Foreign direct investments and round tripping between Cyprus and Russia
| Published date | 02 July 2019 |
| DOI | https://doi.org/10.1108/JMLC-08-2018-0054 |
| Date | 02 July 2019 |
| Pages | 442-450 |
| Author | Spyridon Repousis,Petros Lois,Pavlos Kougioumtsidis |
| Subject Matter | Financial risk/company failure,Financial compliance/regulation,Financial crime |
Foreign direct investments and
round tripping between Cyprus
and Russia
Spyridon Repousis,Petros Lois and Pavlos Kougioumtsidis
University of Nicosia, Nicosia, Cyprus
Abstract
Purpose –This paper aims to look at the linkageof foreign direct investments (FDIs) and round-trippingin
the Cyprus–Russiacorridor.
Design/methodology/approach –The paper is dividedinto two chapters. The first chapter looks at the
relationship between FDIs and round-tripping in Cyprus and Russia. The second chapter discusses and
combines statisticaldata from different sources about illiciting financialflows from Russia and the linkage of
FDIs and round-trippingwith Cyprus.
Findings –Evidence suggests that, despite the obviously numerous and varied legislative provisions
and initiatives, the movement of vast amounts of capital to or through the Cypriot financial system is a
phenomenon, which has absolutely not been removed. The illegal outflow of money seems to grow
rapidly over the years instead of decreasing. What actually happens is that after a dramatic decline in
the years 2013-2015, the FDIs of the Russians to and from Cyprus in 2016 returned to pre-crisis levels of
2013, and so far, it seems the inflows–outflows system returned to “normal”levels. Cyprus ranks first
in inward FDI and outward FDI with almost 35 per cent of total flows from Russia. An element that
demonstrates the presence of round-tripping, is the sharp and rapid parallel increase of inward FDI
and outward FDI, and that the category of total deposits in Cyprus by nonresidents, including special-
purpose entity, recorded significant fluctuations caused by not only the largesizeofdepositsbutalso
the short time remaining in the banking sector. Russia ranked second among the countries with the
largest average illegal capital outflows in the years 2004-2013. Movement of capital to exploit
the particularly beneficial Cyprus tax system is still a tax backdoor for Europe and worldwide (hence
the neologisms like Cyp-Rus), especially after the “de-offshorization”law in Russia in practice since
January 1, 2015.
Originality/value –Evidence presented in this paper is important for national and supernational
supervisory anti-money laundering bodies and compliance authorities to understand bad practices in
financialtransactions between Russia and Cyprus.
Keywords Russia, Cyprus, Foreign direct investments, Round-tripping
Paper type Research paper
1. Introduction
One of the key components of the global economic system is the transnationalcapital flows
as an expression of the globalizedenvironment of the markets. Transnationalcooperation is
a cornerstone of today’s economy, andthe need for regulation of this relatively new type of
economic interfacebecomes more than ever essential.
The phenomenon of offshore finances mainly developed in the late 1950s with the
creation of the Euromarket based in London (Christensen,2012). The secretive jurisdictions
are a major feature of international financialmarkets, as they provide a combination of low
or zero taxation, “loose”legislation, weak international judicial cooperation and legitimate
secretive agencies (Christensen,2012). Secrecy, as to remove the requirement to disclose the
actual administrative/organizational corporate structures, trusts or other legal entities, and
JMLC
22,3
442
Journalof Money Laundering
Control
Vol.22 No. 3, 2019
pp. 442-450
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-08-2018-0054
The current issue and full text archive of this journal is available on Emerald Insight at:
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