Institute for War and Peace Reporting | Giving Voice, Driving Change

New Twist in Serbian Bank Scandal

A former banker suspected of massive fraud has mysteriously been allowed to leave the country.
By Milenko Vasovic

Speculation is raging in Belgrade over the mysterious appearance in Cyprus last month of disgraced financier, Dafina Milanovic, who has been under house arrest in Serbia ever since her bank crashed seven years ago.


Some believe she went to recover missing bank funds, others suggest the regime simply wanted to get rid of her because she knew too much about its involvement in the scandal.


Tens of thousands of Serbs were hit by the collapse of Dafiment Bank - many of them pensioners who lost their life savings.


Milanovic is thought to have funnelled around 200 million German marks into foreign accounts. Professor Kostadin Pusara, who tried to rescue Dafiment, claims the former banker has "considerable amount of money abroad and that under certain circumstances it could be made available."


Early in 1992, a year before Dafiment crashed, a retired policeman working for the bank was caught at Belgrade airport trying to smuggle5 million marks out of the country. He had apparently done so successfully twice before.


Last summer, Milanovic reportedly said that if she were allowed to leave the country, she would be able to help finance the reconstruction of Serbia in the wake of the NATO bombardment.


Sources in Belgrade believe that she has already been sent to recover money from her bank accounts in Switzerland and Austria. She is thought to have been barred from withdrawing the money because of her close association with Yugoslav President Slobodan Milosevic.


Milanovic is not believed to have deposited any money in Cyprus. She is said to have gone to the island because her brother has a house there.


Many of those who fell victim to the fraud suspect she was allowed to go in return for co-operating with the regime or because it believed her to be a liability. "They let her go because she knew too much," said Radojka S, a 60-year-old, impoverished pensioner who lost all her savings, 23,000 marks, in the collapse.


The Dafiment story began in the early nineties. Desperate for cash, the Serbian government froze hard currency accounts. As a result, people boycotted the state banks and kept their savings under their mattresses. Officials racked their brains for a way of getting hold of the cash.


Dafiment Bank, effectively a pyramid scheme, was the answer. Set up by Milanovic with the help of the authorities in 1992, it provided savers extremely attractive high rates of interest - 11 to 15 per cent for hard currency accounts and 75 to 195 per cent for dinar currency accounts. Tens of thousands of people queued up to invest. Some even sold their homes and deposited the proceeds.


The cash-strapped government used the deposits to finance the Bosnian war and stave off social unrest - the interest rate payments drawn by savers, who might have otherwise struggled to make a living, enabled them to live reasonably well.


Dafina, dubbed the "Mother of Serbia", quickly became a celebrity. A flamboyant, plumpish, middle-aged women, she wore garish pink outfits and tasteless gold jewellery. She was often pictured with government officials and was given prime time slots on state television to reassure people that their money was safe in her hands.


Around 4 billion German marks flowed into the bank. Dafina proceeded to disperse the funds among the leaders of Serbs in Croatia and Bosnia, and the Serbian state.


Dafiment cash, for instance, financed a complex in Erdut, eastern Croatia, used as a training camp run by Zeljko Raznjatovic, alias 'Arkan', and his paramilitary group, the Tigers. Serbian Railways and the Belgrade business centre, Vukov Spomenik, received 39 million and 15 million German marks respectively.


But Dafiment's days were numbered. When the pyramid scheme began to falter, savers panicked. They rushed to the bank to withdraw their deposits, waiting in vain in kilometre-long queues. Belgrade had never seen such crowds.


Dafiment collapsed owing hundreds of million of marks. Given the regime's involvement in the scam it was not entirely surprising that the state was slow to take the case to court. During the investigative process, computer disks with lists of savers and those who'd managed to withdraw deposits before the crash mysteriously vanished. The material was crucial to the case. Its disappearance meant that the serious fraud courts could not mount a prosecution.


The public turned on Dafina Milanovic. The authorities confiscated her passport and placed her under house arrest. Speaking about her ordeal to journalists shortly after the bank's collapse, she said she would give up all the money in the world to be able to use the toilet alone.


Milenko Vasovic is a regular IWPR contributor


More IWPR's Global Voices