Supervisor Elham AbolFateh
Editor in Chief Mohamed Wadie

Russian Bankers Shifted Wealth away Long before Sanctions

Fri 15 Apr 2022 | 01:44 PM
Ahmad El-Assasy

Following Russian President Vladimir Putin's invasion of Ukraine on February 24, Western nations replied with huge sanctions against Russia's economy and banking system, expanding on previous penalties dating back to 2014 and the annexation of Crimea, according to the EU Observer.

Hundreds of Russian billionaires were subjected to even harsher sanctions. However, following some high-profile seizures of yachts and London houses, efforts to identify and freeze assets owned by Putin's inner circle have become bogged down in the maze of offshore jurisdictions.

The International Consortium of Investigative Journalists (ICIJ) released a new batch of financial data as part of the Pandora Papers on Monday (11 April) that revealed how Russian oligarchs moved their money to tax havens.

The data demonstrates how offshore operators skillfully assisted affluent Russian customers in concealing their assets behind shell firms, frequently in the name of a friend, spouse, or paid assistant.

Alpha Consulting, a financial services firm created in 2008 by Victoria Valkovskaya, a Russian translator from Moscow who relocated to the Seychelles, an Indian Ocean island nation that is one of the world's most secretive jurisdictions, is highlighted.

According to the ICIJ, the company declared in 2019 that its client base was 75% Russian, with 800 people.

Roman Avdeev, a famous Russian businessman and owner of Credit Bank of Moscow, a large Russian financial institution that has been sanctioned by the US since the beginning of the invasion, is one of its important clients.

Data demonstrates how Alpha Consulting assisted him in forming offshore corporations in the Seychelles, the British Virgin Islands, and Belize.

Nominee directors, or stand-ins for official company documents, were employed to conceal the true owners.

The documents also illustrate how the banking sector assisted Russian millionaires in shifting wealth just before or shortly after Western sanctions, some dating back to Russia's invasion of Crimea.

In 2015, Herman Gref, the CEO of Sberbank, Russia's largest bank, employed an offshore operator in Singapore to reorganise a $75 million [€69 million] family trust linked to a tangle of offshore firms.

Eight CEOs from five of Russia's largest financial institutions — Sberbank, Alfa Bank, VTB, Gazprombank, and VEB — have helped billionaire clients hide their riches in order to avoid Western sanctions.

Only three bankers responded to ICIJ's demands for information, including VEB's chair, Igor Shuvalov, and Alfa Bank founders Mikhail Fridman and Petr Aven, although they all denied wrongdoing.

The Pandora Papers contain the names of 45 Russian billionaires, each having a net worth equal to 15% of Russia's GDP, 12 of whom have recently been sanctioned.

Since the invasion began, heavy sanctions have been imposed on Russian financial services, allowing oligarchs to hide their money.

Sberbank closed its European operations in April, and rival Russian bank VTB followed suit shortly afterwards.

Avdeev, the owner of Credit Bank of Moscow, was also forced to place his London-based brokerage firm Sova Capital Limited under special administration due to "serious liquidity concerns."

However, the full impact of the next wave of sanctions imposed in 2022, involving financial institutions, was not included in the report and will not be known for some time.

In a possible attempt to brand sanctions as a badge of honour or dismiss their impact, Russian state news agency Russia Today tweeted pictures on Monday of a dinner hosted this week by Russian Foreign Minister Sergei Lavrov, where sanctioned guests received special cards distinguishing them from other guests who were not.