(International Tax Review) - Regulators in the Channel Islands have warned financial institutions to uphold UK sanctions on 18 specific Russian individuals and businesses with holdings in those jurisdictions. This is on top of hundreds of other individuals and companies hit by sanctions going back to 2014.
The Crown dependencies have consistently stressed that they will enforce all UK sanctions, alongside EU and UN sanctions. However, the UK government faced criticisms from the opposition that it was not going far enough in reaction to the invasion of Ukraine.
Low-tax jurisdictions such as Guernsey, the Isle of Man and Jersey have long been key offshore centres for businesses and individuals. After the collapse of the Soviet Union, Russian individuals and companies have amassed a huge amount of wealth offshore.
One 2018 Global Witness report found that Russian oligarchs had an estimated £34 billion ($45.5 billion) held in UK tax havens. However, the wealth is not just held in the three Crown dependencies. The report found that the British Virgin Islands (BVI) was the second most popular destination for capital leaving Russia – second only to Cyprus.
The UK government secured support from the three Crown dependencies and 14 overseas territories, including the BVI, to enforce its sanctions ahead of the invasion.
However, the sanctions on specific individuals and businesses have a limited scope. Furthermore, entities in these jurisdictions are not easily traced back to their owners, so it is possible that Russian oligarchs and banks are able to play the system. ITR will be keeping an eye out for tougher measures.
By Josh White and Leanna Reeves
February 25 2022
