Foreign direct investments and round tripping between Cyprus and Russia

Abstract

Purpose This paper aims to look at the linkage of foreign direct investments (FDIs) and round-tripping in the Cyprus–Russia corridor. Design/methodology/approach The paper is divided into two chapters. The first chapter looks at the relationship between FDIs and round-tripping in Cyprus and Russia. The second chapter discusses and combines statistical data from different sources about illiciting financial flows from Russia and the linkage of FDIs and round-tripping with Cyprus. Findings Evidence suggests that, despite the obviously numerous and varied legislative provisions and initiatives, the movement of vast amounts of capital to or through the Cypriot financial system is a phenomenon, which has absolutely not been removed. The illegal outflow of money seems to grow rapidly over the years instead of decreasing. What actually happens is that after a dramatic decline in the years 2013-2015, the FDIs of the Russians to and from Cyprus in 2016 returned to pre-crisis levels of 2013, and so far, it seems the inflows–outflows system returned to “normal” levels. Cyprus ranks first in inward FDI and outward FDI with almost 35 per cent of total flows from Russia. An element that demonstrates the presence of round-tripping, is the sharp and rapid parallel increase of inward FDI and outward FDI, and that the category of total deposits in Cyprus by nonresidents, including special-purpose entity, recorded significant fluctuations caused by not only the large size of deposits but also the short time remaining in the banking sector. Russia ranked second among the countries with the largest average illegal capital outflows in the years 2004-2013. Movement of capital to exploit the particularly beneficial Cyprus tax system is still a tax backdoor for Europe and worldwide (hence the neologisms like Cyp-Rus), especially after the “de-offshorization” law in Russia in practice since January 1, 2015. Originality/value Evidence presented in this paper is important for national and supernational supervisory anti-money laundering bodies and compliance authorities to understand bad practices in financial transactions between Russia and Cyprus.

The Evolution of Belarusian Public Sector: From Command Economy to State Capitalism?

“…The biggest foreign investor in Belarus is Russia (USD 4.0 billion, 30.1% of total FDI) and the second biggest investor is Cyprus (USD 2.3 billion, 17.6%). Taking into account that Cyprus is widely used as an off-shore investment platform for Russia (Repousis, Lois, and Kougioumtsidis, 2019) and other former Soviet republics including Belarus (Sidoruk, 2017), Cyprian investments may largely be of Russian descent with many of them simply domestic investments that have taken a round trip for tax avoidance purposes. The highest shares of foreign-owned companies (Figure 4) are found in IT and communication (Belarus became popular for outsourcing IT services for European countries) and retail, with big chain stores entering the Belarusian market, whereas the highest volume of FDI was directed to industry (40.1% of the whole FDI inflow) (Mukha, 2019).…”