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Illegal funds are kept in shell companies, making them very difficult to find.
For decades, Russian oligarchy The transfer of billions of dollars of counterfeit money overseas made it very difficult to keep it in shell companies and find it.
How much is Russian ‘dirty money’ around the world?
According to the Atlantic Council, an American think tank, the Russians have about $ 1 trillion in what they consider to be “dirty money” hidden abroad.
In its 2020 report, it estimates that a quarter of that amount is controlled by Russian President Vladimir Putin and his close allies – the wealthy Russians known as the “oligarch”.
“This money can be exploited and used for Kremlin espionage, terrorism, industrial espionage, bribery, political manipulation, misinformation and many other malicious purposes,” the report said.
Where does this money come from?
Another American think tank, the National Endowment for Democracy, says Putin encourages his closest allies to “steal from the state budget, extort money from private companies and seize profitable companies altogether.”
According to the company, this is how they created personal wealth in the tens of thousands of dollars.
Russian opposition leaders Boris Nemtsov and Vladimir Milov claim that between 2004 and 2007, $ 60 billion was transferred from Putin’s funds to Putin’s allies.
The Pandora Papers financial documents released in 2021 by the International Federation of Investigative Journalists, which exposed the secret legacy and business of world leaders, politicians and billionaires, have made those close to Putin even richer – and could help the Russian president. Move your own wealth.
Where is the money kept?
Historically, most of that money went to Cyprus – attracted by favorable taxes. For some, the island was known as “Moscow in the Mediterranean”.
According to the Atlantic Council, $ 36 billion worth of Russian remittances were sent to the country in 2013 alone, most of which came from shell companies used to cover up the real owners.
In 2013, the International Monetary Fund (IMF) forced Cyprus to close tens of thousands of bank accounts of shell companies.
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The British Virgin Islands are a common source of Russian illicit money
Some British overseas territories, such as the British Virgin Islands and the Cayman Islands, were also preferred by Russians for that money.
In 2018, Russian oligarchs held about $ 45.5 billion in these tax havens, according to a report by the global human rights group Global Witness.
A portion of this money goes to financial capitals such as New York and London, where one can invest and earn returns.
Transparency International, an anti-corruption body, says at least $ 2 billion in UK assets are in the hands of Russians linked to financial crimes or the Kremlin.
The motive behind the Russian money laundering scandal was further exposed in a 2014 report by the Organized Crime and Corruption Reporting Program (OCCRP) on the so-called ‘Russian laundry’.
According to the document, between 2011 and 2014, 19 Russian banks embezzled $ 20.8 billion from 5,140 companies in 96 countries.
How is money hidden?
The most used way for Russian oligarchs to hide their “dirty money” abroad is through shell companies.
“These oligarchy groups hire the best lawyers, auditors, bankers and campaigners in the world to create legal mechanisms to cover up and defraud their funds,” the Atlantic Council said.
“An extremist oligarchy has layers of anonymous shell companies across many maritime borders, and their funds are moving between them at lightning speed.”
In 2016, the International Federation of Investigative Journalists released Panama Papers, which show that one company created 2,071 shell companies for rich Russians.
What steps are being taken to track the money of oligarchy?
In the aftermath of the invasion of Ukraine, several countries announced a series of measures to monitor Russian money.
The United States is assembling a new task force called “Klepto Capture” to control the finances of Russia’s oligarchy.
It is intended to seize assets managed by the judiciary and acquired through misconduct.
The UK government has taken steps to increase the use of court orders known as ‘Unexplained Wealth Orders (UWOs)’, which provide information on where people got the funds used to buy property in the UK.
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Cyprus was the common denominator for Russian currency, and the island became known as the “Moscow of the Mediterranean”.
Another type of court order, known as AFOs, allows British courts to freeze funds in banks or corporations if money is suspected of being involved in criminal activities.
The government also passed the Economic Crimes Act with the registration of beneficial owners of assets owned by foreign companies.
Britain also dropped its “Golden Visa” scheme, which granted residency to wealthy foreigners who had invested large sums of money in the country.
Malta, another preferred tax haven for Russian oligarchs, has also canceled its own “gold passport” scheme, which allowed millionaires to buy citizenship.
Cyprus and Bulgaria cancel their gold passport plans in 2020.
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