Russian companies find shelter with some domiciliary providers

Since the February 2022 invasion of Ukraine, the European Union has introduced 13 packages of sanctions against Russia. In the process, more than 400 companies and 1,700 individuals have been placed on sanctions lists, which could freeze their European assets. In the months since the raid, many oligarchs have been listed, who the EU believes have close ties to President Vladimir Putin. After the start of the war in Ukraine, the Dutch government also took measures to frustrate the stay of Russian companies in the Netherlands. But oversight of those companies is lacking, according to an investigation by the Financieel Dagblad.

It appears that more and more Russian companies based in the Netherlands or their representatives are seeking refuge with address service providers (domiciliation providers) in order to avoid the government's control radar. By doing so, they think they can find a cover for activities that violate international sanctions.

These companies have been roaming the Netherlands since the war in Ukraine, after more and more service providers pulled their hands away from them. These companies have moved several times as professional address providers and landlords fear violating international sanctions.

It also appears that several address providers (so-called domiciliation providers) do not have their checks in order and thus unintentionally and unwittingly cooperate in violating the international sanctions. For example, a company in Zwolle may have several bv's registered that are affiliated with a sanctioned oligarch.

Why are Russians still bothering to leave companies in the Netherlands if tightening laws and regulations are hampering business? The FD has searched for answers. And to do so, it must first step back in time.

Until 2021, it was far from uncommon for Russians to set up 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 a fiscal one: a treaty between the Netherlands and Russia ensured lower taxes when paying dividends, for example. The management of the Dutch companies was often in the hands of trust offices, professional parties that handle administration and banking for their clients.

That orderly situation changed three years later. President Vladimir Putin cancelled the tax treaty in late 2021 because he no longer wanted money to disappear from Russia through tax evasion. And when Russia invaded neighboring Ukraine two months later, a series of European Union sanctions followed against Russian oligarchs, companies and also certain goods.

In addition, to restrict Russian money flows into and out of the Netherlands, an emergency law was drafted by the cabinet, prohibiting trust companies from serving Russians any longer. Some of the Russian companies consequently left the Netherlands, or dissolved themselves. Those that remained had to look for a new business address.

The Russians' trail eventually leads to a domiciliary provider in Zwolle, a provider of mailing and business establishment addresses. This is no surprise. A year ago, the FD revealed that some address providers were helping Russian companies that could no longer turn to trust offices. The majority of Russian ex-trust clients simply continued to operate in the Netherlands as a result. Therefore, the trust ban seems to have little effect.

According to legal experts, surveillance of the Russians and their billions has deteriorated. With companies disappearing under the government's control radar, activities that violate international sanctions may still take place. Many domiciliary providers thus appear to have their customer controls in place. Virtual offices can therefore be an easy "cover" for criminal activities, including corona-style fraud and drug trafficking.(WWFT regulations).
Domiciliary providers are also obliged to comply with (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 means of control to keep out (inter)nationally sanctioned individuals or companies. And finds it unfortunate that some address service providers fail to do so and damage the standing of our industry.

Source: FD. Read for the entire message 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