By the Blouin News World staff

Dirty Russian money looks for new laundries after Cyprus

by in Europe.

The 10-ruble coin.

The 10-ruble coin. Shiny . . . .

The conclusion of the new Cypriot bailout plan leaves many Russian depositors out of pocket — a $4 billion haircut according to some estimates, with an announcement from Russia’s government Monday that they’ll be getting no aid from Moscow — but also leaves a great number of Russians busily looking for a new safe haven for their money.

Many of these will be legitimate investors and depositors who simply prefer to leave their cash in jurisdictions where the courts are less corrupt and the tax authorities less predatory. After all, while Russia has a low flat tax rate of 15 percent, it also has an IRS-equivalent notorious for leaking information about individuals’ incomes to kidnappers and disgruntled spouses alike.

Most of the approximately $32 billion of Russian money in Cyprus was essentially legitimate, Much of it was simply passing through, business funds enjoying a generously low corporate tax rate – 10 percent to Russia’s 20 — before flowing back into Russia as ‘foreign investment,’ something which explains why tiny Cyprus was Russia’s largest investor.

However, a reasonable proportion was dirty money being parked there or moving on to more desirable locations such as London and New York after receiving another laundering. Cyprus was especially infamous for its ‘sandwiches,’ a moniker for Cypriot companies serving as shells for Russian money, and which were then in turn owned by other shell companies in jurisdictions such as Andorra and Belize (these multiple layers designed, as one might imagine, to muddy ownership to the point of total obscurity).

For many of the gangsters and underworld financiers who treated Nicosia as another stop on their laundry routes (typically the money was prewashed by moving it through banks in countries such as Ukraine, Moldova, Latvia and Israel first), new havens are an urgent necessity.

Switzerland, once the upscale money launderer’s destination of choice, has in recent years made efforts to shed its dubious image and cooperate with international investigations more enthusiastically, even though it still has amongst the highest levels of banking secrecy. Nonetheless, for the kind of quick and simple transactions Russian organized crime favors, with funds needing to be easily accessible, Swiss banks are not ideal.

Instead, there appears to be something of a feeding frenzy as rival jurisdictions specializing in few-questions-asked banking look to pick up new business. From island havens such as Nauru in the Pacific and São Tomé and Príncipe in the Gulf of Guinea, to closer locations such as Luxembourg and Lebanon, the money laundries are open for business and eager to welcome Russia’s dirty billions.

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