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A Memorandum of Understanding was signed between the Cyprus Securities and Exchange Commission (CYSEC) and the Federal Financial Markets Service. Vladimir Milovidov, chief of the FFMS, explained that the MoU provides both organizations with a possibility to acquire information from the opposite party on request. The information to be disclosed under the agreement is the kind of information in possession of financial regulatory authorities, like, for instance: whether the company is manipulating prices or not; whether it meets the existing requirements for financial market participants (or other existing legislation) or not; finally, whether the company meets licensing requirements. 

Cyprus is a very popular tax heaven among Russian companies, and this innovation will likely hurt many of them because too many use Cyprus precisely for the purpose of tax evasion and hiding real stakeholders. Real stakeholders of many Russian companies are actually non-residential companies in offshore districts. Some unofficial data even states that around 90% of all transactions on RTS (Russian Stock Exchange) are carried through offshore zones. If the mechanism of information exchange between the CYSEC and the FFMS proves effective, Russian regulators will acquire info on real owners of companies in many sectors of the economy – as well as financial institutions like investment companies, brokers and registrars.

It is true, however, that even the FFMS’s experts aren’t sure they’ll be able to get all the information they need. “The Cyprian regulator will disclose information on owners of those institutes only which have its licenses – and only when possession of those licenses doesn’t contradict the internal Cyprian legislation”, - explained Andrey Novalovsky, a partner of the “Liniya Prava” law firm. This means that the CYSEC doesn’t have to present information classified as “banking secrets” – like the one on flows from one banking account to another, added Eduard Savulyak, chief of Moscow office of “Tax Consulting” (UK consulting company). – “But in “extreme” cases, like, for instance, a criminal prosecution in Russia, it is likely that the Cyprian regulator will eventually disclose all needed information”, - he added. He thinks that the whole agreement under consideration will lead to unpleasant changes for many firms – litigation, reassessment of transactions already made in the past, financial restatements, etc. 

Source: “RBC”