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The secret world of offshore banking proves that it can resist kleptocrats

Russia’s invasion of Ukraine has produced an unexpected side effect: the complicated offshore financial system quickly demonstrates that it can self-destruct.
The war has produced an extraordinary coalition between tax havens that usually compete fiercely with each other to attract Russian wealth. Under the leadership of the European Union, the United States, the United Kingdom, Switzerland and Monaco, all of which have long been considered a cache of assets for the richest people in Russia, are suddenly working together to impose sanctions and remove the cronies of Russian President Vladimir Putin from the laws and area to dispel impunity, known as the “tax haven”.

In addition to separate sanctions against Russian banks and other organizations, each of these jurisdictions has frozen or confiscated the personal assets of top Russian government officials, billionaire managing directors and representatives of state media. Other jurisdictions have also joined the fight. Singapore stopped without individual sanctions, but the popular tax haven took the “almost unprecedented” step of excluding Russian banks. Even Cyprus, so dependent on Putin’s cronies that it has been described as a “Russian bank with dirty money posing as an EU state,” has risked the anger of its main customers by breaking an agreement to allow Russian planes to use Cypriot airspace and dock Russian navy ships in ports. from Cyprus to rent.

Vladimir Putin Vladimir Putin Russian President Vladimir Putin congratulates women on the upcoming International Women’s Day when he meets with flight personnel, students and employees of the Aeroflot Aviation School in Moscow suburbs, Russia, on March 5, 2022. Sputnik/Mikhail Klimentyev/Kremlin via REUTERS ATTENTION EDITORS – THIS IMAGE WAS PROVIDED BY A THIRD PARTY. (Sputnik/Reuters Photo Agency) More Brooke Harrington Tuesday, March 8, 2022, 6:27 PM In this article: Vladimir Putin Russia’s second and fourth president invasion of Ukraine has produced an unexpected side effect: the complicated offshore financial system quickly demonstrates that it can be dismantled alone.

The war has produced an extraordinary coalition between tax havens that usually compete fiercely with each other to attract Russian wealth. Under the leadership of the European Union, the United States, the United Kingdom, Switzerland and Monaco, all of which have long been considered a cache of assets for the richest people in Russia, are suddenly working together to impose sanctions and remove the cronies of Russian President Vladimir Putin from the laws and area to dispel impunity, known as the “tax haven”. Sign up for The Post Most newsletter to receive the most important and interesting stories from the Washington Post. In addition to separate sanctions against Russian banks and other organizations, each of these jurisdictions has frozen or confiscated the personal assets of top Russian government officials, billionaire managing directors and representatives of state media.

Other jurisdictions have also joined the fight. Singapore stopped without individual sanctions, but the popular tax haven took the “almost unprecedented” step of excluding Russian banks. Even Cyprus, so dependent on Putin’s cronies that it has been described as a “Russian bank with dirty money posing as an EU state,” has risked the anger of its main customers by breaking an agreement to allow Russian planes to use Cypriot airspace and dock Russian navy ships in ports. from Cyprus to rent. Video: Pandora’s newspapers reveal offshore tax havens These are extraordinary developments in themselves, no matter what Putin does next in Ukraine. Although sanctions do not lead to Russia’s planned withdrawal, they have shown that tax havens can act collectively for the benefit of society by refusing to help and support kleptocrats.

This is a big revelation because offshore centres, from giants like the United States and Switzerland to small islands like Nevis in the Caribbean, insisted for decades that it could not be done under any circumstances. But as several commentators have pointed out, the news shows us time and again that the impossible is really possible.

But most importantly, tax havens have shown the world that they are prepared and able to break down their own walls of silence and complicity, even though they threaten their core business model. The seriousness of the threat to kleptocrats can be seen in their reactions to this step. When the Panama Papers revealed what many suspected was part of Putin’s personal wealth, it allegedly saw the revelations as a “personal attack,” and called for retaliation against the West in the form of meddling in the 2016 US presidential election. Corruption among government and business leaders around the world was the first violation of the near-impenetrable secrecy that has always been the main product of global tax-havens.

A few years later, Putin now describes coordinated sanctions against supporters of his regime as “akin to an act of war.” The coalition negotiating sanctions seems to view these measures in the same way. The French finance minister described the seizure of a yacht owned by Igor Sechin – a former deputy prime minister who is today considered the second most powerful Russian after Putin himself – as part of a “sweeping economic and financial war in Russia” last week. With Russia’s extraterritorial wealth conservatively estimated at 85 per cent of the country’s GDP, the stakes are high, but it’s not just about money. Anti-corruption activists such as Alexei Navalny, who fought against Russian kleptocracy for years, insist that sanctioning and confiscating the oligarchs’ extraterritorial assets is essential to stopping the abuse of Putin’s regime.

Navalny started just two years ago that sanctions against Russian oligarchs were failing precisely because they were applied piecemeal, “chaotically” and halfheartedly by countries like the United States and the United Kingdom. But it has all changed in a matter of hours. While some opponents continue to see progress on sanctions as unduly delayed-particularly in “Londongrad,” as the British city is known for its openness to Russian cash-several commentators have already concluded that “the age of Russian money in London is finished.”

Where will Russian wealth go now that Putin’s war has inspired other tax havens to band together to keep the billionaires out? Now that the offshore system has demonstrated its ability to eject some of its most treasured clients from tax havens, kleptocrats from outside Russia must be wondering if they will be next. They can’t undo what we’ve all seen: that the offshore omerta wall can and will be breached in a variety of ways.

It would be a consummate irony if Putin himself, with his invasion of Ukraine, achieved what a series of devastating extraterritorial leaks could not do: the self-destruction of the offshore financial system. It undoubtedly, though unintentionally, accelerated the process of “John Doe” and the experts behind the Paradise Papers leaks 2017 and 2021 Pandora Papers began to break the wall of seemingly impenetrable tax secrecy.