By Kenneth Rijock
MIAMI, USA — Reliable sources in the Moscow financial community have reported that the government of Russia is seriously considering imposing economic sanctions on the United Kingdom, upon the grounds that Britain is facilitating tax evasion by Russian nationals through its Caribbean Overseas Territories.
Apparently, many affluent Russian taxpayers are evading income tax on their earnings, and Russia intends to hold the UK responsible, as the scheme involves two British Overseas Territories, the British Virgin Islands, and the Cayman Islands.
According to individuals who are privy to the investigation, Russian nationals are purchasing BVI companies and, using the total anonymity associated with a BVI company, and its bearer shares, opening corporate accounts in the Cayman islands. The next result is that cash is transferred into, and held by an entity, whose beneficial ownership cannot be determined in any circumstances.
A financial services firm in the BVI is known to refer all its "corporate" clients to its office in Grand Cayman, where a bank account is arranged through a local financial services provider. Hundreds of millions of dollars have been hidden from view in this manner, and Russian law enforcement and regulatory agencies cannot ascertain beneficial ownership, even when they have the name of the corporation.
Russia is blaming the United Kingdom for failing to end local legislation that allows companies with bearer shares to exist in the BVI and that allows non-UK nationals to form such entities. Additionally, the Cayman Islands laws on banking and corporation secrecy and confidentiality, and that allow foreign entities to hold accounts there, are blamed as well.
Though both the BVI and the Cayman islands enjoy local autonomy, Russia considers the UK to be ultimate responsible, as both territories are British possessions and under British sovereignty. The extent of sanctions, and if and when they will be imposed upon the UK is not known.
Kenneth Rijock is a banking lawyer turned-career money launderer (10 years), turned-compliance officer specialising in enhanced due diligence, and a financial crime consultant who publishes a Financial Crime Blog. The Laundry Man, his autobiography, was published in the UK on 5 July 2012.