London has long invited curiosity, especially for those learning English while reading about Chase, Ian Fleming, Somerset Maugham, Graham Greene and other quintessential English writers. The image of fog-draped streets, the Madame Tussauds wax museum, the Tower of London, and a small Baker Street flat often lingers. The time arrives to travel to Europe for business or leisure, and the journey begins in earnest.
The 1998 London visit described here was not about entertainment. The objective was to locate real estate purchased by a prominent bank with funds from the company then involved, to identify that property, and to pursue legal action to recover the asset. It turned out that even in Moscow, according to an agency known among specialists, the bank had acquired a building in London for about $40 million, essentially all the profits the company had earned up to that point. Investigators, both in uniform and undercover, revealed the origins of the funds. The accounting department kept two tables empty by choice—one for the tax inspectorate and the other for the tax police, an old service that some readers may remember. Taxes were paid regularly, with no optimization. Founders’ large salaries were heavily taxed, yet the motive remained clear.
From the perspective of the financial director, his own salary was modest by contemporary standards, while the chief accountant earned far less than today’s norms. He frequently raised the discrepancy with the founders, only to be met with distractions like talk of a prestigious apartment for a trusted employee and similar perks for others. The company’s image as a savior persisted, even as questions about the actual distribution of wealth and the tax situation remained. After an audience with the tax office, the founders were reminded that taxes were owed and that the firm had, in effect, complied with obligations. The narrative acknowledges the complexity of maintaining such an image while managing real economic risk.
In small firms, finance is often steered by chief accountants. As the company expanded and planned a major investment, a finance manager was needed, but funds were still placed with a “very good bank.” This policy clashed with prudent diversification—an old adage about not putting all eggs in one basket, yet in 1998 few foresaw potential asset-bank correlations turning negative. The era’s optimism met reality in the risk landscape, underscoring a disconnect between asset growth and prudent banking diversification.
Withdrawal of the $40 million amassed over the years proved impossible from the seemingly reliable institution. Under the influence of the chief accountant, the indifferent founders insisted they could not disappoint a bank that trusted their funds. The 1990s were an era of brisk entrepreneurship, where some risks were taken without full scrutiny. An executive security head urged restraint on changes to investment policy. The writer’s response was to convert ruble-denominated funds into foreign currency, anticipating devaluation that later did come to pass, despite assurances from national leaders. The period’s mood was shaped by big hopes and sharp uncertainties.
Ownership eventually shifted the burden onto the need for core business education among staff, revealing how some employees with access to resources could exploit weak controls. Followers of procurement and accounting could receive commissions for ordinary purchases of cars, computers, and office furniture—an outcome of a system where stewardship and oversight were tested. The writer, who had previously contributed to a World Bank project in Moscow, recalls how even basic office setups were managed frugally, sometimes improvising with salvaged materials to stretch a modest budget. The irony lay in spending freedom and commissions while the organization prescribed limited uses of funds, often requiring special permission for anything beyond consulting services and salaries.
The onset of crisis in August 1998, described as the “Black Swan” by Nassim Taleb, arrived earlier than expected. The collapse of a pyramid of short-term government bonds wiped out the savings of investors, banks, and businesses. Investors from so-called unfriendly countries bore the brunt, recovering merely a fraction of their investments. In the face of foreign exchange interventions and collapsing oil revenues, the ruble floated freely, and the fixed exchange framework dissolved. The government’s measures aimed to stabilize the system, with the Central Bank playing a decisive, though controversial, role. The reforms included shifting to a floating ruble, prohibiting certain forward contracts, and issuing longer-term securities that investors could exchange. The central bank named several large banks as primary dealers to preserve liquidity, while many financial institutions sold off toxic securities under the guise of safe assets, a move that left clients exposed.
At that time, the Bank of Russia was led by a veteran banker who believed the system required strong protection. Some banks struggled to meet client payments and faced solvency fears, eventually passing ownership through subsidiaries and routing funds to offshore holdings. The banking system stood at the edge, held by the tenacious leadership at the central bank. The narrative notes that access to a single reputable bank could be blocked, and international actions complicated legal recourse for recovering substantial sums.
London emerged as the next stage, with a bank having reportedly purchased a building for a similar amount. A meeting with a well-known London law firm produced a mix of expertise and caution: while a specialist could offer guidance, the possibility of seizing the property as a precautionary measure in a very complex case remained uncertain. The discussion highlighted that funds funneled through offshore entities could obscure ownership, complicating any court order in a foreign jurisdiction. The lawyers acknowledged that recovering assets would require navigating a tangled web of corporate entities and jurisdictions, making outcomes uncertain.
Meanwhile, attempts to open a personal bank account in the UK faced hurdles. British institutions, under directives from the Bank of England, sometimes refused accounts to citizens of Russia and Nigeria, reflecting the period’s political and financial climate. The narrative also touches on Nigerian letters from the early 1990s, infamous scams that promised vast fortunes in exchange for modest upfront payments. The writer notes how some attempted schemes did not deliver; yet, in hindsight, the British financial sector would later engage with related Russian wealth through private banking and family office services, illustrating a cyclical return of interest and opportunity.
The overarching message is clear: wealth creation in the modern economy requires real production and tangible work in the real sector. Banking products and securities alone cannot build a middle class. The emphasis shifts to the importance of productive enterprise as the true driver of long-term prosperity, a view that stands independently of any single institution or market quirk. The text reflects a personal stance on this point, while acknowledging that the views may not align with editorial positions. [Citation: historical context on the 1990s Russian banking crisis and 1998 market turmoil.]