Russians Watch 'Flight' transfers To IOFCs

Tax-news.com

07 February 2000

The Russian Government claims that it has reduced the illegal flow of cash out of the country by nearly 50% since the introduction of tough new 'capital flight' laws mid last year. The capital flight laws were part of a package of tighter economic controls introduced following Russia's 1998 financial crisis and include as one of their criteria for determining suspect transactions whether a foreign party to a contract is based in an offshore tax haven.

According to the deputy governor of the Russian central bank, Victor Melnikov, capital flight has gone down to US$15 billion last year compared with $25 billion in 1998. "Capital flight is an evil and in the government's view it is definitely a threat to national security," Mr Melnikov said.

Mr Melnikov also said he expects additional anti-flight measures to be introduced soon. Measures on the Government's agenda for consideration include compulsory company registration, a requirement for exporters to convert all earnings into roubles, and new powers for banks to allow them to suspend suspicious foreign exchange deals for up to five days pending referral to Russian authorities for investigation.

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