Russian-Linked Network Laundered Billions for UK Drug Gangs’ Lockdown Cash

The National Crime Agency (NCA) has exposed a multi-billion-dollar money laundering scheme. This operation emerged as criminal organizations in the UK faced difficulties in processing large sums of cash during periods of lockdown. According to investigators, the identification of this Russian-speaking network, which was integrated into the UK’s illicit drug trade, represents the most significant achievement in combating money laundering over the past ten years. This worldwide operation, headquartered in Moscow, facilitated the conversion of illicit funds from criminal groups into untraceable cryptocurrency in exchange for a fee, thereby safeguarding drug profits from discovery. Furthermore, the Russian state utilized this network to finance espionage activities. The NCA and its collaborating agencies informed journalists at a recent briefing that the network spans 30 countries, with 84 individuals apprehended to date, 71 of whom were in the UK. UK Security Minister Dan Jarvis stated that the initiative “exposed Russian kleptocrats, drug gangs and cyber criminals – all of whom relied on the flow of dirty money”. On Wednesday, the United States Treasury imposed sanctions on the principal individuals leading this network. Ekaterina Zhdanova, who leads the Moscow-based cryptocurrency network named Smart, has been identified as a central figure in this operation. US authorities had previously sanctioned her in November 2023 for her alleged involvement in transferring funds for Russian elites. Bradley Smith, the Acting Under Secretary for Terrorism and Financial Intelligence for the US Treasury, affirmed that the country “remains committed to disrupting any effort by Russia to use digital assets or other illicit financial schemes to accrue, store, and transfer their ill-gotten gains”. Rob Jones, the director general of operations at the NCA, commented that the link between Russian elites, cyber criminals with significant cryptocurrency holdings, and UK drug gangs had been “invisible until now”. He further stated, “We have identified and acted against the Russians pulling the strings at the very top,” and noted that the NCA has now rendered it “extremely difficult” for the primary individuals involved to conduct their activities. The investigation into this extensive and intricate network began during the 2021 pandemic lockdown. At that time, drug gangs throughout Europe encountered difficulties in integrating large quantities of cash from street sales into the legal financial system, which subsequently hindered their ability to acquire additional illicit goods, such as cocaine from South America. The NCA indicates that two cryptocurrency networks operating from Moscow, identified as Smart and TGR, provided a resolution to this issue. Both networks possessed substantial amounts of cryptocurrency derived from ransomware attacks. Ransomware is a type of online extortion where a criminal group disables an organization’s computer systems until a payment is made to restore access. TGR and Smart utilized the proceeds from these attacks to establish an agreement with British drug networks, offering them a nearly immediate method to transform illicit street cash into a functional asset. The Russian-controlled network imposed a commission for undertaking the risk associated with handling the cash. Its system of couriers then laundered these funds, channeling them through ostensibly legitimate businesses, such as construction companies in the UK and other locations, or employing individuals to transport the money in luggage to Dubai. Eventually, the cash was reintegrated into the economy by being deposited into bank accounts under the guise of legitimate earnings. Essentially, Smart and TGR operated similarly to a legitimate bank, levying a modest fee for offering a system to transfer money across international borders. The initial lead emerged in 2021 when law enforcement officers intercepted Fawad Saiedi, a courier for drug profits, who was found with £250,000 in his vehicle. Saiedi subsequently confessed to orchestrating the movement of £15.6 million in illicit funds and received a prison sentence exceeding four years. Further investigation by the NCA revealed that he had been employed by Ekaterina Zhdanova, who heads the Smart cryptocurrency exchange service in Moscow. The NCA subsequently identified a consistent pattern nationwide, showing connections between individuals engaged in the drug trade and those involved in cryptocurrency. Additionally, they uncovered further ties to the infamous Kinahan drugs cartel, which originated in Dublin and maintains a base in the United Arab Emirates (UAE). Couriers handling drug profits, operating in a manner similar to Saiedi’s activities, collected cash from criminal gangs after establishing a straightforward system to build mutual trust and facilitate rapid transfers. Upon confirmation that the cash had been handed to a courier, an equivalent amount in cryptocurrency, supplied by the Russian Smart and TGR networks, was dispatched to a drug gang’s clandestine online accounts. This cryptocurrency could then be utilized to purchase cocaine in large quantities from South American cartels. Investigators pinpointed one cohort of couriers who gathered cash from 55 distinct British locations over a four-month period, acting on behalf of at least 22 different gangs. Evidence of similar schemes was also observed in other parts of Europe. A separate courier network operating within the UK was managed by Semen Kuksov, the offspring of a Russian oil executive. He and his collaborators amassed over £12 million in drug-related cash within a mere 10 weeks for conversion into virtual currency. Last February, he received a prison sentence of nearly six years. To date, the NCA and its partners have confiscated £20 million in cash, which is linked to an estimated £700 million in drug sales. The majority of arrests and charges thus far have been against couriers such as Saiedi and Kuksov. Rob Jones of the NCA remarked: “If you’re somebody now wanting to move money from a drug deal, which has been responsible for real harm in the UK, you’re going to think twice, because you don’t know whether that courier has been compromised.“You don’t know whether we’re following them, and you don’t know where those proceeds of crime are going to end up.“We are anticipating where this trade will go next, and we will be ahead and waiting.” The US sanctions imposed on Wednesday represent the concluding phase in dismantling the network, by specifically targeting its leadership. The US Office of Foreign Assets Control announced sanctions against George Rossi, a Russia-born Ukrainian national also known as Georgy, who heads TGR, and his deputy, Elena Chirkinyan, a Russian national. Rossi has portrayed himself as a legitimate London-based businessman, though his current location is unknown. The US Treasury reports that Ekaterina Zhdanova and other individuals within the TGR network utilized cryptocurrency and British financial services to transfer £2 million into the UK for the purpose of purchasing property for a Russian national, whose identity has not been publicly disclosed. The NCA has not yet indicated whether it has initiated measures to confiscate this property. Nevertheless, Zhdanova’s purported involvement in aiding sanctioned individuals constitutes only a portion of her alleged connections to Moscow, according to the NCA. Investigators assert that in 2022, the Russian state employed the Smart and TGR crypto-exchange services to transfer funds intended for espionage. Subsequently, in 2023, the NCA states that the operation facilitated the movement of cash into the UK for an operation by the state-controlled Russia Today media platform, which is prohibited in the UK.