There is little reason to believe that Ukrainian elites stopped using offshore companies in order to avoid governmental regulation of their assets. The acting president and his partners are no good role models in this respect.
Starting with Igor Kononenko, an old business partner of Petro Poroshenko and a leading figure in the party of the president. On August 26, vlada.io published a series of documents that bring him into connection with offshore banking – or depending on the definition into connection with money laundering.
Kononenko’s name appeared a couple of times in the documents, together with Intraco Management Ltd., a company based on British Virgin Islands and Darya Tsaregorodtseva, its financial director. The personal connections that can be concluded from the documents, as well as documented financial transactions and copies of contracts leave little doubt in his involvement in such activities.
Having a complex system of offshore companies is not illegal, but under given circumstances their existence are an indication of tax optimization practices that do not comply with the laws of most countries.
Earlier this year, Valentyn Nalyvaichenko, the recently fired head of the Ukrainian intelligence service (SBU) mentioned in a interview that a leading figure of the Petro Poroshenko Bloc channels half a million USD to offshore accounts every week. It was clear that Kononenko was meant.
Poroshenko’s name didn’t appear in the documents, instead they show connections between Intraco and Geoffrey Magistrate, another old business partner of Poroshenko. Intraco Management Ltd. payed for the fuel costs of Poroshenko’s private jet when he was already president of Ukraine.
A couple of months ago, when Poroshenko published his declaration of income, the press release mentioned that the president pays various financial expenses of his presidency from his own pocket. The fuel for his private jet was mentioned explicitly. (armedpolitics, April 10; the press release is offline)
Boris Lozhkin is another name worth mentioning in this context. He is the chief of staff for the president. He owned a media company and sold it in 2013 for estimated USD 150 millions. The money went into an offshore fund that according to Lozhkin, he has no part in managing. Lozhkin explains: “If I were not chief of staff I would definitely be investing here.” The money of the sale wasn’t included in his declaration of income. (BV, Leonid Bershidsky, June 1st)
A traditional route of Ukrainian (and Russian) offshore money leads via Lithuania to Austria (and Bodensee region). Very dirty money is transferred through holdings based on Cyprus and other islands. After the financial crisis in 2007, the route changes from Cyprus to other places with flexible tax regulations, such as Cayman Islands or Belize.
The flows and stocks of the offshore money appear to some part in the statistics of foreign direct investments (FDI). UNCTAD provides detailed data by country until 2010 and 2012. According to this, the FDI stock of British Virgin Island was higher than investments from the USA or a tenth of investments from Cyprus.
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