Ukraine uncovers money-laundering scheme tied to defense contracts

Investigators found that in 2023–2024, officials at a defense-sector company acted in collusion with organizers of a so-called conversion center to siphon and cash out state funds paid under defense procurement contracts.

According to the investigation, government customers transferred more than 2.5 billion hryvnias ($67.6 million) to the company for contracts related to the repair of military equipment and hardware. Part of that money was then routed to accounts of shell companies allegedly for the supply of spare parts for the Ukrainian Armed Forces.

“In reality, the funds were funneled through a network of front individuals and companies, converted into cash, and returned to the organizers of the scheme and representatives of the core enterprise,” the Prosecutor General’s Office said. Participants in the operation reportedly received commissions of 4% to 5% for laundering the money.

Investigators also established that the nominal heads of the shell companies reside in Russian-occupied territory and were physically unable to manage Ukrainian businesses or sign contracts. There is no record of their presence in government-controlled areas of Ukraine after 2014.

In addition, some of the listed “owners” of these companies do not exist according to foreign registries, fully undermining the legality of the contracts involved.

The State Tax Service of Ukraine concluded that the total volume of transactions showing signs of money laundering exceeded 578 million hryvnias.

Two alleged organizers of the conversion center and a shadow accountant have been formally charged under Part 3 of Article 209 of Ukraine’s Criminal Code. Investigators are working to identify all individuals involved and are also checking whether similar schemes may exist in other areas of defense procurement.