How to Launder a Russian

Issue 05-15-17   |   Reviewer:   Michael S. Raisinghani, Ph.D.
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Abstract

According to Miklos Ligeti, legal director of Transparency International Hungary—which has published research on alleged abuses in a Hungarian program that exchanges residency for bond investments—Russians and others who obtain Cyprus passports but don't actually live there are unfairly buying EU access.

One reason Russians have loaded up on passports is that Cypriot citizenship helps them avoid the prying eyes of their government and pay lower taxes. It also may make it easier to move money, because banks see them as benign locals rather than potentially suspicious foreigners.

The European Parliament passed a nonbinding resolution in 2014 that declared, "EU citizenship should never become a tradable commodity." The sale of EU citizenship has raised concern among anti-corruption advocates, who say the practice opens gaping gateways into the 28-nation bloc.

During the debate at the Strasbourg-based legislature, Romania's Sebastian Bodu protested that European passports would give visa-free travel to cash-rich Chinese and Russians. While tax residency requires spending 183 days a year in Cyprus, it's hard to enforce that requirement. The passport program and tax breaks are seen as a success, helping pull Cyprus from a three-year recession. Cyprus's passport popularity may become the revival's undoing.





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