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Cyprus turns its back on Russians

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By Nick Kochan

Cyprus was once a congenial bolthole for Russians who sought security for their business, with minimal controls or taxes. The coastal resort of Limassol was dubbed ‘Little Russia’ and visitors likened it to a smaller version of Dubai where the names of skyscrapers were in Cyrillic rather than Arabic.

Cyprus became a launchpad for investments in other EU countries and the island prospered.

Now, the Russian money is leaving and Cyprus is turning against its eastern European expatriates, Belarusians as well as Russians, who once served them so well.

Raphael Kharisov, a Russian businessman, was finding Putin’s Russia increasingly inhospitable in 2014 when a leading Cypriot lawyer, Christodoulos Vassiliades, advised him to sell up his industrial company in Russia and bring his family over to Cyprus.

Vassiliades was subsequently designated by the American and British authorities as a sanctioned individual, but at the time that Kharisov consulted Vassiliades, he was simply regarded as the leading advisor for Russian oligarchs in Cyprus.

Russian businessmen had started to set up companies in Cyprus as early as 2000, when the two countries agreed an ‘Income and capital tax treaty’ which gave Russians beneficial tax arrangements if they established companies there.

It was a perfectly legal approach and one that attracted hundreds of thousands of Russian companies, as well as their owners. Kharisov set up a number of Cyprus companies, including Beleverd Holdings Limited, which was registered in Cyprus on 5 December 2014.

In due course, some 120,000 Russians were reported to have moved to the island.

Cyprus proved congenial for the Kharisovs for some seven years, but then Russia invaded Ukraine in February 2022. Tough sanctions imposed by Cyprus forced banks to close bank accounts held by Russians and the levels of due diligence expected from them grew dramatically.

The light regulation that made the island so attractive turned heavier and more oppressive within weeks. Local politicians were forced to respond to international financiers’ demands that the island clean up its act.

Marios Kyriakou, who heads up the compliance department at a leading bank, said, “Russia has become a high-risk venue for us and we do not want them. The Russians who we have allowed to hold bank accounts live here, have genuine interests here and are largely retirees.”

Another Cypriot adviser, Stelios Platis, who runs compliance service company MAP S.Platis, said that setting up a bank account in London, a supposedly tightly regulated venue, had become easier for Russians than in Cyprus, such was the crackdown on its Eastern European community.

The time for the Kharisov family to move on had arrived, and in early 2022 Raphael Kharisov brought his family over to the UK to start a new life. He retained his business in Cyprus, as we can see from the Cyprus Companies register where he is a director with his brother Albert of Staircase Capital Limited. The two men also own a vineyard in the South of France.

Shortly after their arrival in the UK, Raphael’s wife Katerina Kharisova, an artist, started to show her work in London, where she promotes herself as ‘Tsyganka’  (Russian for a female gypsy). Her work appeared at a gallery in Highgate, North London, in August 2022,

The island’s set-piece natural attractions like the ‘Kaledonia’ waterfalls, the ‘Troodos’ mountain and the ancient ‘Kourion’ are still well represented in Katerina’s work.

“I am so thankful to this miracle island – Cyprus – for its natural beauty, for the warmth of its people, for its free, authentic spirit, which causes you to wake up each morning and treasure all the little things in your life. I am so grateful for my awakening”, she told a Cyprus newspaper in 2022.

While Cyprus’s purge of its Russian wealthy continues and, many like the Kharisovs, leave for safer (if less pleasant) climes, much of their money remains.

“Many hundreds of millions worth of Russian money has been left behind and invested in buildings and in bank accounts,” said Stelios Platis. “But no-one does anything about that, our leaders and regulators are afraid to break eggs. They don’t want to punish anyone.”

Russians are meantime seeking the next safe haven when they can protect their wealth from the taxman and sanctions.

My taxi driver in Nicosia was convinced many had gone to north Cyprus and Turkey where checks are much less rigorous. They are taking their families with them and the Russian population has fallen from 120,000 at its peak to a reported 50,000 or less.

A few Cypriots made their fortunes from the Russian financial hegemony on their island but for the majority of Cypriots this invasion of foreign capital has passed like a will in the wisp. They have left little behind, except a phalanx of skyscrapers and a tarnished reputation for probity that its leaders are struggling hard to repair.

 

Nick Kochan is a freelance writer based in the UK. His work may be found at kochan.co.uk