FINANCE Russian money drain from Cyprus continues

Six years on from the financial crisis and meltdown of the Cyprus banking sector that saw a haircut on deposits, Russian capital now seeks a new home outside the island.

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A total of EUR 14.65 bln in deposits belonging to Russian citizens have fled the country’s banking system since 2012 in what is believed to be primarily a result of external pressures, mainly from the US, on Russian capital in Cyprus.

According to the latest data from the Cyprus Central Bank, EUR 67 mln left the country in April alone, while deposits belonging to citizens from that geographical region dropped by EUR 133 mln in the first quarter of 2019. The yoy drop was EUR 1.06 bln from April last year.

The weakening of Russian deposits in Cypriot banks is believed to be related to efforts made internationally to combat money laundering within the EU.

On occasion, foreign media reports have made claims that ‘suspicious’ Russian money is entering the EU through Cyprus.

As  pressure on Cyprus intensified from 2017 onwards, the Central Bank shut down shell companies and instructed banks to interview their depositors and ask for tax certificates. Many depositors failing to meet the criteria, saw their accounts closed.

At the end of 2013, following the haircut on local and foreign deposits of over EUR 100,000, Russian deposits in the banking system of Cyprus accounted for almost one in every three euros in the banking system. Russian deposits at the end of 2012 was EUR 21.51 bln out of a total of EUR 70.15 bln.

From 2015, Russian capital flight from Cyprus reached EUR 5.15 bln. By the end of April 2019, total deposits were EUR 47.73 bln and Russian deposits EUR 6.87 bln.

Today, one in seven euros in the banking system is a deposit belonging to a Russian citizen.

While Cyprus is still under pressure from European institutions and the USA over ‘dirty’ money circulating on the island, the Council of Europe’s Moneyval compliance report is expected at end of the year.