In the first quarter, the assets of non-residents on brokerage accounts of Russian brokers grew by 35%

In the first quarter, the assets of non-residents on the brokerage accounts of Russian brokers increased by 35% to RUB 863 billion. The main growth was in the accounts of legal entities, the assets of companies from the UAE, the Virgin and Cayman Islands increased by four to eight times. These jurisdictions can be used by Russian companies and individuals for the repatriation of capital from unfriendly countries to Russia, servicing foreign assets, and operations within the framework of foreign economic activity. However, due to the tightening of controls, interest in such countries is declining, and the center of growth may shift towards friendly jurisdictions.

Sanctions and isolation of the Russian market have not stopped the flow of foreign investors to Russia. According to Kommersant’s estimates, based on data from the Central Bank, in the first quarter, the total number of non-resident accounts with Russian brokers reached 24.6 thousand, an increase of 6.5% since the beginning of the year. More significant growth is observed in terms of assets against the background of the rapid growth of the Russian market. During the quarter, the assets of foreign clients grew by 35%, to 863 billion rubles, and almost all of the growth was provided by legal entities, whose assets grew to 827 billion rubles.

A number of friendly jurisdictions showed record growth in asset volumes. Thus, the assets on the accounts of clients from the United Arab Emirates (UAE) grew eight times, to 63 billion rubles, and moved from sixth to third place in this indicator. Only residents of Cyprus (more than 512 billion rubles) and Great Britain (75.6 billion rubles) have a larger amount of funds. Almost the entire increase in the accounts of investors from the UAE fell on legal entities, whose assets increased from 7.7 billion rubles. up to 62.7 billion rubles. A similar picture is observed with clients from the Virgin and Cayman Islands – assets increased by five and four times, respectively, to 38 billion rubles. and 4 billion rubles. In both cases, growth also occurred at the expense of legal entities.

Market participants believe that the bulk of new clients from these jurisdictions are companies with Russian roots. Maria Agranovskaya, Managing Partner of the GRAD Bar Association, draws attention to the fact that Russian assets in significant volumes flowed to the UAE in March-May 2022 against the backdrop of a mass exodus of some representatives of the upper-intermediate class from the Russian Federation. “After 2022, the UAE has become a financial hub for many wealthy Russian individuals, and many of them have decided to open companies in this country to invest in the much cheaper Russian market,” says Dmitry Lesnov, head of the client service development department at FG Finam.

Companies from the Cayman and Virgin Islands traditionally act as tax havens and allow them to minimize taxes, which was actively used by Russian residents. “Banks in offshore jurisdictions are now extremely reluctant to open accounts, especially for companies with Russian beneficiaries. But if the beneficiaries have a different citizenship, then the chances of opening accounts increase,” says Maria Agranovskaya.

According to the interlocutor of Kommersant in a large investment company, due to sanctions, Russian companies and large investors have to solve the problem of repatriating capital. “A foreign legal entity can be created to solve the problem with the destroyed inter-depository bridge Euroclear / NSD,” notes the interlocutor of Kommersant in the investment company. Such structures can also be created to resolve issues of returning the export earnings of Russian companies that are somehow under sanctions, Kommersant’s interlocutors in the financial market add. “Because of the sanctions, companies are facing difficulties in making settlements for foreign economic activity. Moreover, money transfers are becoming more and more difficult both in “toxic” and “friendly” currencies,” notes a top manager of a large management company.

The change in the landscape of accounts will continue for several more months and will end towards the end of 2023, if there is no tightening of sanctions against friendly jurisdictions, market participants do not exclude. In addition to this, due to the tightening of control in the UAE and offshore zones, their shortcomings have become apparent both in terms of asset security and the availability of banking in general for holders of Russian passports. “Some major banks in the UAE have announced restrictions on servicing Russians, the introduction of sequestration accounts,” notes Maria Agranovskaya. At the same time, the trend of capital inflow from friendly jurisdictions may continue. Now, the interlocutor of Kommersant in a large management company explains, accounts are being opened in such countries, infrastructure is being built, after which operations can begin.

Vitaly Gaidaev