According to Russia’s Bank for Foreign Trade (Vnesheconombank), offshore companies had become one of the main channels of capital flight from Russia abroad since the beginning of liberal economic reforms. Russian businesses have begun actively using offshore jurisdictions since the 1990>th. Most of Russian firms established offshore companies in European countries and especially in the Isle of Man (UK), Cyprus, Gibraltar, Ireland, Switzerland and Liechtenstein. Offshore structures of Russian business are, first of all, centers for concentration profits which are generated in Russia but they evade from paying taxes there and serve as reliable «vaults» for fortunes of Russian «oligarchs» received both by legal and criminal means71.
The IMF highlights the main channels of illegal capital flight from Russia which «have included (i) under-reporting of export earnings, including through transfer pricing schemes; (ii) overstatement of import payments, including through fake import contracts for goods and services; (iii) fake advance import payments; and (iv) a variety of capital account transactions, often effected through the correspondent accounts of nonresident banks with Russian banks»72.
The Global Financial Integrity report (GFI) traces illicit financial flows (IFF) from developing countries in 2002—2013. Unfortunately, Russia was among top countries hit by illegal flows. Three emerging markets – China with cumulative illicit financial flows of $1.4 trillion during 2002—2013, Russia with more $1 trillion and Mexico with $528 billion – were worst hit by IFF73. The GFI report (January, 2014) stated that «approximately 61% of Russia’s $403 billion in outward foreign direct investment (FDI) is held in tax havens and the amount of FDI coming into Russia is also dominated by tax havens. Approximately 53% of FDI invested in Russian companies comes from entities located in tax havens»74. At that, the GFI did not take into account the Netherlands, a low tax jurisdiction that is often used by tax evaders in various sophisticated schemes involving so-called prestigious jurisdictions along with classical offshores.
The GFI study outlines a strong connection between illicit financial flows and use of offshore jurisdictions. The report states that offshore financial centers and banks in developed country are major points of absorption of illicit financial flows from emerging market and developing countries