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Global investigation claims Cyprus helped Russians shield their wealth (update 3)

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A global investigation on Tuesday claimed to show how Russian influence in Cyprus and on local service providers helped oligarchs and billionaires structure their wealth over the years preceding the 2022 full-scale invasion of Ukraine.

The report titled ‘Cyprus Confidential’ was compiled by the International Consortium of Investigative Journalists (ICIJ) and the Organised Crime and Corruption Reporting Project (OCCRP), according to whom more than 270 journalists from 68 news organisations worked on the investigation over eight months, cooperating from 55 countries and regions.

The investigation dealt extensively with corruption, sanctions-busting and how Russian wealth was allegedly shielded, relations with Russia, the role of the banking sector and of independent institutions and the well-documented golden passports scandal.

The investigation claims to reveal “Cyprus’ pivotal role in shielding the wealth of oligarchs and powering the Putin regime”. “As the West sought to block funding for Russian President Vladimir Putin’s war machine, financial enablers in Cyprus — including accounting powerhouse PwC — scrambled to keep his allies a step ahead of looming sanctions,” it says.

It specifically said that leaked documents show staff at PwC Cyprus hurried to restructure companies belonging to Russian oligarchs as the prospect of sanctions loomed.

“Now Cyprus says it is investigating one case in which PwC staff appeared to work on the transfer of an oligarch’s assets in the days after he was sanctioned by the EU,” the report says.

According to the investigation, that examined over three million documents, PwC helped Alexey Mordashov arrange to transfer his stake in TUI Group to his life partner just as the EU sanctioned him in February 2022 over Russia’s invasion of Ukraine.

Documents relating to the share transfer were still being circulated for sign-off in the first days of March 2022, raising the possibility that PwC Cyprus breached the fresh EU sanctions against Mordashov, it said.

“Cyprus’ new sanctions unit said it was aware of the TUI share transfer and that a criminal investigation had been launched, but did not name the target of the probe,” it added. “PwC also helped move a company and assets belonging to metals magnates Alexander Abramov and Alexander Frolov to their sons ahead of UK sanctions. The US and EU have not sanctioned Abramov or Frolov.

“Like other pro-Kremlin billionaires, Mordashov – described by Forbes as Russia’s richest person in 2021 – was at risk of having his European assets frozen if authorities sanctioned him in response to the invasion,” the report said.

“At PwC Cyprus, staff exchanged documents marked ‘URGENT’ and ‘PLEASE APPROVE’ as they prepared paperwork to sell Mordashov’s stake in German travel company TUI Group – reportedly worth well over $1 billion – to a British Virgin Islands company owned by his life partner, Maria Mordashova.

The Financial Times described the sale as an attempt by Mordashov to “outpace” EU sanctions.”

An analysis of the leaked data by ICIJ suggests that in all, 39 Russian clients of PwC Cyprus were hit with sanctions by the EU, UK, United States or Ukraine because of their close ties to Russian President Vladimir Putin or their prominent roles in economic sectors critical to his regime’s war in Ukraine.

The report said it was not clear whether PwC Cyprus worked with these clients at the time they were sanctioned.

PwC declined to comment to investigators on specific clients due to confidentiality obligations, but said the firm had “terminated relationships with approximately 150” clients following the Russian invasion in 2022.

russia cyprus

“All PwC firms, including PwC Cyprus, take the application of sanctions against clients and sanctions prohibiting various professional services extremely seriously,” the firm said in a statement.

“PwC’s internal standards are reviewed and updated to reflect both lessons learned and changing circumstances, and we do not hesitate to take action when our standards are not met. Any allegation of non-compliance with applicable laws and regulations is taken very seriously, investigated and appropriate action is taken if necessary.”

The investigation itself focused on the nitty gritty of timelines and when documents were moved around or transferred in the lead-up to sanctions, in particular to what time of the day Mordashov was sanctioned and what had been done before that to secure his assets.

A spokesperson for Mordashov said he had never broken “any laws, whether in Europe, Russia, or any other jurisdictions.”

“Mordashov was technically under sanctions throughout the day on February 28, 2022, though it is possible that neither he nor PwC were aware of his blacklisting until it was announced in the evening,” the investigation said.

President Nikos Christodoulides said on Tuesday night that everything that has come to light will be investigated and “no one is above the reputation of our country”.

In statements to journalists at an event in Paliometocho, Christodoulides said important decisions had been taken, even after his government came to power. “On the occasion of the sanctions by the British and the Americans, we proceeded to further strengthen the entire institutional framework. Everything that has seen the light of day will be investigated and within a deadline. I repeat, no one and no one is above the reputation of our country,” he said.

“We should be done with this matter. The reputation of our country, the credibility of our country, you understand that it is of crucial importance in the effort of all the Cypriot people, so that we have a strong and resilient economy that will allow us to have a targeted social policy, a strong economy that will allow us to invest in health, education and other sectors,” he added.

“So, of course, it is an issue that is very high on our priorities. I repeat for the umpteenth time, no one can be and is not above the name and reputation of our country and everything that comes to light will be investigated.”

Speaking earlier on Tuesday, Government Spokesman Konstantinos Letymbiotis said: “We have seen the publications. Our country has fortified its position in recent years. We say this with certainty and self-confidence because we know the framework that our country now has and that it applies.”

He said a meeting was held last week under the president to monitor the implementation of the latest measures taken by the government, and Cyprus would continue to further protect its financial system and the credibility of the country.

This was also demonstrated by the reports of Moneyval and economic assessments. There would be an immediate statement from the government and an investigation if necessary, he added.

To another question, he said that the measures that have been taken in the last year and in previous years were clear, and the positions of the US and UK governments regarding the credibility of the Republic of Cyprus and its immediate response regarding the sanctions were also relevant.

“We are certain that today the Republic of Cyprus is a reliable country, with a reliable financial system, possibly with one of the strictest frameworks surrounding it, and we will continue to maintain this reliability,” Letymbiotis said. “Tolerance for money laundering or sanctions-evasion is zero and will continue to be zero.”

Responding to a question on whether last week’s meeting was to get ahead of the publication, Letymbiotis answered in the negative, noting that the meeting was a follow-up to the decisions of the Council of Ministers in June 2023, which aim at more strengthened, effective implementation of sanctions.

After the meeting last Wednesday, Letymbiotis said the government was working towards safeguarding Cyprus’ name abroad where sanctions were concerned.

Technical support from the British government on creating a sanctions implementation unit was in its final stages and details are expected to be submitted within the month. The scope of the technical assistance has also been broadened to include the creation of a supervisory authority, Letymbiotis said.

Cyprus went into damage control mode in April this year after the US and UK sanctioned 23 Cypriot passport holders and over a dozen companies registered in Cyprus. They were deemed to be “financial fixers” helping sanctioned Russian oligarchs Roman Abramovich and Alisher Usmanov to hide their assets in complex financial networks.

Lawyer Christodoulous Vassiliades stood out as the individual who was sanctioned by both countries. Russia issued an arrest warrant against him last month, for which he was accused of being involved in a “large scale” money laundering operation by an organised group in Russia.

Cyprus moved quickly to freeze all accounts of all sanctioned individuals, with the central bank director saying not doing so would have been catastrophic for the economy. Earlier this month, four people and two companies linked to Cyprus were included in new US sanction list.

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