The invitation was once for dinner and dancing, at a mansion on St George’s Hill, a gated property in Surrey that has grow to be an enclave for rich Russians. The Chelsea Football Club director Eugene Tenenbaum was once celebrating his fiftieth birthday, in “disco attire”. On the flyer emailed to visitors, an outdated picture confirmed a small boy status barefoot, in entrance of what seems to be a pile of hay. The caption beneath learn: “You’ve come a long way baby!”
Tenenbaum had masses to rejoice – as an in depth affiliate of Roman Abramovich, he helped arrange an empire that ranged from the oilfields of Siberia to the Premier League in England – and he sought after to thank those that had helped alongside that adventure. Among the visitors on that September night time in 2009 was once Demetris Ioannides. He had flown in from Cyprus, staying at Surrey’s four-star Oatlands Park lodge.
A chartered accountant who opened his personal apply in 1988, Ioannides based the Cyprus department of the accounting crew Deloitte. In 2005, he led a control buyout, putting in place his personal company, MeritServus.
But Ioannides retained ties to the London-headquartered crew. On his web page, he claimed to be chairman emeritus of Deloitte in Cyprus, and to be a “preferred service provider”.
For his purchasers, he appeared to Russia and past. “A Cyprus holding company provides the perfect gateway to the EU,” the MeritServus web page defined, noting that “Cyprus has double tax treaties with over 40 countries including Russia, Ukraine, Iran and China”.
For the previous 20 years, Ioannides has been a part of a circle of Cypriot attorneys, accountants and banks interested by bringing one of the greatest fortunes out of Russia and into Europe and past.
Last week, a yr after western governments unleashed a barrage of economic embargoes towards Russia in retaliation for the invasion of Ukraine, the song stopped. The UK govt added Ioannides and his company to its sanctions record, along a outstanding Cypriot attorney, signaling rising considerations over what the Foreign Office calls “oligarch enablers” running within the Mediterranean island state. The Bank of Cyprus, adopting the United Kingdom measures, iced over the related accounts.
The sanctions got here after the Guardian’s reporting of the Oligarch recordsdata, a cache of greater than 300,000 paperwork from the archives of MeritServus and affiliated firms. Material from the recordsdata suggests the company remaining yr helped Abramovich hurriedly reshuffle the trusts he used to regulate his wealth, elevating questions on whether or not the reorganization was once designed to steer clear of asset freezes.
Lawyers performing for Ioannides and MeritServus stated: “Our client has no involvement in any Abramovich family trusts.”
Abramovich has no longer replied to questions in regards to the control of his budget by means of MeritServus.
Lawyers performing for Tenenbaum stated he had a “professional and friendly relationship” with Ioannides “over many years”.
All 3 males are actually matter to sanctions by means of the United Kingdom govt.
Some name it Moscow at the Med. Russian cash accounted for greater than €1bn held in Cypriot banks in 2021, and Russia is a very powerful unmarried spouse for inward and outward funding in Cyprus, in keeping with the latest information from its central financial institution. The 2nd biggest town, Limassol, is house to about 50,000 Russian audio system. When the rustic opened a “golden passports” scheme in 2013, to promote citizenship in go back for funding, a lot of the €7bn raised got here from Russian households.
“You can ask questions about whether Cyprus has been totally corrupted now by Russian capital. Russian money is so ingrained in Cyprus, so many of the elite have bought citizenship there,” says Timothy Ash, an associate fellow at the Chatham House thinktank.
Those responsible for enforcing sanctions are growing increasingly concerned about the role Cyprus has played – and may still be playing – in facilitating the movement of Russian capital.
“There’s an effort now to be more efficient, to follow through on political commitments to enforce these sanctions EU-wide”, says Dionis Cenusa, an affiliate of the Eastern Europe Studies Centre, a Lithuanian thinktank. “Cyprus’ Russian ties flew under the radar for a long time, it didn’t get the same focus from the EU Commission as companies working in Hungary, for instance. That’s shifted,” he adds.
The Oligarch files, which were shared with the Guardian by an anonymous third party, shine a light on the kind of services Cyprus offered Russia’s wealthiest citizens.
While MeritServus and its affiliates advise on tax and accounting, much of its work involves the creation and management of offshore companies and trusts. It handles the paperwork to set them up, provides directors for them, and even holds their shares. MeritServus is paid to provide a screen, a public face as shareholder and director of companies that really belong to its clients, so that the ultimate owners of valuable assets such as shareholdings, mansions and yachts can remain hidden from public view. Finservus, the company MeritServus used most often for this purpose, held shares in hundreds of companies on behalf of its clients.
The head office is a cream-coloured block in Limassol overlooking the district court. Here, Demetris works in the same building as his son and daughter, neither of whom are under sanctions as individuals. Panos Ioannides, a Yale graduate, is a director of MeritServus and specializes in investment schemes for those seeking Cypriot citizenship; Persella, who studied at the University of Bristol before taking an MBA at Columbia in New York, manages what appears to be an affiliated company, MeritKapital, a Cyprus investment firm with a London company that is licensed by the UK’s financial regulator.
Persella said in response to a request for comment: “MeritKapital Limited is a distinct and separate legal entity to the other “Merit” firms and it’s run and operated by means of me, Persella Ioannides, no longer Demetris or Panos Ioannides.”
Separately, a spokesperson for Persella Ioannides stated that MeritKapital had a “different client pool” to MeritServus.
Mr Blue
The body of workers at MeritServus had a codename for his or her greatest consumer, which incessantly gave the impression in electronic mail exchanges. In a most probably nod to the Chelsea staff colors, they known as Abramovich “Mr Blue”.
Records counsel the connection started in 2001, the yr Abramovich arrange Millhouse Capital, which controlled his stakes in firms starting from oil and gasoline to aluminum and banking. Initially offering officials for Millhouse, over the following 20 years MeritServus would assist transfer the oligarch’s billions into European economies. Emails, banking data, mortgage agreements, corporate filings and accept as true with paperwork document the acquisition of trophy property – belongings, artwork, soccer golf equipment, yachts and jets – along investments in startups and extra established companies. MeritServus was once there when Abramovich purchased Chelsea, it controlled the accept as true with that owns his former £150m house in Kensington Palace Gardens, and some other that holds an $800m artwork assortment.
It did not simply deal with transactions for Abramovich. The subject material observed by means of the Guardian suggests MeritServus undertook paintings for his buddies, together with Tenenbaum. And it acted for Russian businessmen unrelated to their affairs.
One of them was once Konstantin Malofeyev, referred to as “the Orthodox oligarch” for his hyperlinks to Russia’s state church machine. He seems to have grow to be a consumer since 2005, the yr he arrange his personal fairness crew Marshall Capital Partners. A banker became propagandist, Maloveyev was once positioned underneath sanctions by means of the EU and the United States in 2014, after Russia’s annexation of Crimea. The Americans described him as “one of the main sources of financing for Russians promoting separatism in Crimea”. MeritServus seems to have saved him as a consumer till May 2017, wearing out quite a few transactions involving thousands and thousands of bucks and euros in 2015 and 2016, whilst he was once underneath sanctions, in an obvious breach of Cypriot legal regulation.
MeritServus says it had “inadvertently not identified” Malofeyev as being at the sanctions record. As quickly because it become acutely aware of its error, in 2017, the company says it knowledgeable the accountancy regulator and the federal government division chargeable for fighting cash laundering, and “the position was resolved” with each our bodies.
Prior to being positioned underneath UK sanctions, MeritServus additionally stated it performed commonplace products and services with right kind permissions from regulators.
It added that it was once no longer focused on “money laundering or breaches of sanctions laws, nor has it facilitated, condoned or turned a blind eye to the same”.
A protracted historical past
The ties between Cyprus and Russia are extra than simply industrial. They stretch again over centuries, with a shared alphabet and non secular bonds cast inside the Orthodox Church. After independence from the United Kingdom in 1960, the USSR was once fast to arrange diplomatic hyperlinks with the newly established Republic of Cyprus.
When the Soviet Union collapsed, the binds best deepened. Support from Russia got here within the type of palms offers that heightened the long-running tensions between the Republic of Cyprus and Turkey. In 1998, a double taxation treaty between the 2 nations took the connection to a brand new stage.
By routing their money via company constructions spanning Cyprus and different tax havens such because the British Virgin Islands, the businessmen who made their fortunes within the chaotic privatizations of the Nineteen Nineties may just slash their tax expenses and steer clear of public scrutiny in their monetary affairs.
In October 2010, Russia’s then president Dmitry Medvedev said the significance of the connection all over an reputable consult with to Cyprus: “We have very good relations, we have a mutual understanding on nearly all international issues, we have a shared history, we have spiritual kinship , and we have the present day.
It was around this time that annual Russian capital flows through the Mediterranean island began to reach into the billions. They peaked at over €21bn in 2012, according to the rating agency Moody’s, when it was estimated a third of all deposits were of Russian origin. A banking crisis, triggered by Greece’s national debt debacle, led to those sums reducing very significantly in the years that followed.
Some of the billions that flowed through Cyprus belonged to Abramovich.
Dig back through the oligarch’s long history of court disputes in London, and it is in a 2008 high court ruling that his relationship with Ioannides first emerges. The judge, who appears to have been somewhat bewildered by the complexity of the offshore arrangements used by the oligarch, described what he had found during the course of the hearings.
“The upshot is that there appears to be a web of companies, largely in the BVI and Cyprus, which hold various interests, personal and business, some very sizeable, of which Mr Abramovich is, or would appear to be, the ultimate owner. The Cypriot companies are ultimately owned, so far as the legal title is concerned, by the Deloittes or Mr Demetris Ioannides, who was a director of Meritservus Ltd and Meritservus (Trustees) Ltd, the two Deloitte Cypriot service companies, or by other Meritservus personnel.”
After a request for remark from the Guardian, Deloitte requested MeritServus to “cease and desist” from claiming any hyperlinks or the usage of the Deloitte identify in its exposure. MeritServus has since modified the language on its web page, putting off the outline of Ioannides as chairman emeritus of Deloitte Cyprus. An advertorial from the web page of a Cypriot industry e-newsletter that described MeritServus as an “offshoot” of Deloitte was once additionally taken down.
With its financial institution accounts frozen and its operations now underneath UK sanctions, the longer term for MeritServus is unclear. Cyprus itself is confronted with a troublesome selection: flip clear of Russia, or wait patiently for a solution to the war in Ukraine.
Additional reporting by means of Rob Davies and Harry Davies