One thing wealthy Russians will have learned this weekend is that when a deal sounds too good to be true, it probably is. That is now certainly the case for those who have invested heavily in Cyprus, where the 10,000-strong Russian community is thought to have as much as €35bn in deposit accounts.
For some time, Russian expats have targeted Cyprus’s low taxes and open banking system to hold money away from prying eyes in Moscow – and there is more than a strong indication that Cyprus is also used to launder money.
Russia’s central bank governor has said that money laundering was costing Moscow about 3.5 per cent of Russia’s total GDP.
Most of the cash in Cyprus is legitimate, however, and many thriving Russian businesses operate there.
But for Russians that are about to see a large chunk of their savings disappear the bad news could be just beginning. The Finance Ministry in Moscow is said to be putting pressure on Cyprus’s government to hand over the names of Russians with accounts on the island.
The leverage is that the Russian government is also likely to sweeten the terms of an existing €2.5bn loan.