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Money of Russians under threat: The State Department reached Cyprus

1 2018 June
Tags:Cyprus, Economy, Russians in Cyprus, Banks, West, Sanctions

Cyprus began checking the accounts of Russians after the inspection of the island by the US Treasury. As "Gazeta.Ru" found out, from account holders in Cypriot banks began to demand to explain the transactions for the last 15 years. Those who can not or will not explain the origin of the funds will be forced to close the accounts. At the same time, Cyprus found itself in a difficult situation: a massive exodus of Russian investors will lead the country to an economic crisis.

"Газета.Ru" has learned, what requirements are exposed to Russians at whom accounts in banks of Cyprus are opened.

Employees of compliance departments in Cypriot banks began to demand from separate account holders an explanation of the reasons for transactions for the last 15 years (compliance-inspectors check operations for compliance with legal requirements - Ed.).

At the same time, they introduced a new policy regarding accounts of non-residents and began to seek explanations from citizens of Russia regarding transfers of funds between their accounts. Now every client of Cypriot banks should have a compliance-history of transactions.

Problems in Cypriot banks can affect about 150 000 qualified accounts,

told Gazeta.ru in the financial company Alpari.

Such requirements were introduced by local banks after representatives of the US Treasury paid a visit to Cyprus in May.

After that, the Russian Commercial Bank (RCB Bank) said that following the results of meetings between representatives of the US Treasury and Cypriot regulators, a position was reached about all banks operating in Cyprus on the need to strengthen control over the origin of clients' funds and their operations. 46,29% of shares RCB belongs to the Russian VTB. Another 49,9% owned by Cyprus Crendaro Investments Limited, 3,81% - registered in Cyprus Mitavra Limited.

"The US Treasury seeks to cut off channels for criminal money operations around the world, as well as to ensure the implementation of US sanctions,

- stressed in RCB Bank, adding that such tightening concerns not only the clients of Cypriot banks from Russia.

As explained in the bank, an indication of the closure of accounts can get customers who are not ready to meet the requirements of compliance. "For example, those who are not ready to provide necessary explanations on the nature of transactions to their counterparties or their tax returns," the bank explained.

The requirements of AML (English "anti-money laundering") and KYC (English "know your customer" - the requirement to establish a counterparty's identity before conducting a financial transaction) are the same for all Cypriot banks without exception. "RCB Bank strictly fulfills both existing and announced additional requirements by the regulator. This leads to the fact that many potential customers, primarily non-residents of Cyprus, can not open bank accounts or face the need to close accounts, "the credit institution said.

Cyprus - a favorite place for keeping the funds of Russians. They transferred funds here for a number of reasons: low taxes, a stable currency and a change of citizenship in exchange for the purchase of real estate or businesses.

As a result, many Russians became owners of certain assets on the peninsula. So, 9,27% of shares of Bank of Cyprus, Cyprus Sberbank, belongs to billionaire Viktor Vekselberg, who fell under American sanctions.

It was not possible to receive comments on how Viktor Vekselberg's business will affect the tightening of the procedures for verifying clients in Cypriot banks. An official representative of the Renova group of companies, Andrei Shorh, told Gazeta.Ru that "only the bank itself can answer these questions, not its shareholders." In turn, the Bank of Cyprus at the request of "Gazety.Ru" was not promptly responded, forwarding it for further investigation to the authorized department.

Cyprus is not the only country where Russian capital is not welcome now. After Latvia was visited by emissaries of the US Treasury, many Latvian banks stopped their relations with Russians and Russian organizations that were under sanctions.

"Some Russian beneficiaries asked the Latvian banks to close the account and transfer the company's money to another bank. Others simply blocked money until the history of their origin was clarified, "explained Alexander Pakhomov, Managing Partner of the UK Criminal Law and Business Company, earlier to Gazeta.Ru.

Now it is a question of the US Treasury's unobtrusive request to Cyprus to follow restrictions in the implementation of the US law "On Countering America's Opponents through Sanctions," says Alexander Bazykin, managing partner of HEADS Consulting.

"For the United States, the pressure on offshore companies is a matter of principle, since their availability in fact makes their sanctions policy ineffective, even after the automatic system for exchange of tax information started operating this spring, tracking the movement of capital and finding the ultimate beneficiaries of offshore organizations remains extremely difficult" , - the expert says.

More than 70 countries signed an agreement with Russia on the exchange of tax information. However, it was the US that did not join the multilateral agreement, Anatoly Aksakov, head of the State Duma's financial committee, said earlier in an interview with Gazeta.ru.

"Although they themselves everywhere are making a noise, shouting, they call on them to fight against money laundering, but real actions, unfortunately, do not contribute to this," Aksakov said in an interview.

According to Bazykin,

the power of Cyprus is now essentially between the hammer and the anvil: on the one hand, the massive exodus of Russian capital and the withdrawal of assets can lead to a full-scale crisis in the local economy, on the other - no one wants to quarrel with the US now.

GDP of Cyprus by about 60% is formed by the banking and financial sectors, tourism accounts for only 20%, he notes.

"From 60% from 15 to 20% is formed at the expense of organizations, one way or another connected with Russian capital. If you recall the 2012-2013 years, when the banking crisis was raging in Cyprus, then, according to the most conservative estimates, on the accounts of local banks there were about 35 billion euros owned by wealthy Russians and about 37 billion of Russian companies and banks. When, at the peak of the crisis, foreign capital from the island began to flee, the issue of Cyprus's support was decided at the level of the Russian government and in many respects only because Russian capital did not flinch, Cyprus experienced that crisis. Therefore, the outcome of Russian capital for the economy of Cyprus is without exaggeration the beginning of the end of the local economy, "the expert says.

So far, the Cypriot authorities have shown much greater loyalty to the banks that serve Russians than the authorities of Latvia, says Maxim Osadchy, head of the analytical department of the BKF bank. For example, in February of this year in Latvia "voluntary" liquidation of ABLV bank, actively working with non-residents' funds, began.

In this case, analysts expect that

The US Treasury will come with checks and other jurisdictions that are popular among Russians.

"Wherever it is possible in any way to create obstacles to individual domestic companies or persons on sanctions lists, all available methods are used," Finam analyst Alexei Korenev said.

As explained "Gazeta.ru" Aksakov, given what is happening in the world, you can expect that the US can come to any European country and "limit its sovereignty." Predict which jurisdiction will be next in this list, it is not taken.

At the same time, experts do not believe that the actions of Latvia or Cyprus will force Russian capital to return to their homeland. "The question of the return of the so-called" Russian funds "to the Russian financial system is primarily determined by the reliability and convenience of carrying out these operations within Russia," says Konstantin Korishchenko, associate professor of the Department of Stock Markets and Financial Engineering at the Faculty of Finance and Banking of the Russian Academy of Science. Now we can not say that these conditions satisfy the owners of foreign accounts, he adds.

Natalia Eremina, Ekaterina Katkova
BBC
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