MOSCOW, March 22 (RIA Novosti)
Plenty of Shores
At a meeting yesterday of the Russian Union of Industrialists and Entrepreneurs, Prime Minister Dmitry Medvedev put forward a new solution for the “de-offshoring” campaign started by President Putin last year.
The Cyprus issue was not on the official agenda. Medvedev surprised everyone by covering it and made an incredible proposal.
“Since we are being chased around with our money, why don’t we think about creating offshore zones in Russia?” the prime minister said. His proposal was met with a round of applause.
Medvedev explained that the Russian government is currently in talks with the EU over frozen accounts in Cypriot banks. Some major businesses are involved in the negotiations, he said, and Anatoly Chubais and Vagit Alekperov were there “studiously jotting everything down.” The audience applauded again.
The prime minister was the most eagerly anticipated newsmaker at the meeting. He arrived late for the opening ceremony and missed a message of congratulations from Vladimir Putin and the union’s traditional statement on relaxing the tax burden. Before Medvedev’s arrival, the fate of frozen bank accounts in Cyprus was only being discussed in the lobby.
Interros CEO Vladimir Potanin said in an interview that he was “very disappointed by the situation” but that he was in no way concerned about it because 99% of his money is stored in the jurisdictions of his actual businesses. Foreign banks are “questionable partners and Russian banks seem quite stable.”
VTB president Andrei Kostin confirmed the questionable nature of Cypriot banks. “There are only two banks in a very critical state and it will require huge money to resolve their problems,” he said.
Deputy Finance Minister Sergei Shatalov only commented on possible tax rebates or exemption from property and land taxes for major investment projects in the Russian Far East. That was all. No offshores, he said.
Medvedev roused the curiosity of his audience, and after his speech, all other issues were brushed aside.
Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, was ready with his destruction plan for foreign offshores.
“It’s a blessing in disguise. Money will return to Russian banks,” he said.
He immediately suggested a regional distribution of offshore areas between Kaliningrad and Sakhalin, and possibly on Russky Island as well. Nevertheless, Shokhin advised against putting too much faith in Medvedev’s promises. The offshore area initiative could result in a mere relaxation of tax regulations, he said.
Potanin had the biggest doubts about the whole project.
“Our previous experience in offshore areas was not that successful. If we are returning to this idea, we’ll have to weigh up all the pros and cons. We should also remember that it could have an impact on the competitive landscape," he said.
After the meeting, presidential press secretary Dmitry Peskov announced that “the president is aware of” the prime minister’s proposal.
Gref Estimates Number of Money Laundering Companies
Sberbank President German Gref believes that 20% of Russian banks are involved in money laundering. Although any bank may conduct dubious transactions, 5%-10% of investors do so deliberately, market players say.
Gref expressed the hope that Elvira Nabiullina, future chair of the Central Bank “who has a reputation as a resolute person,” will step up the fight against banks involved in money laundering.
Sergei Ignatyev, the current chair of the Central Bank, said the budget had failed to receive about 450 billion rubles ($14.5 billion) in revenues as a result of illegal operations. Total revenue shortfalls could exceed 600 billion rubles (19.4 billion), which includes illegal domestic operations.
In late February, Ignatyev told the paper that $49 billion had been illegally transferred from Russia to overseas bank accounts last year. He said the overall total could include payments for illegal drug shipments, gray market imports, bribes and kickbacks to officials and managers who purchase products at major private companies, as well as possible tax evasion schemes.
Igor Bulantsev, chairman of the board of Nordea Bank, believes that the proportion of banks involved in money laundering, which about 10 years ago was about 20%-30%, has now fallen to 5%. The financial director of another major bank agrees with this assessment. Another source said that all banks employ a special inspectorate that exposes illegal operations from time to time. The banker believes that deliberate money laundering operations are carried out by 10%-15% of banks.
Viktor Chetverikov, general director of the National Rating Agency, said the number of transit banks is not that high. He added that the Central Bank knew the problems of banks very well, and that the national prudential oversight system was better than that of many European countries. The Central Bank and Sberbank could not be reached for comment.
However, the Central Bank website shows that virtually all Russian banks regularly violate legislation to combat money laundering. The Central Bank punishes dozens of banks each month for such violations.
Those servicing money laundering operations earn $1.4-$2.5 billion, of which the banks are entitled to about 1%, and the rest goes to the masterminds, and law enforcement and other agencies enabling this business, market players claim.
Major banks, officials and regulators believe that the problem could be solved by increasing minimal capital volumes. Gennady Melikyan, a former Central Bank deputy chair and oversight chief, said the proceeds from money laundering should not exceed the value of the bank when it is sold off.
Pyotr Aven, former Alfa Bank President, said 200 local banks accounted for over 90% of banking system assets. “I don’t believe that a small bank can be technologically effective. Such banks are forced to conduct various illegal operations because otherwise it is virtually impossible for them to survive in modern conditions,” he added.
As of February 1, Russia had 955 loan agencies.
Lawmakers Propose Compensating Russians for Unlawful Foreign Court Verdicts
Russian lawmakers have proposed a bill aimed at compensating Russian citizens for losses inflicted by unlawful foreign court rulings, using the property of foreign states in Russia.
Duma deputies Mikhail Starshinov and Irshat Fakhritdinov, as well as Federation Council member Konstantin Tsybko – all from the United Russia party – have proposed amendments to the law on compensation for violating a citizen’s right to justice within a reasonable period. In particular, the wording “as well as the right to a hearing by a competent Russian court,” is to be added to the title, which would extend the law’s application to Russian nationals whose rights have been violated by foreign court verdicts.
The bill states that foreign court decisions, interim or final, on cases that should be considered by a Russian court under Russian law and international agreements, “infringe upon Russia’s sovereignty” and are a priori unjust. Although Russian law already stipulates that such cases be considered by Russian courts, this requirement is not always observed, Starshinov said.
For example, when foreign courts rule to confiscate property of Russian individuals or companies, the new initiative calls for compensating them with government money. However, this initiative “will not require additional government spending,” since the losses will be compensated by “seizing the Russian property of the individual who initiated the case.” If that property is insufficient to compensate for the above losses, the liability will be transferred to the foreign state’s property in Russia – even property that enjoys immunity under international agreements.
Starshinov does not believe his initiative would provoke international scandals. He said he would discuss every detail with his colleagues and the courts, including the Supreme Arbitration Court. He said he had already discussed the initiative with his party members, who did not see any grounds for criticism of this “explicitly pro-Russian bill.”
To illustrate his plan, he cited the recent rulings on the Schneerson Collection and the Sedov boat, adding, however, that the bill was not directly triggered by any specific case.
In August 2010, a court in Washington ruled in favor of a local Hasid group that claimed the ownership of the unique book collection nationalized by Russia in 1918. The collection eventually remained in Russia but was handed over to a local Hasid organization.
The Sedov was seized by French authorities in 2000 when the Swiss company Noga demanded that Russia repay a $60-million debt. The ship was later released.
“The initiative treads on uncertain ground involving jurisdictions of foreign courts,” said Vadim Solovyov, head of the Communist Party’s legal service. “It sounds reasonable, but explicitly calling for confiscating property is unacceptable. This will definitely lead to scandal.”
“If we start acting like this, Russia will simply be excluded from the list of civilized countries,” he added.
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