Gibraltar—Marbella. Russian oligarchs hide their Spanish assets offshore 

Gibraltar—Marbella. Russian oligarchs hide their Spanish assets offshore
Spanish authorities intend to collect every year millions of euros from Russian oligarchs Photo: The CrimeRussia

It emerged that Russian oligarchs, members of ‘Russian mafia’, and many other owners of real estate in Spain have neither Spanish citizenship nor residential permit and successfully evade national taxes. Mansions in Marbella purchased by Russians officially belong to offshore companies incorporated in Gibraltar, a tiny British Overseas Territory. The Spanish tax authorities are going to amend the legislation to identify the ultimate beneficiaries of luxury seaside properties and oblige the Russian oligarchs to pay millions of euros in taxes to the state treasury.

The Spanish authorities are inventing more and more ways to drive Russian oligarchs out of their country – or at least, compel them to pay taxes on real estate transactions. The fiscal bodies are going to close one more loophole in the law soon to expose those concealing their assets and sources of income. This primarily relates to so-called ‘Russian mafia’, illegal ‘cashiers’, and Russian officials owning real estate in Spain.

Back in the 1990s, Spain had actively attracted investments in all forms. The authorities were not really interested in the biographies and sources of income of people purchasing villas on the sunny beaches. Immigrant Roman Frumson, a former USSR citizen and famous antique and picture dealer, was among the first semi-criminal persons who have settled in Spain.

Роман Фрумсон

Roman Frumson (on the left, during the wedding ceremony)

Back in the 1980s, he has immigrated to Cologne and then relocated to Marbella and purchased a home for 600 million pesetas (some €3 million). The police have noted his arrival but opted not to interfere with his affairs – although the law enforcement authorities considered Frumson a patron of pimps and suspected him of money laundering. He was killed in February 1998 in Marbella. By that time, comfortable Spanish villas and tolerance of the local authorities to people with money have attracted the attention of criminal ‘authority’ Mark Milgotin (Marik), thieves-in-law Shakro Molodoy and Tyurik, and many other such persons.

Марик

Mark Milgotin (Marik)

The stance of the Spanish authorities toward criminals and their money has changed a long time ago – but currently they are unable to solve the problem. The majority of the luxury mansions officially belong to offshore companies and their final beneficiaries can't be identified. The wealthy people living there are paying nominal rent comparable with gardeners' fees. Charging taxes on such revenues is impossible. Most such dummy companies are incorporated in a tiny British overseas territory — Gibraltar — having its own tax policy.

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Gibraltar is a small British Overseas Territory contested by Spain and located at the southern tip of the Iberian Peninsula, including the Rock of Gibraltar and a sand neck connecting it with the peninsula. The total area of Gibraltar is only 6.5 square kilometers (comparable with Bibirevo district in Moscow); the total length of its motorways is 29 km. Gibraltar is an EU member – but the EU customs rules do not apply to it because it does not charge value-added tax. The country attracts oligarchs residing in Spain because it is located only an hour away from Marbella – if necessary, it is easy to settle any matters there in person.

Officially, Gibraltar has ceased to be an offshore territory, but its legislation still stipulates absolute confidentiality of investors. Any person may transfer £2 million (some $2.5 million) to the charter account of a company incorporated in Gibraltar and receive a residential permit enabling free travels throughout Europe and full confidentiality of personal information.

Гибралтар

Gibraltar

Aleksander Sigarev, ex-Head of Novorossiysk-based Novbiznesbank, became one of the first Russian oligarchs opting not to put all his faith and trust in the Spanish authorities – but to secure his assets against possible surprises. Back in 1995, he purchased a home for $2.6 million and yacht for $1.5 million in Marbella and was riding around the city in a Rolls Royce with Gibraltar license plates. 

Later it became known that the money spent so lavishly by Sigarev belonged to clients of Novbiznesbank. The bank had granted unrecoverable loans to dummy companies affiliated with its head. In total, $73 million were stolen from the bank, and Sigarev has been put on the wanted list for swindling. The Bank of Russia revoked the license of Novbiznesbank in 1998 due to its "unsatisfactory financial standing and failure to fulfill obligations to clients and creditors". 

His business partner was Leonid Terekhov believed to be one of the bosses of Medvedkovskie organized criminal group. According to the Spanish police, in addition to extortion and money laundering, he was suspected of the leadership of ‘Russian mafia’ long before Wasp and Troika special operations resulting in arrests of bosses of Tambovsko-Malyshevskie organized criminal group in Spain.

Геннадий Петров, Александр Малышев

Gennady Petrov and Aleksander Malyshev

The Department Against Organized Crime of the Province of Málaga has launched an operation dubbed "Cobalt" against Sigarev and Terekhov. For several months, the police were monitoring phone calls of Sigarev and covertly checked the flow of funds on his accounts. It turned out that the former Head of Novbiznesbank had been transferring funds to New Your under the disguise of credits. Various dummy companies incorporated mostly in offshore territories were the recipients of these monies. The police hadn't rushed to arrest Sigarev in order to identify as many of his connections as possible. However, a conflict arose between the partners, and Terekhov hired assassins to eliminate Sigarev. Then the police have intervened and arrested in 1999 the banker, the criminal ‘authority', contract killers from the Baltic countries, and several more persons.

All of them have been charged with money laundering on a large scale, establishment of dummy companies for that purpose, and use of fake documents. In addition, the assassins have been charged with murder threats. However, the investigation started experiencing problems when it came to Gibraltar-based companies belonging to Sigarev. Ultimately, the Spanish authorities decided to extradite the entire group of foreign criminals to Russia assuming that the Ministry of Internal Affairs (MIA) of the Russian Federation has plenty of questions to them as well. In Russia, it became known that the banker had close ties with the Novorossiysk customs and was allegedly involved in embezzlement of 50 million rubles ($802.2 thousand) through a banking service agreement signed with this organization... However, over time the media lost interest to the fate of a banker who had hidden money from the Spaniards in Gibraltar.

Spanish police detained several Russian citizens in Marbella in 1999

The current global trend to identify and expose the final beneficiaries forces oligarchs to look for new ways to conceal their foreign assets. Even the once-loyal Great Britain became interested in the origin of the wealth of billionaires with shady past. A Trust Registry has been introduced a year ago following the EU Fourth Anti-Money Laundering Directive to collect information about trust beneficiaries – both UK residents and offshore trusts paying taxes in the UK (i.e. owning assets in the country or deriving revenues from UK-based sources). The requirement to register offshore trusts is applicable only if the trust itself – not the companies owning it – incurs tax liabilities. Nominal companies are exempt from this rule. According to the Trust Registry regulations, trust managers must disclose the founders, themselves, beneficiaries, all persons “controlling” the trust, and even those identified as “possible” beneficiaries in the trust documents.

Посол Великобритании в России Лори Бристоу

Laurie Bristow, Ambassador of the United Kingdom to Russia

The special attitude of the UK authorities towards Russian oligarchs is caused by geopolitical reasons as well. The parliament requires the government to disclose the income sources of Russian oligarchs residing in London mansions. In turn, the government has tightened the control over investments into the British economy, especially from Russian businessmen.

"Over the past few years, we have become less tolerant to those who come to our country, enjoy our way of life, but violate the laws. We are going to ratchet up pressure on them," – Laurie Bristow, Ambassador of the United Kingdom to Russia, said.

The ambassador abstained from commenting on individual cases, including the decision of Roman Abramovich not to seek a UK investor visa. He noted, however, that the government is now entitled to make inquiries about the wealth origin. 

Even France pursuing a pretty neutral foreign policy and largely listening to senior allies has found a way to clamp down on Russian oligarch Suleyman Kerimov. He is suspected of concealing his ownership of three luxury villas in Côte d'Azur. According to the law enforcement authorities, the mansions fictitiously belong to Swiss citizen Alexander Studhalter – while Kerimov is the true owner of the properties purchased to legalize criminal proceeds.

Сулейман Керимов

Suleyman Kerimov  

Now once-friendly Spain is going to oblige real estate owners to pay taxes and disclose the true beneficiaries of offshore entities. Since recently, people living in Spain for most of the year are considered its tax residents. According to the Spanish legislation, the residents must disclose in their tax return declarations all the real properties belonging to them regardless of their location – including Moscow apartments and mansions on Rublevskoe highway – and pay taxes on those. In addition, tax residents of Spain have to pay a profit tax in the amount 20–32% depending on their revenues. 

The Ministry of Finance and Civil Service of Spain expects to collect millions of euros in taxes from Gibraltar residents living in luxury oligarchs' communities. The only problem is to prove that an oligarch had resided in Spain for more than 180 days in the year – every migrant worker in Russia knows how to circumvent such requirements.

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