Where do Russian oligarchs keep their 'dark money' ?

Russian billionaires have been moving billions of dollars in ill-gotten gains abroad for decades, putting it in shell firms to make it impossible to track.

Countries all across the world are now working to find out where it came from.

What is the global amount of Russian 'dark money'?

Russians have roughly $1 trillion (£750 billion) in "dark money" stored abroad, according to the Atlantic Council, a US think group.

According to the research, Russian President Vladimir Putin and his close cronies - wealthy Russians known as "oligarchs" - control one-quarter of this sum.

"This money can be used by the Kremlin for espionage, terrorism, industrial espionage, bribery, political manipulation, disinformation, and a variety of other criminal reasons," according to the report.

What were the methods used to create the dark money?

Putin's close associates have been urged to "steal from the state budget, extort money from private businesses, and even organize the outright seizure of valuable enterprises," according to another US think tank, the National Endowment for Democracy.

They have amassed personal fortunes worth tens of billions of dollars, according to the report.

Boris Nemtsov and Vladimir Milov, Russian opposition leaders, claim that $60 billion was moved from Gazprom finances to Putin's friends between 2004 and 2007.

People close to Putin have gotten exceedingly wealthy, according to the Pandora Papers, which were disclosed by the International Consortium of Investigative Journalists. They may be helping him move his own wealth around.

What happens to the money once it leaves the bank?

Much of this money has previously flowed to Cyprus, tempted by lower taxes. "Moscow in the Med," as the island was dubbed by some.

According to the Atlantic Council, Russian money poured into the country in 2013, totaling $36 billion (£27 billion). Much of it was delivered through shell corporations, which are meant to conceal the true owners of the assets.

Cyprus was forced to cancel tens of thousands of bank accounts owned by shell firms by the International Monetary Fund in 2013.

High-angle shot of a yacht marina in the British Virgin Islands
The British Virgin Islands is a favourite haven for Russian money - Image source: Getty Images

British Overseas Territories like the British Virgin Islands and the Cayman Islands are popular vacation spots.

According to a report by Global Witness, Russian oligarchs had an estimated $45.5 billion (£34 billion) in tax havens in 2018.

Some of this money ends up in financial hubs like New York and London, where it may be invested and profited from.

According to Transparency International, Russians accused of financial crimes or with ties to the Kremlin own at least $2 billion (£1.5 billion) in UK property.

The scope of Russian money laundering was further revealed in a 2014 study on the "Russian Laundromat" by the Organized Crime and Corruption Reporting Project. It claimed that 19 Russian banks laundered $20.8 billion (£15.6 billion) to 5,140 businesses in 96 countries between 2011 and 2014.

What is the method for concealing the funds?

Shell corporations are the most common means for Russian billionaires to hide their "dark money" overseas.

According to the Atlantic Council, "these oligarchs use the best lawyers, auditors, bankers, and lobbyists in the world to create legal techniques to conceal and launder their assets."

"A serious oligarch has a slew of anonymous shell companies in a slew of offshore jurisdictions, and his money moves at breakneck speed between them."

The Panama Papers, published by the International Consortium of Investigative Journalists in 2016, revealed that one business alone had set up 2,071 shell corporations for wealthy Russians.

What actions are being made to recover the funds of oligarchs?

Countries have launched a variety of measures to track down Russian money in the aftermath of the invasion of Ukraine.

The US is forming a new "KleptoCapture" task team to investigate Russia's billionaires' finances.

The Justice Department will be in charge of it, and it will be used to seize assets earned through illegal means.

The United Kingdom government has made steps to boost the use of Unexplained Wealth Orders (UWOs), which require persons to prove where they acquired the money to buy assets in the United Kingdom.

A street in Nicosia, Cyprus, with a signboard saying "Russian products"
Cyprus is such a popular destination for Russian money that it is called 'Moscow on the Med' - Image source: AFP via Getty Images

Courts can use Account Freezing Orders (AFOs) to freeze accounts in a bank or building society if they believe the funds are linked to criminal conduct.

Furthermore, the government has passed the Economic Crime Act, which includes a beneficial ownership register for property controlled by foreign corporations.

The UK has also discontinued its "golden visa system," which allowed affluent foreigners to live in the nation if they invested substantial sums of money.

Malta, a popular shelter for Russian cash, has also ended its "golden passport" program, which allowed oligarchs to purchase citizenship. In 2020, Cyprus and Bulgaria ended their golden passport programs.

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