Cyprus Confidential: Three Bombshells from Russian Dark Money Data Leak

A major investigation by the International Consortium of Investigative Journalists (ICIJ), Paper Trail Media and 67 other media partners has revealed the pivotal role played by Cyprus in facilitating high-level the flow of Russian dirty money around the world, despite the small island's membership of the European Union meaning a supposed "zero tolerance" policy on sanctions evasion.

The 3.6 million Cyprus Confidential documents indicate a systematic Russian exploitation of the island's outsized financial services sector, which twinned with limited financial disclosure laws has traditionally made Cyprus one of Europe's most prominent hubs of money laundering, particularly from Russia.

The Cyprus government has defended its track record on money laundering reform, telling the ICIJ that the island has, since 2013, "engaged in persistent efforts and has managed to stabilize its banking sector and become a top jurisdiction for both anti-money laundering and sanctions enforcement."

The Council of Europe and U.S. State Department have both praised Cypriot progress. But the ICIJ leak revealed extensive Russian abuse of the country's financial system both before and after Moscow's full-scale invasion of Ukraine began in February 2022.

Newsweek has contacted the Cypriot Foreign Ministry by email to request comment.

Putin's 'Wallet'

The dealings of Roman Abramovich, one of the most prominent Russian oligarchs to rise out of the chaos and lawlessness of the Soviet Union's collapse, are detailed extensively in the Cyprus Confidential papers, which Newsweek has not independently verified.

Long thought to be close to Russian President Vladimir Putin—and regularly described as one of the strongman's many "wallets" for off-the-books cash—the billionaire was sanctioned after the Kremlin's invasion of Ukraine began in 2022.

Even the British establishment—long pliant on the question of dirty Russian money—turned on Abramovich then, forcing him to sell London's Chelsea F.C. soccer club, which had become the cornerstone of the Russian-Israeli oligarch's soft power projection.

The new ICIJ revelations suggest secret payments worth tens of millions of dollars to help run the football club that may have breached rules put in place by the Premier League. Among the reported beneficiaries were star player Eden Hazard and an associate of elite manager Antonio Conte.

The leaked documents uncovered a series of large financial transactions related to Abramovich in the days leading up to Moscow's full-scale invasion on February 24, 2022. On February 15, $1.7 billion in shares of the Evraz PLC steel and mining giant were transferred from Abramovich's British Virgin Islands-based company Greenleas International Holdings Ltd. to himself.

That week, ICIJ reported that Abramovich also sold $61 million in shares of the Russian tech company Yandex N.V. from Greenleas to Matteson Overseas Ltd., a company owned by business associate Valeriy Oyf. At roughly the same time, another sale of $180 million in Yandex shares was conducted between Abramovich-owned companies Ervington Investments Ltd. and Matteson Overseas.

Newsweek has contacted Abramovich's legal representatives in the U.S. by email to request comment.

Creative Accounting

The ICIJ investigation accused the mammoth PwC accounting firm's Cypriot branch of helping Russian oligarchs escape looming sanctions as tanks rolled across swathes of Ukraine in the spring of 2022.

The documents revealed how scientists-turned-billionaires Alexander Abramov and Alexander Frolov rushed to transfer $100 million between two shell companies they controlled, with the original source found to be the steel and mining giant Evraz PLC, a firm that produces 97 percent of the metal used in Russian railways. Abramovich is also a part owner of Evraz.

Two months after the $100 million transaction was requested, the British government described Evraz as "of strategic significance to the government of Russia" and imposed sanctions, which included a ban on British citizens and businesses from doing business with the company. The government later imposed an asset freeze and travel ban on Abramov and Frolov, noting them as members of Putin's "cabal of selected elite."

PwC Cyprus has maintained an oligarch-studded list of clients for years, working with at least a dozen Russians who were sanctioned due to their involvement in the Kremlin's 2014 seizure of Ukraine's Crimean Peninsula and parts of its eastern Donbas region. Thirty-nine of the firm's clients were caught up in the EU-U.K.-U.S.-Ukraine sanctions offensive following the February 2022 invasion.

Following the tsunami of Western sanctions on Moscow, PwC was among the firms that ended its Russian operations and separated from its Russian affiliate. "PwC member firms outside of Russia are exiting any work for Russian entities or individuals subject to sanctions," the company said in July 2022.

In a statement sent to Newsweek, a PwC company spokesperson said all its firms "take the application of sanctions against clients and sanctions prohibiting various professional services extremely seriously. As we announced in March 2022, with regards to sanctions following the Russian invasion of Ukraine, PwC introduced a policy, that goes beyond what is legally required, of applying all sanctions imposed by major countries across the PwC network, irrespective of the sanctions country of origin.

"With specific regards to PwC Cyprus, following the Russian invasion of Ukraine, PwC Cyprus has terminated relationships with approximately 150 client groups. Sixty as a result of the introduction of the broader PwC Russia-related sanctions policy implemented in 2022 and an additional 90 following a further geopolitical de-risking review by PwC Cyprus of its international client portfolio. This additional review looked at non-sanctions related risks.

"Prior to the invasion of Ukraine and PwC's decision to apply a more expansive policy on sanctions, PwC Cyprus followed PwC's sanctions policy at the time and legal requirements for EU companies, and applied all sanctions that were imposed by the European Union and the United Nations."

Hard Cash, Soft Power

The ICIJ report found that veteran German journalist, broadcaster, and media personality Hubert Seipel—famed for his unparalleled access to Putin—was paid hundreds of thousands of dollars in "sponsorship" by a shell company linked to sanctioned oligarch Alexey Mordashov.

ICIJ cited one handwritten note on a 2018 document that explained the $700,000 payment as support "for writing a book on [the] political environment in the Russian Federation." A second note referred to a 2013 deal regarding a "Putin biography." Seipel has written two books about Putin, the German titles of which translate to Putin: Inner Views of Power (2015) and Putin's Power (2021).

The deal, ICIJ wrote, "provides a striking example of the breadth and sophistication of Russia's propaganda machine abroad." Collaboration with Seipel could be considered somewhat of a coup for the Kremlin, given the journalist's pedigree. "Germany's media and publishing industries have sung Seipel's praises and anointed him one of the country's leading analysts of Russia," the ICIJ wrote.

Seipel has denied any suggestion of wrongdoing. The author acknowledged Mordashov's "support" for his Putin publications but said there were no "specific factual errors were found in any of the books." ICIJ reported that the transactions related to the book deal were prepared by firms including PwC Cyprus.

A spokesperson for Mordashov declined to comment on the specific Cyprus Confidential revelations, though told Newsweek in a statement that "not once in his long career" did the businessman "or any of the companies he runs, breach any laws, whether in Europe, Russia, or any other jurisdictions."

"This is further substantiated by multiple due diligence procedures carried out by Western auditors and regulators on the companies and Mr. Mordashov himself over his 30-year career. Everything he has built and achieved was accomplished through fair business practices and strict compliance with regulations."

Update 11/15/23, 9:39 a.m. ET: This article was updated with a statement from PwC.