How Russian oligarchs hide money in Cyprus: US journalists found out a lot of interesting things

After Russia's full-scale invasion of Ukraine, the world began hunting for Russian oligarchs, or rather their assets under sanctions. Cyprus turned out to be the place where Putin's associates hide and launder billions of dollars, reports CBS.

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After Russia launched its invasion of Ukraine, the United States and its allies responded with sanctions targeting companies, oligarchs and officials linked to Russian President Vladimir Putin.

Headlines trumpeted Russian oligarchs' booty across Europe - yachts in Italy, villas in the south of France, and priceless art in Germany - but these basic assets are relatively easy to come by. Finding the billions of dollars hidden by oligarchs around the world is becoming increasingly difficult.

On the subject: Russian citizen arrested for illegal export of American microelectronics to Russia

How to hide such a sum of money from the international community, which claims that it intends to find them? The question led to Cyprus, a tiny Mediterranean island at the crossroads of Europe, Asia and the Middle East. The once bustling holiday destination is at the center of an international game of hide-and-seek.

“Moscow on the Mediterranean”

A poet once described Cyprus as "a golden green leaf thrown into the sea". The island, only 225 km long, is surrounded by sandy beaches and rich history. These turquoise waters, according to legend, were the birthplace of Aphrodite. But today the "playground of the gods" has become a playground for wealthy Russians.

Before the war, Limassol on the south coast of the island was a favorite place for Russians to relax. Limassol has earned the nickname "Moscow on the Mediterranean".

But Alexandra Attalides, a member of the Cypriot parliament, says that after the collapse of the Soviet Union, the oligarchs who came to the island did not come here for the beaches.

“There are beautiful beaches in Spain, Portugal, and Greece. There are many beautiful beaches everywhere. I think they found fertile ground here that helped them,” she said.

“After 1989, they stole the property of the Russian people and began to build their empires. And then maybe they were afraid that something would happen someday, so they wanted their assets to be safe outside of Russia. So they were looking for tax havens, and we had a very low tax rate at the time,” Attalides said.

“Cyprus has historically built its financial system to attract foreign wealth,” said Myra Martini, an analyst at Transparency International, a nonprofit that tracks money laundering around the world.

She says that for decades, if you were an oligarch or just a shady character looking to hide your rubles, Cyprus would be the number one place to do it.

“Cyprus provides secrecy and constant security, which is what criminals and the corrupt are usually looking for,” she says. — In Cyprus, for many years you could open a bank account without being asked many questions. You can open a company, meaning you can put money into it without having to say who you are or where the money is coming from.”

“Cyprus has become as famous for its opaque banking system as it is for its clear water. Soon, foreign money poured into the island like sun-starved tourists,” Maritini said.

"Golden Passports"

By 2012, the country of about a million people had accumulated almost $72 billion in bank deposits. About 30% of these bank deposits came from Russian citizens.

But in 2013 the situation changed. A debt crisis in neighboring Greece threatened to sink the Cypriot economy.

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Lawmakers, fearing the country would lose all Russian capital, put forward a scheme that other countries have used to attract wealth: a “citizenship by investment” program.

Here's how it worked. Any foreigner who invested more than $2 million in the country, usually by buying a property, could obtain a Cypriot passport - a coveted item since Cyprus is part of the European Union. The passport opened doors to 27 European countries.

From 2013 to 2020, Cyprus issued almost 7 of these "golden passports" - almost half to Russians.

Suddenly, Limassol's skyline is filled with high-rise luxury apartments, its port with mega-yachts, and its shops with super-rich Russians.

“You could see them walking like princesses into the most expensive stores. They have their own businesses, they have their own homes, they have luxury homes,” Attalides says.

But in 2020, an undercover Al Jazeera investigation uncovered corruption in the passport program. Cyprus illegally issued hundreds of "golden passports", some to criminals and fugitives.

Weeks later, after protests and pressure from the EU, the Cypriot government closed the program. But the passports had already been issued.
“When you give passports to people and then we realize they are criminals, you are opening the door of Europe to criminals,” Attalides says. “Golden passports also opened the doors of Europe to the Russian elite.”

At least a dozen of these now sanctioned Russian oligarchs have been issued “golden passports.”

Among them:

• Igor Kesaev, who owned a Russian arms factory.
• Billionaire Alexander Ponomarenko, who was the chairman of the board of Russia's largest airport and whom the US government calls one of Putin's "accomplices".
• And the aluminum tycoon Oleg Deripaska, who is part of Putin's inner circle. According to the US Department of the Treasury, he is under international investigation for, among other things, allegations of money laundering, wiretapping and extortion. He denies these accusations.

Myra Martini said a Cypriot passport could make it easier for sanctioned oligarchs to buy property and move assets, and that warm relations between wealthy Russians and Cyprus were causing concern internationally.

“If you are a small country that is very dependent on foreign money coming from one single country, that can also lead to conflict, right? says Martini. “I think Cyprus is one of the weakest links.”

Cypriot Finance Minister Konstantinos Petrides does not agree with this. His office oversaw efforts to freeze the Cypriot assets of all who fell under EU sanctions.

“As for citizenship, I think about ten people were subject to restrictive measures. And the Council of Ministers initiated a procedure to revoke their passports,” Petrides said. “I don’t have any names right now.”

Petrides' office responded that due to European data protection regulations, "a detailed list cannot be made public." But other EU countries have published detailed lists of their actions.

“The government of Cyprus does not need anyone to trust it. We have the Cyprus Mutual Evaluation Reports 2019 which show all the progress that has been made in recent years. I think that we, as Cyprus, have proven that we are a reliable member of the EU. We acknowledge that there have been mistakes in the past. But Cyprus has also been unfairly stigmatized,” Petrides said.

Petrides said the passports of the sanctioned oligarchs were in the "process" of being revoked, and said that Cyprus had confiscated $105 million worth of Russian deposits. A big number, but only a fraction of the estimated $5,6 billion Russian deposits made in Cyprus last year. Of the dozens of Cypriot properties and active front companies that have been traced back to sanctioned Russians, Petrides said that any Cypriot company owned by an EU-sanctioned oligarch is subject to “close scrutiny.”

But often Russian oligarchs do not list their names next to their assets.

The Abramovich case and Deripaska's child

Take the case of Roman Abramovich and his planes. According to US investigators, they were hidden under five shell companies stacked like Russian nesting dolls with addresses in the British Virgin Islands and the British Isle of Jersey, leading to an anonymous trust in Cyprus.

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But ultimately it was not the Cypriot authorities who attempted to confiscate the planes. These were prosecutors from the US Department of Justice.

“There have always been dark corners in the international financial system. And it's like water finding a crack, and that's where the criminal networks will go,” said U.S. Deputy Attorney General Lisa Monaco. She heads the Department of Justice's "Kleptocapture Unit", tasked with finding the assets of sanctioned oligarchs hidden around the world.

It turns out, just like tourists visiting Cyprus, dirty money doesn't stay on the island forever. Usually they are “laundered” and invested in other, Western economies.

Investigators say this is one way Oleg Deripaska was able to circumvent sanctions.

“The task force uncovered a network of collaborators, money launderers and middlemen who helped him hide his wealth in real estate here in Washington, D.C. and Manhattan,” Monaco says. “In the United States, in the arts, in the vanity business, including a music studio in Beverly Hills.”

The Department of Justice alleges that in 2020 Oleg Deripaska arranged for the birth of one of his children in the US even though he was under US sanctions.

In the first case, he managed to pull it off. But not in the second. US Customs stopped him. The government case details how, with the war in Ukraine escalating, Deripaska used a “Cyprus” company to arrange a private jet flight from Russia to Los Angeles for his pregnant girlfriend, transferring money to rent a house in Beverly Hills. But when she landed in Los Angeles last summer, customs officers stopped her.

Deripaska, his girlfriend and a US resident who helped him are now charged with sanctions evasion. They are not in custody, but the Justice Department has announced plans to confiscate his US property worth approximately $70 million.

Since the beginning of the war, the US has taken steps to confiscate more than $1 billion of sanctioned assets around the world.

“We are seeking authority from Congress to allow us to use the proceeds for the benefit of the Ukrainian people,” Monaco says.

Oleg Deripaska publicly criticized the economic consequences of the war in Ukraine for Russia. However, American investigators say he is a puppet of Putin, who supports the Russian war machine.

In Cyprus, journalists found a villa in a seaside complex, offices in the building, and more than a dozen active shell companies associated with Oleg Deripaska. The Cypriot government does not say whether it has frozen any of these assets.

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