UK Fintech Borrowed from Firm Backed by Tycoon With ‘Concerning Ties’ to Russia

Donal Griffin
·6 min read

(Bloomberg) -- When Mikhail Nadel, a banker once accused of looting Kyrgyzstan’s biggest lender, wanted help to get his UK payments firm off the ground, he turned to a tycoon with alleged ties to Russian intelligence and organized crime.

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Dzing Finance, the fintech managed by Nadel, borrowed €5.3 million ($5.8 million) in 2021 from an entity backed by the family of Oleg Boyko to power its growth. The loan deal came months after the US Senate Intelligence Committee said Boyko had “concerning ties” to the Russian state and criminality. Canada and Australia sanctioned him last year after Moscow’s invasion of Ukraine, citing his alleged links to the Kremlin.

Both Nadel and Boyko have always denied any wrongdoing. Dzing hasn’t been accused of any impropriety. And while the loan is outstanding, Boyko’s family exited the company behind it over the past year.

Still, the coming together of the two businessmen highlights the kind of challenges emerging in the UK’s electronic-money and payments institutions that move more than £1 billion ($1.3 billion) a day. The Financial Conduct Authority, which has doled out licenses to hundreds of lightly regulated payments firms including London-based Dzing, said in March that it intends to take “more assertive action” soon against problematic actors, without specifying anyone in particular.

A spokesman for the FCA declined to comment. Nadel confirmed the loan in a LinkedIn message to Bloomberg News. Larisa Shishkina, a spokeswoman for Finstar Financial Group — the private equity firm Boyko co-founded and chairs — denied his or his family’s personal involvement in making the loan.

Dzing, which bills itself as a “fast-growing neobank,” is one among a plethora of UK firms offering payments services such as transactions processing, prepaid cards, overseas remittances and digital wallets. They describe themselves as alternatives to old-school banks but critics including Transparency International say some of them open a door for dirty money.

Many of them lack proper controls while some pose an “unacceptable risk” to customers and have “elevated fraud rates,” the FCA wrote on March 16 in a so-called Dear CEO letter to the heads of payments institutions. Clamping down on fraud in the sector is a key priority for the regulator, according to the Economic Crime Plan unveiled by the government the same month.

Read more: London Payments Firm Moves $1 Billion a Month Despite Red Flags

Investors and executives at electronic-money institutions must pass a “fit and proper” test, according to the FCA’s industry rulebook. Yet Transparency International UK, the British arm of the global anti-corruption group, sounded an alarm in a 2021 report, saying more than a third of EMIs licensed by the regulator have red flags related to their activities, owners or directors.

“Our research has raised questions about the quality of checks on those behind companies in this area,” said Ben Cowdock, head of research at Transparency International UK.

Long before helping found Dzing in 2018, Nadel was chairman and controlling shareholder of AsiaUniversalBank, or AUB, Kyrgyzstan’s biggest lender. Global Witness and the International Monetary Fund are among bodies that have alleged AUB was involved in widespread criminality, including money laundering, during the regime of then-President Kurmanbek Bakiyev.

An uprising in 2010 took down Bakiyev’s administration and authorities seized AUB. Nadel was convicted in absentia of fraud and money laundering, but he has denied any wrongdoing and has said the charges were politically motivated.

Boyko, meanwhile, built a fortune across banking, gambling and commodities, much of it amassed since the 1990s through Finstar.

Nadel’s and Boyko’s paths crossed through Dzing, which won an FCA license in 2019. While Nadel oversees operations, most recent UK filings list Tatjana Orlova, the ex-wife of seafood tycoon Vitaly Orlov, as the controlling shareholder.

The firm’s website says the “World needs some DZING!” It invested £5.5 million in product development in 2020 and 2021, with plans to have plowed in another £7.1 million by the end of this year, Dzing’s UK accounts show.

This spending has been backed by €5.3 million of short-term “convertible loans” — debt that can be switched to shares — owed to an unidentified creditor of Dzing’s parent company, according to its most recent accounts. This is Tirona Ltd., according to Nadel and Finstar spokeswoman Shishkina. It is a Cypriot firm that was historically controlled by Boyko and his family.

Dzing got the loan prior to the February 2022 invasion of Ukraine and the ensuing Western sanctions, but not long after the US Senate Intelligence Committee publicly accused Boyko of wrongdoing. Investigating an American businessman as part of a wider probe into alleged election interference by the Kremlin, the panel released a 966-page report in August 2020 in which it outlined his relationships with multiple “oligarchs” including Boyko.

“Boyko has concerning ties to the Russian government, to Russian intelligence and security services, and to organized crime,” the report said. In a heavily redacted section, the committee also cited press reports that Boyko had been involved in a “Kremlin-backed foreign election influence operation” in Moldova.

Regime Associates

The war in Ukraine prompted Canada and Australia to sanction Boyko in April last year, with Ottawa placing him on a list of individuals described as “close associates of the Russian regime.” Shishkina, the spokeswoman for Boyko’s PE firm, said they are carrying out the “necessary legal work” to have the restrictions lifted.

The UK, the European Union and the US have not sanctioned Boyko. In a statement on his company’s website last year, the tycoon said his heart was broken by the conflict in Ukraine. Citing his family’s roots in the country, he said he’s worried for the safety of all Ukrainians and called for an end to the war.

Nonetheless, following the sanctions, Boyko’s relatives have disposed of their stakes in Tirona and the family no longer holds any shares, according to Guy Middleton, a spokesman for Riga, Latvia-based 4finance SA, a consumer lender owned by Tirona. Shishkina said Boyko is no longer interested in European assets and is focused on Southeast Asia instead.

Tirona’s shareholders are now reviewing what to do with its investments, including the loan to Dzing, Middleton said.

“It is vital that the FCA pay close and ongoing attention to those that control firms providing payments services,” Cowdock at Transparency International UK said, commenting broadly on the need for tighter industry controls. “A failure to do so opens the door to suspicious wealth, which could put the UK financial system at risk.”

--With assistance from Aaron Eglitis and Irina Reznik.

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