MOSCOW, August 20 (RIA Novosti) – The Moscow police said Tuesday it had arrested fraudsters who sold fake bank guarantees worth a total 1 billion rubles ($30 million) to state contractors in Russia. Four people were detained on suspicion of fraud, the police press service said on its website Tuesday.

The report did not identify the suspects, but said they worked with the employees of unspecified banks to defraud state contractors.

Companies that win state tenders in Russia are required by law to provide proof they are capable of fulfiling contracts. This is usually done by obtaining a bank guarantee – a form of insurance under which a bank pledges to foot the bill for the work in case the contractor fails to fulfill their obligations.

The fraud gang tricked state contractors into buying bank guarantees from them – even though no bank actually backed them, police said.

The report did not say how much the group allegedly earned from issuing 1 billion rubles of fake bank guarantees. Banks usually charge between 0.5 and 5 percent of the contract’s total sum for such guarantees.

The suspects in custody face up to ten years behind bars on charges of large-scale fraud, the report said.