Russian companies find shelter with some domiciliation service providers

Since the invasion of Ukraine in February 2022, the European Union has introduced thirteen packages of sanctions against Russia. Over 400 companies and 1700 individuals have been placed on sanction lists, allowing their European assets to be frozen. In the months following the invasion, many oligarchs who, according to the EU, have close ties to President Vladimir Putin, were added to the list. After the start of the war in Ukraine, the Dutch government also took measures to hinder the presence of Russian companies in the Netherlands. However, according to an investigation by the Financieel Dagblad, oversight of these companies is lacking.

It has become clear that an increasing number of Russian companies based in the Netherlands, or their representatives, are seeking refuge with address service providers (domicile providers) to evade government scrutiny. They believe this offers them a cover for activities that violate international sanctions.

These companies have been drifting through the Netherlands since the war in Ukraine, as more and more service providers cut ties with them. These companies have moved multiple times because professional address providers and landlords fear violating international sanctions.

It also appears that several address providers (so-called domicile providers) do not have their checks in order and thus inadvertently and unintentionally cooperate in violating international sanctions. For example, several private limited companies (bv's) linked to a sanctioned oligarch may be registered at one company in Zwolle.

Why do Russians still bother to keep companies in the Netherlands if increasingly stringent laws and regulations hinder doing business? The FD has sought answers and must first take a step back in time to do so.

Until 2021, it was far from uncommon for Russians to establish companies in the Netherlands. These were often intermediate holding companies or joint ventures, with assets in Russia or other foreign countries. The main reason for this was fiscal: a treaty between the Netherlands and Russia ensured lower taxes on the distribution of, for example, dividends. The management of the Dutch companies was often in the hands of trust offices, professional parties that handle administration and banking for their clients.

This clear situation has changed three years later. President Vladimir Putin cancelled the tax treaty at the end of 2021, as he no longer wanted money to disappear from Russia through tax avoidance. And when Russia invaded neighbouring Ukraine two months later, a series of sanction measures followed from the European Union against Russian oligarchs, companies, and certain goods.

To limit Russian money flows in and to the Netherlands, the cabinet subsequently introduced an emergency law prohibiting trust offices from serving Russians any longer. Some Russian companies consequently left the Netherlands or dissolved themselves. Those who remained had to look for a new business address.

The trail of the Russians eventually leads to a domicile provider in Zwolle, a provider of postal and business addresses for companies. This is no surprise. A year ago, the FD revealed that some address providers help Russian companies that can no longer turn to trust offices. The majority of Russian ex-trust clients therefore remained active in the Netherlands. The trust ban thus appears to have little effect.

According to lawyers, oversight of the Russians and their billions has deteriorated. Now that companies are disappearing from the government's radar, activities that violate international sanctions may still be taking place. Many domicile providers appear not to have their customer checks in order. Virtual offices can therefore be an easy 'front' for criminal activities, such as COVID support fraud and drug trafficking. (Wwft regulations).
Domicile providers are also obliged to adhere to (inter)national regulations and thus also the sanctions against Russia and must refuse (potential) clients if there is a reasonable suspicion that sanctions may be violated.

Postadres.nl uses a thorough control measure to deter (inter)nationally sanctioned persons or companies. And regrets that some address service providers do not do so, harming the reputation of our industry.

Source: FD. Read the full report from the Financieel Dagblad:
https://fd.nl/bedrijfsleven/1510846/russische-bedrijven-vinden-onderdak-bij-een-zwols-bejaardentehuis gift=2aC1o&utm_medium=social&utm_source=email&utm_campaign=earned&utm_content=20240327