Column by the managing partner of the Grad Bar Association, Maria Agranovskaya, on how familiar jurisdictions are gradually being replaced by new ones

Until the beginning of 2022, the traditional destinations for investing or depositing funds were countries that overnight became “unfriendly”. After the start of the SVO, capital began to actively flow to other jurisdictions, including returning to Russia.

Historically, Russians considered Switzerland, Great Britain, and the USA as a safe place for savings. There was interest in placing assets in a number of other European countries (France, Italy, Spain, Cyprus) and dwarf states (Liechtenstein, Luxembourg). Offshore jurisdictions were also in demand. For example, holders of Russian passports chose Cayman for holding structures, trusts, private and also venture funds. Pacific offshore companies were also popular. In particular, companies from these jurisdictions participated in the business or acted as a place of custody for assets.

Now service providers in the Caymans or British Virgin Islands are not eager to work with Russians. The situation is similar with Guernsey and Jersey. Panama as an offshore is also subject to US influence. Other offshore companies have not had absolute information protection for quite some time. Traditional jurisdictions are gradually being replaced by new ones. However, there is no truly loyal attitude of the authorities towards Russian citizens almost anywhere.

So far, the UAE is leading in terms of the volume of transferred investments. Many of those whose wealth exceeds $10 million actively transferred funds to this country. Given the difficulties in remittances, clients asked to find exchange options, for example, a house in London or a villa in Marbella for a penthouse in Dubai. Clients are also trying to keep deposits in Swiss banks, but in their branches, for example, in Dubai.

However, the UAE cannot be considered a “safe haven”. Local regulators have introduced a number of restrictions, in particular, banks have significantly reduced their work with Russian residents. The cost of real estate in the country also leaves much to be desired. In addition, they do not provide any residence permits or passports here.

However, obtaining a passport from other countries has become much more difficult for Russians recently. So, in Israel, local passports are issued much more slowly, and checks are more stringent. Grenada’s passport-for-investment program is virtually frozen.

Turkey has reduced the number of passports issued and doubled the amount of investment. And the country is too unpredictable as a jurisdiction for storing funds or long-term investments.

There is growing interest in Asia in general and Hong Kong in particular. Of course, there is a fairly developed legal system here and, despite the proximity to China and some specifics, good specialists work there and there is access to financial instruments. However, Russian citizens are not particularly welcome in Hong Kong either. It is extremely difficult for a domestic beneficiary without residence in another state to open accounts here.

As a result, we have to explore new, rather exotic directions. For example, Mauritius is good both in terms of a stable and loyal jurisdiction and in terms of taxation. This country is suitable for both business management and private wealth management. Kazakhstan and Kyrgyzstan, in turn, are good for opening current accounts and bank cards. Investors also buy or build villas for rent in Bali, Thailand, and other countries. However, most often we are not talking about large investments.

Maria Agranovskaya, managing partner of the Grad Bar Association