‘Shady’ loans, ‘lax’ controls raised risks of money laundering at Papaya

A single company involved in multiple “shady” loan deals accounted for close to a quarter of the money that flowed through e-money firm Papaya.

Regulators raised serious concerns that Papaya apparently ignored suspicious transactions by this company, owned by the brother of Papaya’s sole registered shareholder, Dmitry Panurskis.

The e-money firm is alleged to have allowed “voluminous funds” to pass between its customers without verifying if the transactions were legitimate.

Papaya’s “lax approach” to preventing money laundering accentuated the financial crime risks it was exposed to, a compliance report by the Financial Intelligence Analysis Unit (FIAU) found.

The e-money firm unsuccessfully attempted to impose a permanent gagging order on Times of Malta after it approached Papaya for comment about the anti-money-laundering agency’s findings.

Papaya is contesting a €280,000 fine imposed by the FIAU in 2023 as a result of its findings.

The e-money firm says the FIAU’s compliance visit, which was carried out in 2020, is outdated and does not reflect Papaya’s increased efforts to combat money laundering.

“Papaya Ltd strongly objects to the conclusions drawn by the FIAU – not only because we believe they are unfounded, but also because we consider the procedure through which they were reached to be in breach of our fundamental right to a fair hearing...

“It is also important to note that the compliance review referenced in the FIAU’s report was conducted over five years ago. Since that time, Papaya has been subject to multiple external audits by reputable international firms, none of which confirmed the types of violations suggested in the FIAU’s original assessment,” a company spokesperson said.

What did the FIAU find?

The FIAU drew particular attention to Papaya’s relationship with a Danish money lender owned by Panurskis’ brother.

It found that while Papaya gathered documents on €57 million in loans and transactions the Danish firm was involved in, many were missing key details like the purpose of the loans and repayment schedules.

In one example uncovered by the FIAU, there was even contradictory information in a loan agreement about who the actual lenders and borrowers were.

The FIAU also found examples of the lender paying back more than the amount found in the loan agreement, agreements containing “exorbitant” interest fees, and others, like a €1.7 million loan, with a repayment deadline of less than one month, leading to rapid movements of cash.

“The loan agreements were shady in nature, indicating that the funds being borrowed are required for the ‘possibility of realisation of economic activity’ yet without providing the details as to the intended use of the funds, which is customary for loans,” the FIAU said.

The family relationship between Papaya’s shareholder and the owner of the Danish company appeared to contribute to a “lax” scrutiny of the transactions taking place.

Such family ties should never reduce the scrutiny or due diligence expected under anti-money-laundering laws, the FIAU said.

Times of Malta reported last year that the authorities were investigating whether a Russian national with suspected criminal links had concealed his ownership from regulators.

Panurskis, Papaya’s registered owner, dismissed the claim as a “misinformation attack”.