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Probe into European Telecom Fraud Has US Demanding $1 Billion

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Probe into European Telecom Fraud Has US Demanding $1 Billion

August 19, 2015

  By Susan J. Campbell, TMCnet Contributing Editor

It seems simple enough – you have the technology to make connections and then you notice the technology allows you to make money on those connections. You have the assets you need from your master agent and the potential for the deal is promising – why not go ahead? In the world of telecom, what seems too good to be true just might be fraud.

According to a story in The Wall Street Journal, U.S. authorities are cracking down on fraudulent activities and in their latest attempts, are seeking help from European counterparts. The wide-ranging criminal probe is looking at corruption by three global telecom companies and intermediaries that are close to Uzbekistan’s president’s daughter. The U.S. is seeking $1 billion in assets.

While fraudulent activities tend to gain more momentum than they should in the telecom space, especially where VoIP is involved, this latest investigation is more about bribery and positioning. Probes conducted by the U.S. Justice Department and Securities and Exchange Commission revealed evidence that suggests that hundreds of millions of dollars were funneled to businesses controlled by Gulnara Karimova, Uzbek President Islam Karimova’s elder daughter. 

The businesses involved are believed to be Amsterdam-based Vimpelcom Ltd. , Mobile TeleSystems (News - Alert) PJSC of Russia and Sweden’s TeliaSonera AB. The younger Karimova, it seems, sought to secure wireless frequencies and other deals within the country. The three companies in question have agreed to cooperate with the U.S. and European judicial authorities, yet have declined to comment on the accusations.

While some may wonder why the U.S. has the right to investigate fraud overseas, experts suggest that the U.S. has the right to get involved in deals involving the American financial system. To bolster their position, the U.S. generally seeks assistance from other countries where financial systems are concerned due to monies being held in bank accounts. Prosecutors believe that Ms. Karimova is the sole owner of a $1 billion fortune in funds scattered across the continent.

This investigation is important as the companies in question are being investigated for activities that limited the ability of other companies to fairly compete for business. Likewise, the president’s daughter used her position and her friendship with powerful individuals to secure the funds she wanted to allow or block specific telecommunications activity. The attempt and subsequent activities were fairly brilliant in scope and success, until she let too many people in on the fraud.

As this crime ring comes crashing down, others are sure to pay more attention to the details and try to protect their cash cows. Likewise, governments everywhere are paying more attention. Who will ultimately emerge the winner?

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