The Kremlin Neck-Deep in the Panama Papers

Although, thus far, the main story to come out of the roughly 11.5 million leaked financial/corporate documents, collectively known as the Panama Papers, has to do with the cellist Sergei Roldugin, a boyhood friend of President Putin and godfather to one of Putin‘s daughters, the release of these documents also highlights the use of Russian companies and even large state-owned enterprises by the Kremlin to serve their specific ‘‘‘ in this case corrupt ‘‘‘ purposes.

Meanwhile, however, Mr. Roldugin ‘‘‘ presumed by many to be a proxy for Putin and perhaps his inner circle ‘‘‘ was identified as being involved in a number of offshore deals leaving a $2 billion money trail.  Specifically, Roldugin was found to be the beneficiary owner of three overseas companies, Sonnette Overseas, International Media Overseas and Raytar Limited, of which the first two were created by Bank Rossiya (currently a target of international sanctions, and known to many as ‘‘‘the Kremlin‘s bank‘).

Another important company was revealed, Sandalwood, whose beneficial owner was listed as Oleg Gordin, who ‘‘‘coincidentally‘ was found to hold power of attorney on a number of Roldugin‘s company bank accounts.  All of these offshore companies were found to be involved in a variety of apparently fraudulent deals and transactions designed to move and launder ill-gotten funds.  One such scheme implicated Russia‘s state-owned VTB bank ‘‘‘ an institution with an array of commercial business dealings around the world ‘‘‘ that backed a loan to Sandalwood from one of its subsidiaries, Russian Commercial Bank (RCB), in Cyprus, long known to serve as an offshore haven for Russian oligarchs and businessmen.

In addition to a number of lesser-known confidants of President Putin, the Panama Papers also included the names of several high-ranking Russian officials who were linked to shell companies located in the British Virgin Islands, Panama and Cyprus.  It was revealed that Russia‘s Deputy Minister of Internal Affairs, Alexander Mahoney, had created an offshore empire for internet TV through five companies domiciled in the British Virgin Islands.  Four Russian officials were implicated, directly or through their families (i.e., spouses or sons), including Vladimir Putin‘s Press Secretary, Dmitry Peskov.  Another four parliamentarians were implicated, with many belonging to Putin‘s United Russia party, and two governors were referenced.

While some of these entanglements appear to fall into the category of what might be considered ‘‘‘technically legal,‘ many still raise questions of criminality and who was truly in control of these companies.  In many cases, offshore companies were controlled by the sons of these Russian officials, who were surprisingly young when given control of the entity.  Individuals with links to well-known Russian SOEs, including Rostec (via Stanislav Chemezov, the son of the company‘s director) and Russian Railways (via Alexei Krapivin, the son of a close associate of former head Vladimir Yakunin) among those notables identified.

Taken together, the Panama Papers point to an overarching Kremlin strategy of utilizing offshore, non-transparent havens to enrich key decision-makers while maintaining plausible deniability.