For decades, Russian oligarchs have moved billions of dollars of dubious money abroad, putting it into shell companies to make it extremely difficult to trace.
Now countries around the world are taking steps to find it.
How much Russian “dirty money” is there in the world?
The US think tank Atlantic Council says the Russians have about$1 trillion of what he calls “dirty money” hidden abroad.
Its 2020 report estimated that a fourth part of this amount is controlled by the Russian president Vladimir Putin and his close associates, the wealthy Russians known as “oligarchs”.
“This money can be exploited and diverted by the Kremlin for espionage, terrorism, bribery, political manipulation, disinformation and many other nefarious purposes,” the report says.
How did they get the dirty money?
Another US think tank, the National Endowment for Democracy, says Putin has encouraged his close associates “to steal from the state budgetextort money from private companies, and even orchestrate the full seizure of profitable companies.
He says that in this way, they have amassed personal fortunes running into the tens of billions of dollars.
Russian opposition leaders Boris Nemtsov and Vladimir Milov have claimed that between 2004 and 2007, $60 billion of funds from oil giant Gazprom were transferred to Putin cronies.
The Pandora Papers, published by the International Consortium of Investigative Journalists, note that people close to Putin have become very wealthy and could help him move his own wealth.
Where is the money kept?
Historically, much of this money has gone to Cyprus, since there the taxes are favorable. To some, the island became known as “Moscow in the Mediterranean“.
According to the Atlantic Council, US$36 billion in Russian money flowed there in 2013 alone. Much of it came through shell companieswhich are used to hide the real owners.
In 2013, the International Monetary Fund persuaded Cyprus to close tens of thousands of bank accounts of shell companies.
British Overseas Territories, such as the British Virgin Islands and the Cayman Islandsare also favorite destinations.
A Global Witness report noted that in 2018, Russian oligarchs held an estimated $45.5 billion in these tax havens.
Part of this money reaches financial capitals such as New York and Londonwhere you can invest and provide benefits.
The anti-corruption organization Transparency International claims that at least $2 billion of property in the UK belongs to Russians accused of financial crimes or with links to the Kremlin.
The breadth of Russian money laundering was further exposed in a 2014 report by the Organized Crime and Corruption Reporting Project. The report noted that between 2011 and 2014, 19 Russian banks laundered $20.8 billion through 5,140 companies in 96 countries.
How is the money hidden?
The usual way Russian oligarchs hide their “dirty money” abroad is through shell companies.
“These oligarchs hire the best lawyers, auditors, bankers and lobbyists in the world to develop legal means to hide and launder their funds,” says the Atlantic Council.
“A serious oligarch has layers of anonymous shell companies in a score of offshore jurisdictions, and his funds move at lightning speed between them.”
In 2016, the International Consortium of Investigative Journalists published the Panama Papers, which showed that a single company had created 2,071 shell companies for wealthy Russians.
What measures are being taken to find the oligarchs’ money?
Following the invasion of Ukraine, several countries have announced a series of measures to track Russian money.
The United States is creating a new task force, “KleptoCapture,” to crack down on the finances of Russia’s oligarchs.
It will be in charge of the Department of Justice and its objective is to seize assets obtained through illicit conduct.
The UK government has taken steps to increase the use of Unexplained Wealth Orders (UWOs), which force people to show where they got the cash from to buy assets in the UK.
Account Freezing Orders (AFOs) allow courts to freeze funds from a bank or building society if they suspect the money is related to criminal activity.
And the London government passed the Economic Crimes Act, with a registry of usufructuaries of assets owned by foreign entities.
UK too eliminated its “golden visa scheme“, which granted residence rights to wealthy foreigners if they invested large sums of money in the country.
Malta, a favorite haven for Russian money, has also scrapped its “golden passport” scheme that allowed oligarchs to buy citizenship.
Cyprus and Bulgaria scrapped their golden passport schemes in 2020.