$800m settlement seeks to end dispute over unauthorised fund transfers dating back to 1990s

The Russian Federal Customs Service offered to settle a $22.5bn damages claim against the New York Bank of Mellon over allegations of money laundering, according to Dow Jones.

The case dates back to 2007 when BNY allegedly facilitated a series of unauthorised fund transfers amounting to $7.5bn.

The litigation purports to seek damages allegedly arising in connection with the activities of Lucy Edwards, who worked for The Bank of New York in the 1990s and facilitated a series of unauthorized fund transfers through the Bank.

The settlement figure is expected to be around $800m and follows an order from Russia’s Prime Minister Vladimir Putin, according to local reports.

BNY said in a statement: ‘We are encouraged to have received a letter directly from the Federal Customs Service suggesting that we meet to discuss a potential settlement of the case.’

Background on the Russian Court Case

In May 2007, a $22.5 billion lawsuit was filed in the Arbitrazh Court of the City of Moscow against The Bank of New York Mellon (BNY) by a group of Miami, Florida-based trial lawyers on behalf of the Russian Federal Customs Service (FCS).

The suit purports to seek damages allegedly arising in connection with the activities of a Russian émigré, Lucy Edwards, who worked for The Bank of New York in the 1990s and facilitated a series of unauthorized fund transfers through the Bank without the Bank's knowledge. After a well-publicized investigation by the Department of Justice in 1999, Ms. Edwards and her husband pleaded guilty to two U.S. offenses.

The FCS is asking the Russian court to adjudicate its claim under the U.S. RICO statute, when no foreign court has EVER adjudicated a RICO claim and the U.S. Congress intended RICO only to be used by U.S. courts.

The plaintiff's claim is completely invalid under both U.S. and Russian law and would be dismissed by courts in the U.S. and most other countries, as leading U.S. and Russian legal experts have testified. In fact, U.S. courts have summarily dismissed attempts by the same Miami-based law firm to use the same legal theories to bring similar claims for customs duties against U.S. tobacco companies on behalf of Belize, Ecuador and Honduras, among others. BNY also was never charged with any wrongdoing nor was it accused of the crimes upon which the Russian claims are purportedly based.

While the Company would not be surprised by an adverse judgment, given the concerns it has raised to the court about the handling of the case, it remains confident that any adverse judgment would not be enforceable in countries where the Bank has significant assets, given the substantial, well-established legal and financial safeguards in place. As a result, the Company is confident there will be no material financial impact on the Bank or its shareholders.

If necessary, BNY intends to pursue every available route of appeal through every level of the Russian legal system and beyond.