Cyprus to clamp down as investigation reveals oligarchs moved assets after Ukraine invasion
Cyprus has vowed to tighten controls on its financial sector as an investigation published by the Guardian and its reporting partners reveals oligarchs transferred hundreds of millions in assets while sanctions loomed after the Russian invasion of Ukraine.
The role of the blue-chip accountants PwC Cyprus and other advisers in managing transactions as Vladimir Putin’s forces launched their assault has emerged from Cyprus Confidential, a cache of 3.6m files leaked by an anonymous source to the International Consortium of Investigative Journalists (ICIJ) and Germany’s Paper Trail Media, which shared access with the Guardian and other reporting partners.
The largest ever financial data leak from Cyprus also sheds light on how opaque offshore structures managed by accountants and corporate service providers in the EU member state may have enabled undisclosed payments to an influential western journalist, and potential breaches of rules around football club financing.
The Cypriot government has responded by promising a “zero-tolerance approach” to sanctions violations as it battles to safeguard its status as a financial centre.
In response to detailed questions from the consortium, a spokesperson said Cyprus was receiving technical support from the British government to create a sanctions implementation unit next year, with plans to be submitted this month alongside a report on how its authorities investigate and prosecute financial crime. It has also joined an EU cross-border project on making sanctions effective.
The exact rules around timing and enforcement of the sanctions against Putin and the officials, politicians and business leaders close to his regime is now under scrutiny, both within Cyprus and around Europe.
The president, attorney general, key cabinet members and officials were briefed at a high-level meeting last week over the country’s progress on implementing tighter controls. The Cypriot government spokesperson, Konstantinos Letymbiotis, said: “The strategy of our government, who took office in March 2023, is of zero tolerance on matters concerning sanctions evasion and law violation, and by extension, to safeguard the country’s name as a reliable financial centre. I would like to stress that our government is unequivocally committed to fighting corruption and illicit finance and take all necessary actions to ensure full implementation of EU sanctions.”
The leak reveals the scale of Cyprus’s role as a gateway into Europe for the Kremlin-connected elite. Among the 104 Russian billionaires Forbes magazine identified in 2023, two-thirds appear alongside family members as clients of the island’s professional service providers. There are records relating to 71 Russian clients who have come under sanctions since February 2022. Many of these relationships have since been terminated, advisers say.
The Cyprus Confidential files reveal: • PwC Cyprus and other advisers helped one of Russia’s most powerful oligarchs, Alexei Mordashov, attempt to transfer £1bn in a public company on the day he was placed under EU sanctions. The Guardian has been told the transfer is subject to an “ongoing” criminal investigation in Cyprus.
• €600,000 of undisclosed payments from companies linked to the same oligarch to an influential German journalist, considered a leading expert on Russia, to support the publication of two books about Putin.
• Tens of millions in offshore payments made by Roman Abramovich during his ownership of Chelsea football club to agents, scouts and club officials that may have breached strict football rules on accounting and financial fair play.
• Undisclosed agreements that allowed Abramovich and the super-agent Pinhas Zahavi to control the careers of 21 young footballers under controversial third-party ownership arrangements, which have been compared to bonded labour.
After being approached for this report, the Cyprus finance ministry said it had launched a criminal investigation into the transfer of Mordashov’s stake in Europe’s largest tour operator, Tui. The tycoon’s name appeared on the EU’s sanctions list on 28 February 2022, with documents appearing to show his advisers attempted to transfer his £1bn stake to Marina Mordashova, who is reportedly his life partner, on the same day.
A spokesperson for the ministry said: “We are aware of Tui share transfers and a criminal investigation is being carried out.”
Tui is one of the largest companies listed on the London and Hanover stock exchanges, and details of the transfer, which represented about a third of the company’s shares, were declared in stock market filings beginning on 4 March 2022.
A spokesperson for Mordashov said he and his companies had always acted in line with “fair business practices and strict compliance with the regulations”. They added: “All information and regulatory notifications with respect to the share transfer were duly disclosed to the relevant authorities and made public to the extent legally required short after the share transfer, which clearly demonstrates that there was no intention to hide something or to circumvent the laws.”
A spokesperson for PwC said: “Any allegation of non-compliance with applicable laws and regulations is taken very seriously, investigated and appropriate action is taken if necessary.”
Mordashov and PwC said they were unaware of the criminal investigation. The Guardian has seen no evidence of any intention to break rules.
The EU’s decision to place Mordashov under sanction was confirmed by a judgment in September, according to the European court of justice, but the oligarch can appeal again.
The leaked documents, which date from the mid-1990s to April 2022, show nearly 800 companies and trusts registered in tax and secrecy havens that were owned or controlled by Russians who have been placed under sanctions since 2014, when Russia annexed Crimea. These include more than 650 Cyprus companies and trusts.
Nikos Christodoulides, a career diplomat who was elected president in February of this year, has led efforts to bring the financial services sector into line after decades of lax regulation.
His government moved to tighten controls on Russian capital this spring when the US and UK imposed sanctions on 23 Cypriot passport holders and more than a dozen companies registered in Cyprus, including the offshore services firm MeritServus, which was revealed by the Guardian as having assisted Abramovich in transferring his assets to family members just before he was added to the sanctions list.
• The image on this article was replaced on 14 November 2023.