Cyprus feeling the pinch of Russian deposits drain

Cyprus appears to be the only country where Russian deposits are losing out in Moscow’s efforts to repatriate Russian capital which has been deposited or invested abroad. Russian President Vladimir Putin has personally taken on the campaign to repatriate Russian capital through incentives, as part of his plans to revitalise Russia’s economy.

However, Putin’s efforts do not seem to have borne fruit as according to a study made by Frank Research Group (Frank RG), two-thirds of Russia’s millionaires and billionaires’ capital is still outside the country.

According to the study, Cyprus is the only country to have lost out compared to other competing countries (Luxembourg, the Netherlands, the Bahamas, Bermuda, Virgin Islands). According to the latest data from the Central Bank of Russia, quoted in the study, Cyprus has seen EUR 10 bln of Russian money, deposited repatriated over the last 15 months.

This is capital belonging to companies registered in Cyprus, most of which potentially has Russian interests, and were transferred to Russian entities.

According to the Frank RG study, wealthy Russians (Russians with a fortune of more than USD 1 mln) have accumulated USD 455 bln, with only as much as USD 140 bln being deposited in Russian banks, while some USD 315 bln are still outside Russia.

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However, about a year ago analysts and experts such as professors at the Paris School of Economics, Filip Novokmet and Thomas Piketty, and professor at Berkeley University of California, Gabriel Zucman argued the wealth of rich Russians was a trillion dollars, which means that just 1/9 of their funds are in Russia.

The Kremlin offered financial amnesty to Russians who had capital abroad, giving them the possibility of repatriation. But again, little interest was exhibited, as only 7200 cases were recorded, reported Bloomberg.

In their latest effort to repatriate capital, the Russian government broadened the amnesty offer adding more incentives. In particular, by March 2019, Russians who close their accounts in offshore companies will be able to transfer their assets back to Russia without being taxed, while any tax evasion of the past will not be investigated.