Panama files show Russian crackdown on offshoring is failing

The thousands of Russian names on a list of offshore companies suggests President Vladimir Putin's effort to crack down on such entities is ineffective, experts say, and highlights how keeping wealth abroad remains one of the few ways to keep it safe from corrupt local officials.
A database published by investigative journalists on Monday showed over 6,000 Russian citizens and legal entities own or manage offshore companies through Panamanian law firm Mossack Fonseca.
Spanning over two decades, the data showed no decrease in the number despite the government's efforts.
The documents have sparked public outrage and investigations in the West but in Russia the response has been muted. International media outlets with access to the full database say they show a network of Putin's friends handling large sums, allegedly for the president. Moscow has dismissed this as speculation.

Beyond Putin's inner circle, they also show that thousands of Russians not just tycoons but mid-size business owners use offshore companies. A record USD 151.5 billion in capital was pulled out of Russia in 2014, when investors panicked about sanctions. Some USD 57 billion flowed out last year.
As Russia struggles economically, Putin has made a big show of wanting to crack down on the use of offshore companies, which can help dodge taxes.

In March last year, a year after the annexation of Crimea and U.S. And European Union economic sanctions, Putin issued a public warning to a star-studded gathering of tycoons at a posh Moscow hotel: get your money back to Russia, or foreign governments might snap it away from you.

Oleg Deripaska, one of the billionaire attendees, later told Russian television that Putin said: "Do it now and for good, and no one will have anything against you."
In June, Putin signed a bill declaring a capital amnesty, under which funds brought back to the country would not be taxed and the owner would not be prosecuted.
Six months later, only about a hundred people were reported to have brought back their fortunes with the help of the amnesty that year, and the bill was extended through July this year.
The thousands of names listed in the so-called Panama Papers suggest the effort is still not yielding much. That may be due to the fact that, like some of his other initiatives, Putin's public scolding of oligarchs seemed to be largely political theater for the domestic audience.

However stern Putin's message was, it was not followed by any legislative or regulatory announcements that would make doing business or keeping money in Russia more attractive.
Roman Anin, an investigative reporter who helped research the Mossack Fonseca leak, says the reaction to the revelations was muted in Russia because business people have typically resorted to offshore jurisdiction for a reason fundamentally different from western Europe. For business people, it's not about evading taxes, but avoiding corrupt officials.