 million has been withdrawn from the bank.
It added: “Since 2017, the value of the bank's assets has been constantly and sharply decreasing, while the share of illiquid assets, on the contrary, is growing just as rapidly.”
David Nitlispakh, head of the Swiss fund Pala Assets, represents the creditors of Russian Standard Ltd.
Pala Assets is a Switzerland-based investment company focusing on emerging market bonds.
Mr Nitlispakh said: “We have stated for a long time that the shareholder of Russian Standard organized a massive withdrawal of money from the bank.
“We are convinced he should bear full responsibility for unlawful actions to inflict such large damage on the bank.
“We are confident that it will not be possible to break the law with impunity.”

Russian Standard Bank

Russian Standard Bank

Pala Assets is considering filing an application to start a criminal prosecution.
A spokesman said: "What is happening is a clear malicious violation of the law, and we believe that the criminal activity of depriving the bank of its liquid assets must be stopped."
One creditor said: “The shareholder of Russian Standard Bank has been playing with his bondholders for three years, every time promising repayment of debt and then breaking the promise.
“This is done to squeeze all valuable assets from the bank before it is taken by bondholders as a collateral.
“This scandal can seriously tarnish the reputation of Amex whose exclusive partner in Russia is Tariko.”
Commenting on RSB’s future, Alexey Sanaev, of the Russian brokerage company Finam, told Cards International:
“The bad thing is that if the transactions are what they appear to be, then it would put the reputation of Tariko at significant risk.
“He may be labelled as a fraudster, which is bad.
“What will most likely happen is that the international bondholders will become the primary shareholders of the bank.
“Ultimately, that would help to make sure the bank’s reputation continues to grow in a positive direction. “
And, in a world where reputation is everything, global banking giant American Express finds itself caught up in the financial farrago.
Amex ran a famous advertising campaign in the 70s and 80s with the catchphrase “that’ll do nicely, sir”.
It was aimed at promoting how its credit card was welcomed worldwide and loved by all.
An Amex card carried cache. It was for the aspirational. It appealed to the new entrepreneurial Russian.
Amex and RSB have been close trading partners since the turn of the 2000s.
It was an alliance that saw Amex cards issued in Russia.
But as the worldwide reputation of RSB diminishes, there is a fear Amex may well be looking to distance itself from its partner.
Mr Sanaev said: “Russian Standard Bank was the first – and is still the only – bank to issue American Express cards in Russia.
“When the two companies first collaborated, the market was booming, and consumer spending was growing.
“The bank was a pioneer and one of the greatest beneficiaries of this market.
“I don’t think it is a surprise that American Express chose RSB as its exclusive partner.
“Back then it was the right thing to do, and a good name in the prospective market for Amex to be associated with.
“But the question remains as to whether that is the right thing to do now.
“Amex’s exclusive partner is suffering in terms of its reputation.

“I am not sure if Amex will continue to operate with RSB.
“It isn’t a question of the reputation of Amex in Russia, but the reputation of Amex in America, and globally that may be affected by the activities of its Russian partner.”

Mr Sanaev believes Amex will soon drop the damaged RBS.

He said: “Amex will choose a different partner in Russia, one with a cleaner reputation.
“I think that is an obvious thing to do.
“Amex is no longer gaining from the partnership with Russian Standard Bank – financially and in terms of reputation.”
In the early days Tariko embodied what Amex is all about.

He made his fortune from scratch – unlike many other oligarchs who helped themselves to a considerable slice of the nation’s industrial assets during the 1990s.

After graduating in 1989 with an economics degree from the Moscow Institute of Railway Engineering, he turned his hand to importing luxury items into Russia.

His money was made in chocolates and Italian sparkling wines.

It was a stepping stone to bringing more big-name drink brands to Russians – and then offering vodka to the world.

In the early days Tariko embodied what Amex is all about.
He made his fortune from scratch – unlike many other oligarchs who helped themselves to a considerable slice of the nation’s industrial assets during the 1990s.

"I made a fortune selling vodka to the Russians and now I am making a fortune selling it to the British.”, said Tariko to Forbes magazine.

However, some believe Roustam Tariko is now drinking in the last chance saloon as he fights to keep his business empire and – more importantly – his good name.

EU

Commission adopts ambitious Capital Markets Union Action Plan and Digital Finance Package

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The European Commission has adopted a new, ambitious Action Plan to boost the EU’s Capital Markets Union over the coming years. The EU’s top priority today is to ensure that Europe recovers from the unprecedented economic crisis caused by coronavirus. Developing the EU’s capital markets, and ensuring access to market financing, will be essential in this task. The Action Plan aims to develop and integrate EU capital markets in order to ensure they can support a green, inclusive and resilient economic recovery by making financing more accessible to European companies.

press release, available in all languages, a Q&A and a factsheet are available online with more information.

The European Commission has also adopted an ambitious Digital Finance Package to ensure a competitive and digital friendly EU financial sector that gives consumers access to innovative financial products, modern payments, while ensuring consumer protection and financial stability.

The Digital Finance package consists of:

  • A Digital Finance Strategy
  • Legislative proposals for an EU framework on crypto-assets
  • Legislative proposals for an EU framework on cyber resilience
  • A Retail Payments Strategy, which seeks to achieve a fully integrated EU retail payments system, including instant payment solutions that work cross-border.

press release in all languages, a Q&A and a factsheet are available online. Follow the press conference by Executive Vice-President Dombrovskis  on EbS.

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EU law

In divorces, the odds are stacked against women

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Among the many side effects the Covid-19 pandemic and subsequent lockdowns have had on Europe is a particularly shameful one: skyrocketing domestic abuse. France – with its deeply embedded chauvinism – has stood out in particular, as calls to the government hotline for abused women rose 400 percent during the lockdown.

At the same time, leaving these relationships is not easy. For legally married women, a divorce would be a logical step, but not all women are willing or even able to make that move. The reasons behind that are manifold, yet one of the most common ones is one of the most frequently overlooked as well: the fact that women are commonly disadvantaged in divorce settlements that are leaving women in economic and social hardship more often than men.

Women get the short stick

This fact is surprisingly uniform across the globe, which is why it’s even more of a shock that women continue to find the odds stacked against them in highly developed regions with a strong women’s rights and equality agenda, such as Europe. A 2018 study assessing the gender differences in the consequences of divorce, using data from the German Socio-Economic Panel Study (1984-2015), found that “women were strongly disadvantaged in terms of losses in household income and associated increases in the risk of poverty”. Worse, these losses were permanent and substantial, without significant changes over time.

Even when a settlement results in a 50/50 division of assets, women often feel disadvantaged due to lower earning power caused by childcare responsibilities and reduced hours available to work, or make strategic career choices. Furthermore, women are frequently left indebted by the legal costs of divorce proceedings because their lower savings levels mean they have to rely on eye-watering loans. Women’s financial positions rarely recover enough to reach pre-divorce levels, while men’s incomes tend to rise by 25 percent on average following the split.

 

Rich or poor, you lose

While these problems are common occurrences across different cultures around the world, they’re also independent of the social class. It may seem obvious that these problems are exclusive to the middle class rather than the wealthiest members of society. However, women divorcing rich husbands face the same hurdles and adverse prospects. Indeed, if there’s one common factor that unites women across all social strata, it’s how they have to fight disproportionally harder than their ex-husbands to obtain their fair share of the divorce pie.

Case in point is the bitter divorce fight between Azerbaijani oligarch Farkhad Akhmedov and his ex-wife Tatiana Akhmedova. Farkhad Akhmedov, who is based in Baku despite having failed to obtain Azeri citizenship, made his fortune in the gas sector but left the industry after being forced to sell his stake in Northgas to Inter RAO in 2012 for $400 million under value. Tatiana, a British citizen, was awarded 40 percent of her ex-husband’s fortune by a UK court in 2016, amounting to roughly £453 million – the biggest divorce settlement in history. Instead of accepting the judgement and paying out, Farkhad Akhmedov has been fighting tooth and nail to avoid making payments, or handing over the assets given to his ex-wife in the settlement, including an art collection, real estate and superyacht, valued at £350 million

 

The divorce of the century

In the process, Akhmedov has frequently not only fought with the gloves off, but outright dirty. From the very beginning, Akhmedov’s defense argued that the couple got divorced before, namely in Moscow in 2000. According to the defense, that alleged divorce supersedes the British decision, painting Akhmedova as a fraud. However, the attempt at slandering his ex-wife backfired: no evidence for an earlier divorce ever materialised, leading Justice Haddon-Cave in 2016 to declare “… that the 2000 Moscow divorce documents … were, at all material times, forged.”

This should’ve been a lethal blow to Farkhad Akhmedov’s defense, but four years on, no significant pay-outs have been made – despite the fact that the original 2016 decision in Akhmedova’s favour has been upheld in other courts. In 2018, Akhmedov was ruled to be in contempt of court and was criticised by Justice Haddon-Cave for taking “numerous elaborate steps” designed to avoid the judgement’s execution, such as “concealing his assets in a web of offshore companies.” These entities, primarily located in Liechtenstein, were recently ordered to transfer Akhmedov’s assets to Tatiana.

 

This is a men’s world

It shouldn’t be surprising that this hasn’t happened yet, all the while the oligarch’s contempt for both British law and his ex-wife are unwavering. In fact, the Akhmedov case – owing to the volume of assets and great publicity involved – serves to highlights the stark contrast in divorce outcomes and that women are generally fighting an uphill battle for equity of the settlement that can last for years, straining their ability to move on and restart their lives.

Yet it could help to raise awareness for this deeply engrained inequality, where women all over the world seeking divorce or justice for domestic abuse are exposed to odds overwhelmingly in their ex-spouse’s favour. Stronger, more relentless enforcement of rulings – including painful punishment in case of non-compliance – is the only way to break the vicious circle. Otherwise, gender equality will forever be imperfect, even unattainable.

 

 

 

 

 

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China

Bank embraces blockchain to facilitate Belt and Road trade

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China and the European Union have both said they will accelerate negotiations in order to conclude a China-EU investment agreement by the end of this year, with its colossal infrastructure project “Belt and Road” at the centre of an era of trade and growth for economies in Asia and beyond.

China’s Belt and Road Initiative (BRI), sometimes referred to as the New Silk Road, is one of the most ambitious infrastructure projects ever conceived. Launched in 2013 by President Xi Jinping, the vast collection of development and investment initiatives would stretch from East Asia to Europe.

The original Silk Road arose during the westward expansion of China’s Han Dynasty (206 BCE–220 CE), which forged trade networks throughout what are today the Central Asian countries of Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, as well as modern-day India and Pakistan to the south. Those routes extended more than four thousand miles to Europe.

The Belt and Road Initiative (BRI) is today’s new Silk Road,  a trans-continental passage that links China with south east Asia, south Asia, Central Asia, Russia and Europe by land – and a 21st century Maritime Silk Road, a sea route connecting China’s coastal regions with south east and south Asia, the South Pacific, the Middle East and Eastern Africa, all the way to Europe.

One of the greatest challenges to its success will be to overcome the complexity of multi-commodity trading - there are a number of stakeholders, intermediaries and banks operating together to make deals happen. These deals are massive in value and happen very frequently, with huge amounts of money are being transferred across borders to different parties that all use different systems and have different compliance requirements, data storage systems, currencies, and so on.  The current system is expensive, slow and provides customers with almost no transparency.

LGR Crypto bank of Switzerland

LGR Crypto bank of Switzerland

Innovative digital systems using the “Blockchain” are being developed to facilitate fast and secure methods of enabling these trades to take place.

LGR Crypto bank of Switzerland is a leader in b2b digital money movement and end-to-end trade finance, and has launched blockchain based digital system to support supply chain finance in the Silk Road economies. LGR has also launched a new “Silk Road Coin” cryptocurrency to enable seamless and instant trade along the Belt and Road.

“I think something that we are going to continue to see is the impact of emerging technologies on the industry. Things like blockchain infrastructure and digital currencies will be used to bring added transparency and speed to transactions. Government-issued central bank digital currencies are also being created, and this is also going to have an interesting impact on cross-border money movement.” said Ali Amirliravi, Chief Executive of LGR Crypto bank of Switzerland.

“We’re looking at how digital smart contracts can be used in trade finance to create new automated letters-of-credit, and this gets really interesting once you incorporate IoT technology. Our system is able to trigger transactions and payments automatically based on incoming data from supply chain. This means, for example, that we could create a smart contract for a letter of credit which automatically releases payment once a shipping vessel reaches a certain location. Or, a simpler example, payments could be triggered once a set of compliance documents are uploaded to the system and verified LGR. Furthermore, the letter of credit related documents can be shared with different trading partnership using blockchain platform which further improves transparencies and reduces trading risks. Automation is such a huge trend - we’re going to see more and more traditional processes being disrupted.” he said.

Ali Amirliravi, Chief Executive of LGR Crypto bank of Switzerland

Ali Amirliravi, Chief Executive of LGR Crypto bank of Switzerland

“Data is going to continue to play a huge role in shaping the future of supply chain finance. In the current system, documents are paper based, data is siloed, and the lack of standardization really interferes with overall data collection opportunities. However, once this problem is solved, an end-to-end digital trade finance system would be able to generate big data sets that could be used to create all kinds of predictive models and industry insights. Of course, the quality and sensitivity of this data means that data management and security will be incredibly important for the industry of tomorrow.”

Ali Amirliravi is positive about the opportunities that the Belt and Road Initiative will bring.

“For me, the future for the money movement and trade finance industry is bright. We’re entering the new digital era, and this is going to mean all kinds of new business opportunities, particularly for the companies that embrace next generation technologies.”

 

 

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