Cyprus ignored sanctions to power Kremlin’s financial machine

Under the Influence

Cyprus Confidential exposes how the island’s economic system, known as the Cyprus model, relies on an oversized financial sector with some of the European Union’s weakest financial disclosure laws, an indulgent central bank – and a tsunami of more than $200 billion in Russian investment that has bought its oligarchs vast influence.

Among the sanctioned Russian clients are 44 PEPs — public officials, their relatives or others linked to state-owned entities. Of the 104 Russian billionaires Forbes magazine identified in 2023, 67 appear in Cyprus Confidential documents, along with their family members, as clients of the island’s professional services providers.

The investigation reveals nearly 800 companies and trusts registered in secrecy jurisdictions that were owned or controlled by Russians who have been sanctioned since 2014.

While many of these entities are shell companies, some are subsidiaries of industrial giants — such as steelmaker Evraz, which supplies most of the train rails that Russia uses to transport arms and ammunition to its troops in Ukraine.

In a response to questions from ICIJ partners, a Cyprus Finance Ministry official pointed to a recent International Monetary Fund study showing diminishing direct investment by Cypriot entities into Russia. Additionally, even before the February 2022 invasion of Ukraine, Russian deposits in Cyprus’ banking system had dropped to 4%, he said.

The Enablers

The investigation also reveals how global accounting giant PwC, formerly known as PricewaterhouseCoopers, put its Cyprus office and its 1,100 employees at the service of Putin allies amid Russia’s invasion of Ukraine. For example, PwC helped Alexey Mordashov, one of Russia’s richest industrialists, transfer a $1.4 billion investment out of his name the day after he was slapped with Western sanctions.

The Cypriot Ministry of Finance is aware of the share transfers, and a criminal investigation is underway, a ministry official told ICIJ in November.

PwC Cyprus worked with at least 12 of the 25 Russians who were already subject to sanctions after Russia’s 2014 annexation of Crimea and the war in Donbas. It took PwC until a few months after Russia’s 2022 invasion of Ukraine to announce it was leaving Russia and ask its affiliates to stop working for sanctioned clients.

PwC Cyprus partners who left the firm to form a new provider also took over the administration of companies controlled by the pair of oligarchs the UK listed among Putin’s “cabal.” The firm, called Kiteserve, had office space in the same building as PwC’s offices in Limassol, Cyprus. Kiteserve severed these ties only after the UK sanctioned the pair last year.

Citing the need to maintain confidentiality, PwC declined to comment on its business with individual clients. It added that it complied with EU and United Nations sanctions before Russia’s February 2022 invasion of Ukraine and has since severed ties with 60 clients under the company’s new Russia-related sanctions policy.

Owner of Chelsea

Worth $9 billion, Roman Abramovich has been a member of Putin’s inner circle since the late 1990s. Long based in the UK, he became widely known for his fleet of yachts and as the longtime owner of the UK’s Chelsea Football Club.

The investigation shows a decade-long pattern of payments worth tens of millions of British pounds, routed through offshore vehicles belonging to Abramovich and apparently omitted from Chelsea’s financial accounts.

Chelsea’s finances are already being probed by the Premier League, after the West London club’s new ownership regime voluntarily reported that “incomplete financial information” had been submitted during Abramovich’s tenure.

The investigation also shows that an Abramovich-controlled entity sold a highly profitable stake in an advertising company to an entity controlled by Sergey Roldugin – a classical cellist and longtime friend of Putin. In June 2022, Roldugin was sanctioned by the US Treasury as a “custodian of President Putin’s offshore wealth.”

Putin’s Author

Hubert Seipel, a German journalist and author, forged his brand as one of the country’s leading analysts of Russia by touting his unparalleled access to Putin. He won awards and accolades for portraying Russia as something other than a world menace.

The investigation reveals that, in the past five years, Seipel, 73, has received about $700,000 as a “sponsorship” from a shell company linked to Alexey Mordashov, a Russian oligarch currently under sanction in the US and Europe for his allegedly close ties to the Kremlin.

A handwritten note on a 2018 document says the sponsorship was “for writing a book on [the] political environment in the Russian Federation.” Another note on the same record also referred to a 2013 agreement for “Putin biography.” In 2015, Seipel published a German book with a title that can be translated as “Putin: Inner Views of Power.”

In response to questions, Seipel acknowledged Mordashov’s “support” for his books but defended his work as unbiased.

Dealing with Despots

The investigation exposes detailed discussions between Syria’s state-owned oil company and a Cyprus-registered intermediary about buying drilling equipment made by the Houston-based manufacturer NOV Inc. It presents evidence that the Syrian Petroleum Co and a Cyprus intermediary prepared to conduct at least five transactions between 2014 and 2019 to obtain NOV equipment.” The SPC is owned by Syria and controlled by the government of Bashar Assad.

— International Consortium of Investigative Journalists (ICIJ) with other media partners