Cyprus Confidential Reveals PwC facilitated Alexey Mordashov to Evade EU Sanctions

November 15, 2023

A joint investigation by The International Consortium of Investigative Journalists (ICIJ), Paper Trail Media, and 67 media partners collectively revealed that Cyprus has played an extended role in facilitating the flow of illicit funds for leaders like Russian President Vladimir Putin and other dictators, and other anti-democratic figures.

The report reveals how Syrian President Bashar Al-Assad’s regime was facilitated. Syria’s state-owned oil company succeeded in evading US sanctions by using Cyprus as an intermediary and procuring Houston-based equipment supplier, NOV Inc. The investigation revealed that Syrian Petroleum Co. and Cyprus intermediaries made at least five transactions from 2014 to 2019. The people linked with the Kremlin also used Cyprus to make payments to a well-recognized German journalist known for presenting news coverage on Russia’s autocratic regime.

Alexander Apostolides, an economic historian based in Cyprus, says that professional firms with political connections are adept at finding ways to, “do the things that are either illegal or at least unethical”.

The Cyprus Confidential investigation led by the ICIJ, following an 8-month investigation,  revealed that Cyprus has witnessed an astonishing surge in foreign investments predominantly from Russia, for over many years, leaving Cyrpus as a shady financial hub. Cyprus is greatly influenced by Russia in both politics and finance and the European Union faces challenges in governing Cyprus, which is an EU member, due to the strong influence of Russia on the island.

Cyprus Confidential has hinted at the possible involvement of the top authorities within the Cyprus government and finance in suspicious financial activities. The Cyprus model for its economy relies on large financial sectors and operates under the weakest financial transparency laws in the EU. The central bank is quite permissive and there has been a huge flow of over 200$ billion in Russian investment, empowering Russian oligarchs.

PwC, a global accounting firm, formerly known as PricewaterhouseCoopers, facilitated Vladimir Putin allies amid the Russia-Ukraine conflict. The investigation shed light on how Pwc assisted Alexey Mordashov, a prominent Russian industrialist, in moving a $1.4 billion investment to circumvent EU sanctions.

The Cypriot Ministry of Finance had knowledge of transfer shares and informed ICIJ in November that a criminal investigation is underway.

Meanwhile, Anastasia Mishanina, spokesperson of Mordashov said in a written statement, “All information and regulatory notifications with respect to the share transfer were duly disclosed to the relevant authorities and made public to the extent legally required”.

He added, “Not once in his long career did Mr. Mordashov, or any of the companies he runs, breach any laws, whether in Europe, Russia, or any other jurisdictions.”

About the Cyprus Confidential Documents

ICIJ organized a team of over 270 journalists from 54 countries and one territory and allowed access to the leaked documents via its Datashare platform. ICIJ and Paper Trail Media joined forces to manage and oversee the project through ICIJ’s communication platform, I-Hub.  ICIJ also arranged training sessions for the partners to teach them how to effectively use ICIJ technology for exploring, extracting, and enhancing insights into the files.

The Cyprus confidential investigation team used a huge collection of approximately 3.6 million documents obtained from seven different leaks to facilitate the project. As a part of the investigation, the ICIJ data and research team coordinated with partners to conduct a thorough examination of the records to trace sanctioned Russian oligarchs, billionaires, and politically exposed persons (PEPs) and expose their offshore assets.

The leaked documents, dating back from the mid-1990s to April 2022, include private background investigations, company structures, financial statements, applications for bank accounts, and email messages. However, it remains unclear whether any of the providers continued to work with clients hit with Western sanctions after Russia’s recent war with Ukraine.

Analysis of the Cyprus Investigations

The findings of the Cyprus Confidential Investigations revealed firms in Cyprus were working for 25 Russians who had been sanctioned since 2014. There were 71 more Cyprus-facilitated Russians who were subjected to sanctions since February 2022, making the total 96.

Names of Russian PEPs in Cyprus Confidential

ICIJ recognized 44 PEPs among the sanctioned list, requiring extra scrutiny due to risks of corruption or other illegal activities.  Out of 104 Russian billionaires listed by Forbes in 2023, 67 of them along with their families are found in Cyprus Confidential Documents.

In the leaked documents, ICIJ found nearly 800 firms and trusts registered in confidential places and controlled by the Russians who had been sanctioned since 2014. According to investigation findings, the professional firms assisted Russian-controlled companies registered in the British Virgin Islands, Jersey, the Isle of Man, Liechtenstein, Hong Kong, and other regions. Some of the registered companies are shell companies while others are associated with big companies like Evraz, which supplies rails for Russia’s military shipments to Ukraine.

PwC Offering Services to Sanctioned Russians

Additionally, PwC Cyprus served 12 out of 25 sanctioned Russians since 2014, however, after the Russia-Ukraine conflict, the company announced to cease working for sanctioned Russians. Former Pwc Cyprus partners started their own business called Kiteserve, which holds control of companies associated with Putin’s “cabal” oligarchs, ending ties due to last year’s UK sanctions.

Abacus Ltd Evading Sanctions

A legal dispute centers on Abacus Ltd., initiated by former PwC partners, and Russian billionaire Petr Aven. The UK’s National Crime Agency accused Aven of evading Western sanctions through Abacus and European banks.

MeritServus Serving Russian Oligarchs

Ioannides’ MeritServus firm handles the daily operations of over 100 Cyprus-based companies and trusts belonging to Russian Oligarchs including Western-sanctioned Konstantin Malofeyev.

Role of Cyprus Economic Model in Facilitating Russian Affluents

Moreover, the Cyprus confidential investigation highlights how the Cyprus economic model has made small yet vital contributions to the century’s historical events. The investigation also sheds light on how the small island has become attractive for influential individuals seeking benefits in ethically questionable realms.

Disclosing the Influence of Former  Chelsea Owner Abramovich

The findings also demonstrate that a company under Abramovich’s influence remarkably profitable stake in an advertising company to a company controlled by Sergey Roldugin. Roldugin, a classical cellist and Putin’s close friend was exposed in the Panama Papers for facilitating the transfer of $2 billion via banks and shell corporations. The U.S. Treasury imposed sanctions on him in June 2022 describing him as the guardian of President Putin’s offshore assets.

Abramovich’s involvement in funding millions of British pounds

The project prompted Chelsea Football Club to inquire how Abramovich, its former owner, funded the club’s achievements. Over the course of ten years, the records disclose a continuous pattern of payments worth tens of millions of British pounds channeled through offshore entities owned by Abramovich. These payments appear to have been removed from Chelsea’s financial records.

Also Read: What are Sectoral sanctions & Why are they important in Regulatory compliance?