19 Aug 2020
OCCRP – Oleg Tinkov is a self-made Russian billionaire with a penchant for private jets and luxury homes around the globe that bear his name, just like the online bank he founded.
For years, Tinkov flaunted this lavish lifestyle on social media. In February, his family flew a $58-million plane between three countries in one day while celebrating his son Roman’s 17th birthday, according to his Instagram posts. When Roman was just 10 years old, he posed for an Instagram photo while cutting a ribbon on the staircase of Tinkov’s first jet, worth $28 million. “Roma bought a toy,” the caption read.
That year, in 2013, Tinkov told U.S. authorities that his net worth was $300,000. He was renouncing his naturalized U.S. citizenship and was required to declare his assets in the process. But prosecutors alleged that his shares in Tinkoff Bank alone were worth over $1 billion. He is now fighting extradition from his home in London to face tax fraud charges in the United States.
While Tinkov has been accused of tax fraud in the U.S., he’s been able to save millions legally in a European tax haven.
In the Isle of Man, a British crown dependency in the Irish Sea, Tinkov established an opaque jet leasing structure that enabled him to avoid tax payments on three private jets reportedly worth around $114 million. He effectively leased the jets to himself through anonymous offshore companies, thereby qualifying for tax exemptions that would not apply if he had simply purchased the planes.
Tinkov’s scheme was first made public in 2017 with the publication of the Paradise Papers, a leak of documents from a legal services company called Appleby that helped wealthy clients stash their assets offshore.
In 2018, the European Commission called for the UK to clamp down on what it called “abusive tax practices in the Isle of Man,” after a BBC investigation found that authorities there refunded more than 790 million pounds to 231 aircraft leasing companies that had imported jets between 2011 and 2017. The UK launched an inquiry, but concluded that there was “no evidence of aircraft VAT [value-added tax] avoidance in the Isle of Man.” A separate European Commission investigation is ongoing.
Now, a fresh leak of bank documents from a branch of the Cayman National bank on the Isle of Man demonstrates weak compliance reviews and reveals exactly how these complex corporate structures worked. The new documents also show that Tinkov wasn’t the only one: At least 12 other jet owners used similar schemes, enabling them to reduce their tax bills.
Since October 2011, almost 300 applications to the island’s customs authority for a total exemption from VAT for importing a plane have been given the green light, according to data released through Freedom of Information requests. An analysis by Global Witness found this saved the owners almost one billion pounds — equivalent to the Isle of Man government’s entire budget for 2020.
The loss of these potential revenues is offset by a flourishing financial services industry that tax havens such as the Isle of Man rely on to fuel their economies. The bank documents also expose the role of financial service providers — bankers, accountants, and corporate service firms — in facilitating such schemes.
Tinkov did not respond to questions from reporters.
‘Just Like Anyone Else’
According to his self-published autobiography, “I’m Just Like Anyone Else,” Tinkov was born in Siberia in 1967, the son of a coal miner and a seamstress. After a string of retail and food and drink ventures in the 1990s and early 2000s, he founded Tinkoff Bank, an online bank that now has more than seven million customers. In its latest ranking of billionaires, Forbes listed Tinkov as one of Russia’s richest businessmen.
While the U.S. indictment focused on a corporate trail that led to the British Virgin Islands, it was the Isle of Man that he used to shelter his private jets.
Stark Ltd, his jet leasing company, opened a bank account with the local branch of Cayman National in 2014.
Tinkov appeared in the Paradise Papers leak in 2017 as a client of corporate services provider Appleby, now renamed Estera. Le Monde reported at the time that the businessman used Stark Ltd to buy private jets from the French manufacturer Dassault and didn’t pay a penny of VAT in France. The jets were instead imported, through Stark, into the Isle of Man, where Tinkov demanded an immediate refund from the tax authorities because the planes would be leased out.
The structure used by Tinkov worked as follows: Isle of Man-registered Stark Ltd bought the jets, but rather than using them itself, the company leased them to a separate BVI firm, Moonfield Trading Inc., which was also ultimately owned by Tinkov.
By operating as a leasing company, Stark could claim an exemption on the VAT that would otherwise be due at import, according to reporting by Global Witness.
The scheme depended on a circular financial arrangement that saw the two companies shift funds between their offshore bank accounts. First, Moonfield loaned Stark the money to buy the aircraft. The jets were then leased back to Moonfield for Tinkov’s use. Moonfield then made regular payments to Stark for the use of the jets — funds that were almost immediately returned to Moonfield in repayment of the original loan. In effect, Tinkov was paying himself to use his own jets under a leasing arrangement that enabled him to avoid paying the VAT.
The leaked bank documents show how Stark received $9.4 million in regular “advanced rental payments” from Moonfield between July 2014 and February 2018. The payments were sent straight back to Moonfield as loan repayments. The average gap between Stark receiving a payment and sending back the balance was just a week.
There’s some indication that U.S. authorities who were investigating Tinkov for tax fraud looked into the ownership of the planes as well. Among the bank’s hacked files was a cache of evidence prepared for an appearance by a Cayman National employee at the Isle of Man Courts of Justice in June 2018. An official summons included in the folder refers to “a criminal investigation that is being carried on in Ireland,” but an accompanying email describes the information as “evidence sought by the US Department of Justice,” including information relating to Tinkov’s jets.
Cayman National’s internal emails show that, after the Paradise Papers revelations, the bank’s compliance department became concerned about the Stark account, even though it had access to the loan documents underpinning the arrangement for more than two years.
Taking another look at their client — whom the bank had previously flagged as a “High Risk Customer” and “High Profile Individual,” labels that should have subjected him to extra scrutiny — compliance officers then became worried that Estera, the firm that administered Moonfield, appeared to be “skirting around” concerns about Tinkov.
In one email, a Cayman National employee pointed out the circularity of the structure: “The funds coming into Stark Limited’s account are from Moonfield Trading Inc’s account at Tinkoff Bank in Russia,” the employee wrote. “The funds received are being paid out within a matter of days to an another [sic] account in the name of Moonfield Trading Inc at ABLV Bank in Latvia.”
In another internal email, Cayman National’s banking director wrote that the structure was “effectively a ‘pass through’ account.”
In February 2018, Cayman National filed a disclosure with the Financial Intelligence Unit in the Isle of Man, citing the territory’s Proceeds of Crime Act of 2008. The bank noted that Moonfield’s accounts were outside Estera’s control and that Cayman National didn’t feel they had “full knowledge of the underlying source of the funds being received into Stark Limited’s account.”
In the disclosure, the bank also expressed concern that Tinkov’s name had appeared on the so-called “Kremlin List,” a list of oligarchs and state officials perceived to be close to Vladimir Putin that was published by the U.S. Treasury Department a month earlier.
But alleged links between Tinkov and Putin were first published more than two years earlier, when the businessman was interviewed by the Financial Times in December 2015. The newspaper reported that the oligarch “casually mentioned Vladimir Putin by name more than a dozen times, boasting of his relationship with the president.”
Cayman National’s subsequent review of the Stark account in June 2016 appeared to overlook this reporting. In a check-box that asked the employee to conduct a Google review, a compliance employee wrote “nothing adverse.” Photocopies of the Google search results attached to the review indicate that the Financial Times article was detected but unopened.
There were other red flags that could have been detected during the compliance review process. Moonfield, from whose Russian bank account Stark received the regular lease payments, also had an account with Latvia’s ABLV bank, to which Stark’s regular loan repayments were sent. As early as 2012, ABLV had been implicated in possible money laundering and this information was publically available.
The bank cited their concerns in the 2018 disclosure to Isle of Man authorities, noting that they don’t know “what is happening with the funds once they reach the Latvian ‘Moonfield’ account.”
A month later, U.S. authorities declared ABLV an “institution of primary money laundering concern,” prompting ABLV to announce its own voluntary liquidation.
A spokesperson for Cayman National said, “The bank operates an active risk review programme and has in recent years exited legacy clients where there is a heightened Anti-Money Laundering (AML) risk and there are further cases under review.”
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