CYPRUS: Russian deposits shrink by EUR 5 bln in 6 years

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Six years on from the financial crisis and meltdown of the Cyprus banking sector that affected a large number of local as well as Russian depositors, Russian deposits continue to flee and seek banks in other countries.

Based on Central Bank data for February, there is a steady monthly decline in deposits originated from the specific geographical region.

A large portion of the reduction concerns deposits that underwent a haircut back in 2013 – a condition for Cyprus receiving a €10 bln bailout from international lenders.

With more Russian customers choosing to close their bank accounts in Cyprus, €93 mln worth of deposits fled in February alone, the decline recorded for the first two years of the year reaching €140 mln. Compared to a year ago (February 2018), the decrease was €1.34 bln and compared to two years ago it was even higher at €2.65 bln. 

The decline in the number of Russian depositors in Cypriot banks is believed to be related to international effort to combat money laundering within the EU and pressure from EU and international monetary institutions. At the end of 2013 Russian deposits in the banking system of Cyprus were at a high level, worrying western European that Cyprus had become a safe haven for Russian money, most of which would not s stringent anti money laundering (AML) regulations in other jurisdictions.

Another factor playing in, is Russia’s incentives to wealthy Russians to repatriate their wealth, following several please by President Putin himself.

According to Central Bank of Cyprus data, Russian deposits of €11.76 bln at the end of 2013, had retreated by €4.95 bln by February 2019.

With Cyprus at the centre of attention of critics and European and international monitoring bodies, the country is expecting watchdog Moneyval’s report on how the country is complying to recommendations made in the past years to combat money laundering and the financing of terrorism at the end of the year.

The latest comprehensive review by Moneyval was conducted in 2011. However, events and accusations regarding Russian deposits following the haircut in March 2013 led the competent authority to make an interim evaluation of Cyprus.