Hidden financial dealings of world politicians revealed in leaked documents of Panamanian law firm Mossack Fonseca include billion-dollar money-laundering schemes involving a Russian bank and close associates of Vladimir Putin, the International Consortium of Investigative Journalists (ICIJ) said in a report published on April 3.
The 11.5mn documents, leaked to Germany's Sueddeutsche Zeitung and detailed in the ICIJ's Panama Papers report, and involving 128 politicians and public officials around the world, allegedly show how “associates of Russian President Vladimir Putin secretly shuffled as much as $2bn through banks and shadow companies,” ICIJ said. However, Putin himself is not named in any of the papers.
The Kremlin disparaged the revelations. The documents published by the ICIJ are aimed at the Western public, Lenta.ru cited Russian president’s spokesman Dmitry Peskov as saying on April 4. The publication of the leaked papers mark the “degree of Putinophobia” in the world.
“A priori it is impossible to speak well about the actions of Russia. You need to criticise! It is obvious to us,” Peskov said. One of the purposes of the publication was to “overkill” the positive effect of the liberation of Syria's Palmyra in the media field, he said.
Cue Putin's conductor friend
One Russian listed in the leaked documents as having offshore companies is cellist Sergei Roldugin, the director of the St Petersburg Conservatory and a guest conductor at the city's Mariinsky Theatre. Roldugin is considered one of Putin's closest friends and is godfather to his elder daughter Maria.
According to the documents, and despite reportedly having previously denied that he is a businessman, Roldugin owns and manages three shell companies: Sonnette Overseas, International Media Overseas and Raytar Limited. The companies' assets include 12.5% in Video International, Russia's largest advertising firm, which has annual revenues of more than $1bn. Its ownership was previously a closely-kept secret.
Roldugin was also secretly given an option to buy a minority stake in Russian truck builder Kamaz, which makes army vehicles, and has 15% of a Cyprus-registered company called Raytar. He also owns 3.3% of the private St Petersburg-based Bank Rossiya, which has been described as Putin's “crony bank” and was sanctioned by the US after Russia's 2014 annexation of Crimea.
“It's possible Roldugin, who has publicly claimed not to be a businessman, is not the true beneficiary of these riches,” the authors of the report wrote. “Instead, the evidence in the files suggests Roldugin is acting as a front man for a network of Putin loyalists – and perhaps for Putin himself.” Roldugin did not respond in detail to questions sent to him as part of the investigation.
Other prominent Russian names cited in the papers include the Rotenburg brothers Arkady and Boris, who control seven companies registered in the British Virgin islands. The companies were used for investing in pipeline construction.
The Russian offshore trail begins in Panama, passes through Russia, Switzerland and Cyprus, and also includes a private ski resort where Putin's younger daughter, Katerina, married in 2013. About 100 financial deals related to the network are described in the leaked documents, including the sale of rights to multimillion-dollar loans between offshore companies for $1.
“In almost every instance, the result is the same: money and power moves in the direction of the network, to companies and people allied to Putin,” the report notes.
Meanwhile, Putin presents himself as the driving force behind the Kremlin's de-offshorisation campaign to force foreign account holders to bring seats of Russian businesses back to the country, which he signed into law in June 2015.
“Our fundamental position is as follows: Russian companies should be registered on the territory of our country and have a transparent ownership structure. That is why we set the task to deoffshorisation of the domestic economy,” Putin said before the start of the drive.
Along with the withdrawal of companies from offshore, Russian authorities encouraged the return to the Russian capital from abroad. According to the Central Bank of Russia (CBR), net capital outflow from the country fell to $56.9bn in 2015, which is 2.7 times less than in 2014 ($153bn).
The Panama Papers also relate to offshore accounts allegedly held by 12 national leaders, including Pakistani Prime Minister Nawaz Sharif, Ukrainian President Petro Poroshenko, former Iraqi interim prime minister and vice-president Ayad Allawi, and Icelandic Prime Minister Sigmundur Gunnlaugsson.
In addition, former Georgian Prime Minister Bidzina Ivanishvili, the family of Azerbaijan's President Ilham Aliyev, the son of President Nursultan Nazarbayev’s eldest daughter Dariga, and a former politician from Hungary's ruling Fidesz party were also allegedly shown to have hidden money offshore.
While there is nothing unlawful about the use of offshore companies per se, the disclosed data raise questions about ways in which the system can be abused.
The Panama papers show “how a global industry of law firms and big banks sells financial secrecy to fraudsters and drug traffickers as well as billionaires, celebrities and sports stars”, the ICIJ said.
The documents apparently show how clients of Mossack Fonseca, the world's fourth largest offshore law firm, included 23 individuals who while subject to sanctions supported the regimes in North Korea, Zimbabwe, Russia, Iran and Syria with companies established in various tax havens.
Nothing to hide, says Poroshenko
Meanwhile, Ukrainian leader Poroshenko said on April 4 that his Roshen Group confectionery business interests were lawfully placed into trust after he became president in 2014 and that he no longer manages them.
"I believe I might be the first top office official in Ukraine who treats declaring of assets, paying taxes and conflict of interest issues profoundly and seriously, in full compliance with the Ukrainian and international private law," Poroshenko wrote on his Facebook page.
According to the leaked documents, Poroshenko became the sole shareholder of Prime Asset Partners Limited, which Mossack Fonseca set up in the British Virgin Islands (BVI) in August 2014, when the pro-Russian rebellion in Ukraine's eastern Donbas region was at its height.
A Cyprus law firm representing the newly acquired company described it as a "holding company of Cyprus and Ukrainian companies of the Roshen Group, one of the largest European manufacturers of confectionery products". According to the firm, Prime Assets Partners was established for "a person involved in politics," and had "nothing to do with his political activities".
Ukraine's Prosecutor General's office said on April 4 that it saw no criminal grounds to investigate Poroshenko's offshore business, while the country's newly founded National Anti-Corruption Bureau said the president does not come within its jurisdiction.