The lenders had realistically assumed some of the loans might be misused but were willing to tolerate some waste in the interest of the greater good of stabilizing the Russian economy. If the money-laundering accusations are true, that tolerant presumption no longer holds. In one case, investigators are probing whether the Bank of New York, wittingly or unwittingly, was used by rogue bankers with connections to Russian organized crime to launder money skimmed from international aid loans.
Laundering is the process by which illegally obtained funds are made to appear legal.
Some of the Russian firms implicated have links with Russian President Boris Yeltsin's family and a circle of his former top aides. The money-laundering will be a factor in domestic American politics. The IMF is not popular with many Republican conservatives, and GOP presidential candidate Steve Forbes is already accusing the Clinton administration and its point man on Russian policy, Vice President Gore, of being naive and gullible in dealing with the Russians. The temptation, given the dismaying evidence of fraud, is to pull the plug altogether on loans to Russia, but that is not a realistic option at a fragile time in Russian history. The question is not if financial aid should be extended to Russia but how, and clearly the terms and supervision haven't been rigorous enough.