37 Russia as a Source: Schemes to Transfer Money Out of Russia
Transferring money out of Russian through electronic bank transfers, or physically
carrying money out of Russia is a relatively simple act. For Russian businessmen the task is to
avoid suspicion that they received money in the first place, for if it is known that they received
the money then they may be held accountable for paying income taxes.37 As the Russian tax
police are under increasing international pressure to collect domestic taxes instead of relying on
international funds, Russians continue to send money abroad for “safe keeping.”38
Russian businesses face enormous profit taxes in reported transactions. One popular
scheme to avoid paying taxes is for a Russian businessman to negotiate a contract with a
Chinese firm and ship the goods abroad. After a few weeks, the Russian indicates he was never
paid. Claiming there is little that can be done, the deal is written off. Meanwhile the Chinese
partner pays for the goods by depositing the payment in an overseas bank account.39 An
extremely popular transaction due to its simplicity and the difficulty to trace it, investigators in
the Bank of New York investigation believe most of the money transferred through these accounts
came from Russian importers trying to avoid paying taxes.40 The transaction avoids
alerting Russian authorities as to the real value of the contracts.41 It is understandable that
Russian authorities are unable to detect these transactions given a cultural bias that the Chinese
cheat Russian businesses, a tax inspectorate with limited resources to verify them, and a lack of
international transparency to alert them.
Tolling, the act of selling products at below-market prices to intermediaries, is another
way in which Russian companies underreport the value of their contracts without suspicion.42
The distinction between tolling and outside payment is that here exporters are the culprits. The
practice has grown with privatization.43 For example, in connection with the Bank of New York,
investigators are reviewing a titanium producer in Perm owned by Menatep for selling the
titanium at cut-rate prices to TMC Holdings, Ltd., an offshore company controlled by Menatep.
To mask the true beneficiary, i.e. Menatep, the Bank of New York records indicated that Valmet, a
financial adviser partly owned by Menatep, owned TMC. Economists claim that tolling has
drained billions in profits from Russia’s core metal and oil companies into offshore accounts
controlled by management companies in Russia.44
Raw materials are often exploited in similar transactions. Timber or other raw
materials can be exported below their true market costs, yet the documents indicate that the
transactions were legitimate market prices.45 The oil industry offers similar examples of tolling.
In 1995 Sibneft, a gigantic and then new private company founded on the lucrative remnants of
the once state-owned Soviet oil industry, took control of an Omsk oil refinery.46 Sibneft soon
became the center of an elaborate web of smaller companies acting as middlemen for the sale of
the company’s products abroad.47 According to Russian police reports, the middlemen are
accused of falsifying documents, rerouting shipments of oil products through Ukraine - and
Kristine Kassekert |
