8th Feb 2023

Russian bankers shifted wealth away long before sanctions

  • Russia's foreign affairs minister Sergei Lavrov has said 'no one could have predicted' the scale of Western sanctions (Photo:
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After Russian president Vladimir Putin invaded Ukraine on 24 February, Western nations retaliated with massive sanctions on the Russian economy and financial system, expanding on earlier sanctions dating back as far as 2014 and the Crimea annexation.

Hundreds of Russian billionaires faced even tougher sanctions. But after some much-publicised seizures of yachts and London villas, efforts to identify and freeze assets held by Putin's inner circle have become bogged down in the labyrinthine secrecy of offshore jurisdictions.

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A new trove of financial data released as part of the Pandora Papers by the International Consortium of Investigative Journalists (ICIJ) on Monday (11 April) showed how Russian billionaires shifted their money to tax havens.

The data shows how offshore operatives adeptly helped wealthy Russian clients shield their holdings behind shell companies, often in the name of a friend, spouse, or paid assistant.

Highlighted is Alpha Consulting, a financial services company founded in 2008 by Victoria Valkovskaya, a Russian translator from Moscow who moved to the Seychelles, an Indian Ocean island nation, one of the world's most secretive jurisdictions.

The company reported in 2019 that its client base was 75 percent Russian, amounting to 800 individuals, the ICIJ reports.

One of its prominent clients is Roman Avdeev, a prominent Russian businessman and owner of Credit Bank of Moscow, a major Russian financial institution that has been under US sanctions since the start of the invasion

Data shows how Alpha Consulting helped him to register offshore companies in the Seychelles, the British Virgin Islands and Belize.

So-called nominee directors, or stand-ins, for official corporate paperwork, were used to help shroud the actual owners.

The records also show how the banking sector helped Russian billionaires shift wealth just before or soon after Western sanctions, some going back to the annexation of Crimea by Russian forces.

Chief executive Herman Gref of Sberbank, Russia's biggest bank, used an offshore operative in Singapore in 2015 to restructure a $75m [€69m] family trust tied to a tangle of offshore companies.

A total of eight chief executives representing five of Russia's biggest financial institutions — Sberbank, Alfa Bank, VTB, Gazprombank and VEB — have helped their billionaire clients stash away wealth to escape Western sanctions.

Only three bankers, including VEB's chair, Igor Shuvalov, and Alfa Bank founders Mikhail Fridman and Petr Aven, responded to ICIJ's requests for information, but they denied wrongdoing.

The Pandora Papers include the names of 45 Russian billionaires with a net worth equivalent to 15 percent of Russia's gross domestic product, of which 12 were targeted by recent sanctions.

Since the invasion started, severe sanctions have also hit Russian financial services that have enabled billionaires to stash away their wealth.

Sberbank has wound down its European operations in April, with rival Russian bank VTB following suit shortly after.

Avdeev, owner of the Credit Bank of Moscow, also had to place his London-based brokerage business Sova Capital Limited under special administration because of "severe liquidity problems."

But the full impact of 2022′s new round of sanctions, including financial institutions, was not included in the data and will not be known for some time.

In a potential effort to brand sanctions as a badge of honour, or dismiss their effect, Russian state news media Russia Today tweeted pictures on Monday of a dinner hosted by minister of foreign affairs Sergei Lavrov this week, where sanctioned guests received special cards differentiating them from other guests who were not.


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