Updated on February 26 with Papaya statement

A financial institution in Gżira is a focal point of an international investigation into an alleged “Russian-Eurasian criminal network,” Times of Malta can reveal.

Police this week carried out searches at Papaya, an e-money company suspected of offering ‘money-laundering services’ to the criminal network.

Although certain details about the international probe have been disclosed, Papaya has not yet been publicly named as the financial institution in question.

EuroJust, the EU’s criminal justice cooperation agency, said at least €4.5 million were laundered through Malta since the end of 2015, though the total sum could amount to “tens of millions of euros”.

Investigators are combing through Papaya’s list of account holders and transactions as part of the ongoing probe, sources told Times of Malta.

National authorities in Malta, Latvia, Germany, France and Italy conducted more than 100 searches in a large-scale operation against the alleged criminal network.

‘Organised crime group’

EuroJust said this week that the Maltese financial institution, in reference to Papaya, and the “organised crime group behind it” offered “money-laundering services” via a network of fake companies.

Corporate records name Latvian national Dmitry Panurksis as Papaya’s owner. Panurksis did not respond to a request for comment by Times of Malta.

Lawyer Tonio Fenech, who was a director of Papaya for a number of years, said he resigned from his role in the first half of 2023.  

“I would therefore ask you to refer your questions to whoever represents the company as per the registry of companies,” Fenech said when contacted.

Investigations were initiated in 2021 by the Latvian authorities after they noticed unusual money transfers from Latvia to Malta.

Simultaneously, the German authorities started investigations into suspicious money flows to Malta.

Papaya CEO hit by sanctions

Papaya was set up in 2012 by Frederic Villa, a Swiss national who resides in Malta. He relinquished ownership of Papaya in 2016, however stayed on as its CEO and director.

In February 2023, Villa was hit with sanctions by the US government.

That same month, the Maltese authorities were tipped off about an alleged “plot” in 2022 to launder tens of millions of euros in Russian cash through Malta.

Villa was named in the intelligence tip off as one of the potential parties to the “plot”.

I never, in any way, shape or form endorsed, engaged in or somehow approved any form of money laundering nor did I ever allow the companies in which I was involved to be so involved- Frederic Villa

When contacted, Villa strongly denied involvement in or knowledge of any such plot.

“I never, in any way, shape or form endorsed, engaged in or somehow approved any form of money laundering nor did I ever allow the companies in which I was involved to be so involved,” Villa said.

Villa was among dozens of individuals and companies sanctioned by the United States in 2023, as part of an effort to target companies and people providing “material support” to Russia’s war efforts in Ukraine.

He was placed on the sanctions list over his role as a director of a Maltese company called Stratton Investment Group, which held an account at Papaya.

Russia links

Stratton’s parent company is believed by the US to have been involved in “covert procurement schemes” to supply sensitive Western technologies and equipment for Russian intelligence service and the Russian military.

The parent company is owned by Swiss-Italian businessman Walter Moretti, who was also sanctioned.

Villa told Times of Malta he had been placed on the US sanctions list solely due to his role as a director of Stratton.

He said Stratton had been dormant for two years prior to the sanctioning.  Intelligence passed on to the Maltese authorities identified the need for further information on Stratton’s banking activities, particularly at Papaya.

Villa said the only transaction Stratton was involved in was a €4.3 million one with a UK company, and all the necessary anti-money laundering checks had been carried.

“All this information has been given to the authorities, after my sanctioning. There has been full transparency. Since my sanctioning, I have resigned from the directorship of Stratton, and have had no further contact with Mr Moretti.”

Villa said he had also immediately resigned from Integritas, a corporate service provider he owns, that provided services to Stratton and Moretti. Villa said he did this to be able to focus on taking all the required and necessary steps to clear his name both locally and internationally.

Frederic Villa relinquished his role as Papaya’s CEO and director after being sanctioned in February 2023

He also relinquished his role as Papaya’s CEO and director after being sanctioned in February 2023.

Malta’s anti-money laundering unit last year fined Papaya €279,000 for its “minimal” regard towards its anti-money laundering obligations.

The FIAU said documents collected to support transactions taking place were deemed “inadequate” and, at times, created “more doubts rather than clarifications” regarding the transactions taking place at Papaya.

In one example, the FIAU noted how a loan agreement between two Papaya customers for €700,000 was “updated” to €7 million.

The FIAU said the loan agreements in place shed little light on the purpose of the loans. It said Papaya failed to scrutinise loan documents and the transactions taking place, in breach of its legal obligations.

Papaya subsequently appealed the fine.

'Papaya's business not impacted'

In a statement on Monday, Papaya said it has continued to operate as normal. 

"As a licensed financial institution, Papaya maintains a strong working relationship with Maltese and other European authorities, including but not limited to regulators, auditors, police, Europol, and other law enforcement units.

"Indeed, there have been requests from authorities regarding the activities of some Papaya’s clients. These requests are not associated with the operations of Papaya as a financial institution, Papaya is not suspected of offering any money laundering services or other illegal business, and is not subjected to any form of legal proceedings," Papaya's owner Dmitry Panurksis said. 

To facilitate "the claim resolution process," Panurksis said Papaya and the above-mentioned clients closely cooperate with the authorities as part of the standard appropriate procedures.

"Meanwhile, these inquiries do not affect Papaya’s business; none of the clients’ accounts surveyed by the authorities were blocked nor arrested. Further commentary cannot be provided considering the interests of authorities.

"With regard to Mr. Villa and Mr. Fenech, they no longer work within Papaya since last year, and we believe it is not appropriate to discuss their personal endeavours within the context of the article, which pertains to the activities of our Electronic Money Institution". 

About the fine imposed by the FIAU, Panurksis said Papaya is indeed engaged in the appeal process and we will persist until the penalty is rescinded, "as we have our own stance regarding this matter to our colleagues from FIAU"

"For additional clarification, please, consider contacting FIAU directly. Being a conscientious financial institution, Papaya dutifully aligns with European regulations, including anti-money laundering procedures.

"We have exerted, and shall continue to exert every effort to enhance the quality and security of our financial services," Panurksis said.