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Do you REALLY know your small business customers? How one figure skater’s routine left his bank standing on thin ice

Samantha Sheen, EFI's Financial Crime Adviser

28.06.2021

Introduction 

Earlier this summer an article appeared online describing how a former Olympic figure skater from Slovenia (“Vlad”) was accused by US authorities of defrauding the government out of more than $1.5 million in COVID-related business loans. 

Touched with a sense of nostalgia (I used to figure skate. I was exceptionally average), I dug into this story, and what I discovered suggests that if this really was an event management business, then I really am made of seaweed. This case has not yet been tried in court, but the information supplied so far raises a number of questions as to how Vlad managed to transfer over a million dollars into a couple of bank accounts held with the same bank without raising any red flags. 

 

A Zamboni Lap Around the Facts 

Vlad is accused of applying for 11 different COVID emergency business loans by providing the government agency with false information about the nature of his business activities. Once the applications were approved, Vlad arranged to have some of the funds transferred outside of the US, before his bank detected something suspicious was going on and “froze” his accounts. 

Star on Thin Ice 

So, the first question I had was: What kind of ice-skating events was Vlad’s business running? 

The Hometown Entrepreneur 

Vlad was not particularly active outside of his home country of Slovenia. He competed in the Winter Olympics one year but placed well below 20th position. Since then, Vlad appears to have participated in various ice-skating shows, via a Slovenian company called “Lucky Vladie Ltd”, which was incorporated over 10 years ago. 

Over the next few years Lucky Vladie Ltd was used to organise themed ice-skating shows, offer skating lessons and themed parties, mainly in Vlad’s home country. Prior to 2020, it also appears that Lucky Vladie Ltd was building a dedicated ice-skating theme park called “Lucky VladiLand”. 

Internet and Social Media Footprint 

The website I found for this business readily identifies Vlad as the founder of Lucky Vladie Ltd. Event organising services were also offered via partners in Germany, Poland and the Netherlands. But none were offered to customers in the USA. There was little evidence that Vlad was spending any time in the USA prior to 2019. Vlad’s LinkedIn profile, which included his photo and references to Lucky Vladie Ltd, made no mention of any work in the USA. 

Vlad Re-Invents Himself in a New York Minute 

My next question was: How did Vlad and his business end up doing business in the USA? 

In mid-2020, Vlad’s online profile changed. A new LinkedIn page appeared. Now, he was the General Manager of a company called Ice Entertainment LL, LLC. Vlad had apparently held this role for over 10 years. The main location of this business was identified as New York City. This was odd - Ice Entertainment was only incorporated in June 2020 as a company in New Jersey, USA. Its main activity was organising global ice-skating events in China, Russia, the EU and Slovenia.   

 

Given the 2020 lockdown and restrictions on public gatherings, it seemed a remarkably odd time for Vlad to want to try to expand an in-person ice-skating event business into the USA.

 

No separate website for Ice Entertainment appeared on this new LinkedIn page. No website could be found that promoted the services of Ice Entertainment, and it had no online presence of which to speak.

Vlad Sets Up for A Triple Loop – BOB LLC

The information provided by the US authorities suggests that something was afoot even before Vlad’s new LinkedIn page appeared in mid-2020.

In August 2019, a new company was set-up under the laws of Delaware called BOB LLC (“BOB”), which identified Vlad as the sole owner and director. The nature of its business was event management, working with partners “around the world” to stage ice-themed amusement parks. This allegedly included parks in Poland, Germany, and Slovenia.

My cursory checks could not find a website or any promotional material online about any of the event’s BOB was involved with, any of its partners or any future events in the works. I found the fun park in Poland but the closest thing to skating was an indoor skateboarding rink. I couldn’t find any commercial activity. It seems as if BOB was just set-up, set down its skates and waited.

One month later in September 2019, Vlad opened a business chequing account for BOB with Bank-1 at its branch in New York City. Vlad was the sole signatory on the account.

2020 – Availability of Emergency Business Loans

Most people know that the US had small business loan relief programs throughout the 2020 pandemic. For obvious reasons, businesses were able to apply for these loans using an online portal onto which their application and supporting documentation could be uploaded.

My next question was: How did Vlad get access to the loan relief money?

Vlad Lands a Triple Axle

It’s now the summer of 2020 - remember - Vlad is supposedly running Ice Entertainment in New York City. The following transpires:

One of the great things about online portals is the amount of data they can capture concerning the date, time and location from which a user has accessed it.

  • In one day between 11:00 p.m. and 12:22 a.m. (1 hour 22 minutes), eight loan applications were submitted through the portal. Each directed that loan proceeds be paid to a bank account in the name of the applicant.
  • The applications were submitted from an IP address in Dallas, Texas.
  • Each application was in the name of a different individual who lived in Iowa.

So far, no mention of Vlad. Until:

  • At some point after the applications were submitted, someone logged into the portal via the usernames given when the accounts were first set up and changed the bank account details to BOB at Bank-1, the account opened and controlled by Vlad.

Investigators later discovered the applications bore the name of an elderly woman in Iowa. The loan applications were allegedly submitted on behalf of a farm bearing her name. She neither owned a farm nor knew anything about the loan applications.

All the loan applications were approved in a matter of weeks. The proceeds were deposited into BOB's account with Bank-1. Within days, transfers were made from the account. The amounts ranged from $500 to $399,0000 to beneficiaries in, amongst other places, China, Mexico, India and Slovenia.

Having determined this tactic worked, a second set of applications were submitted in the late summer of 2020, again with the same pattern of outbound transfers.

Vlad Gets Locked Out of the Arena

Finally, near the end of September 2020, Bank-1 became concerned about the activity on BOB’s account. The proceeds were frozen and Vlad was asked to provide further information about:

  • Why it had received the proceeds from the loan applications;
  • The nature and purpose of Bob’s business activities; and
  • The purpose of the international wire transfers.

So, my final question was: How Does Vlad explain his way out of this situation?

Vlad speaks with Bank-1 on the phone and tells them that the international payments were for “corporate partners and equipment suppliers”. He described the deposits as a “delicate subject” and “strictly business matters.” He describes them as “investment participation . . . not a loan.”

To support his explanation, Vlad provided a doctored version of a letter from a US government agency stating the sum of $1,999,000 was payable to “Vlad of BOB,” for “property investments only Vlad also began writing to the bank, asking they accept his explanation and make his account operational again.

Vlad is Sent to the Penalty Box

Having no success since the end of September 2020 in persuading Bank-1 to unfreeze his account, Vlad flew to the US from Turkey in June 2021 and personally went to the New York Branch of Bank-1. In June 2021. What was Vlad doing in Turkey when he was supposedly now based in New York?

What Vlad did not know was that in December 2020, Bank-1 had closed BOB’s account due to suspicious activity. Bank-1 had tried to mail checks for almost $400,000 BOB registered business address in New York, New York. The checks were ultimately returned to Bank-1 as non-delivered.

Vlad had no joy convincing Bank-1’s compliance office with his “investment” story, despite coming back to the bank over three consecutive days. However, what he did not know was that he had already been flagged by the bank as suspicious and reported to the authorities. Unsuccessful in persuading Bank-1, he immediately booked a flight back to Istanbul but was apprehended by the US authorities on the way to his flight.

Vlad Tries on a New Pair of Skates in the UK?

Curiously, on 30 December 2020, a new company appeared on the UK Companies House whose beneficial owner and sole director was – you guessed it – Vlad. He correctly identified his date of birth, his Slovenian nationality and gave as the business’ address a location that turns out to be an apartment development site. His occupation is identified as “consultant” and the business activities of the company as “financial management”.

Conclusion

This case, from my perspective, is not one that involves a lone actor. All the information thus far suggests that this is a far more complicated case to unravel. It also suggests that several actors may have been involved in designing and implementing this complex scheme.

It does, however, show why regulators are impressing upon firms to consider the nature and purpose of a customer’s business and any changes to their activities inconsistent with what would be expected. Should banks and other financial institutions be asking to see the loan application forms submitted to government agencies to verify the legitimacy of the funds received? That’s a question open for debate.

What’s clear is that relying on the KYC given during onboarding is not enough. Ongoing monitoring, KYC reviews and transaction monitoring are measures that need to be integrated if cases such as these are to be more effectively detected and action taken in a timely way.

I will be watching this case with interest to see what becomes of it.