The Audit Oversight Authority for the Audit Profession is taking all necessary steps in response to allegations concerning Deloitte Cyprus, its Director General, Panos Prodromitis, has said.
Prodromitis was asked whether the authority would investigate claims published by the BBC concerning the alleged involvement of Deloitte Cyprus in the manipulation of records linked to potential tax evasion involving companies associated with Russian billionaire Roman Abramovich.
He said the authority had been informed of the recent reports and was taking all necessary action.
“The authority has been informed of the recent publications and is taking all necessary steps in every direction, within the framework of its statutory powers and obligations, with the aim of serving the public interest,” he said.
BBC investigation alleges backdating of documents
The allegations stem from a joint investigation by the BBC’s Panorama programme and the Bureau of Investigative Journalism, which examined thousands of leaked documents obtained as part of the international Cyprus Confidential investigation.
According to the investigation, Deloitte Cyprus allegedly helped backdate documents used to conceal assets belonging to Abramovich worth hundreds of millions of dollars.
The reports identify Limassol-based corporate services provider MeritServus as a central player in the alleged arrangements. The company managed an extensive network of offshore entities linked to Abramovich.
MeritServus was owned by Deloitte until 2005. Following their separation, the two companies reportedly continued to work closely with each other and Abramovich’s associates in managing his global wealth.
The leaked documents allegedly show that Deloitte provided advice that facilitated tax evasion.
Alleged concealment of assets worth millions
According to the BBC investigation, following the introduction of new Cypriot legislation in 2006 requiring companies to publish financial statements, Abramovich’s associates made retrospective transfers of assets to companies in the British Virgin Islands.
One case involved a Cyprus-registered company whose accounts allegedly no longer showed luxury homes, private aircraft and yachts valued at a total of $672 million.
Following the accounting changes, the company reportedly appeared to hold assets worth just $75,000.
The investigation also raised allegations of potential tax evasion involving Cyprus-based Kravin Investments, which reportedly held almost $2 billion in cash in 2003.
According to the reports, backdated documents were used to prevent interest income from being recorded as taxable income in Cyprus.
In a third case, MeritServus allegedly falsified documents relating to assets worth more than $10 billion held by Cyprus-based Electus Investments, making a similarly named company in the British Virgin Islands appear to be the beneficial owner.
Deloitte and Abramovich reject allegations of wrongdoing
Abramovich’s lawyers have denied any wrongdoing, saying he relied on advice from professional advisers.
Deloitte Cyprus told the BBC that it operates in accordance with the law and could not comment on documents drawn up around 20 years ago.
MeritServus ceased operations following revelations from the Cyprus Confidential investigation.
The allegations have raised questions about the extent to which historic financial arrangements can be examined by the Cypriot authorities.
Tax investigation limits and potential criminal offences
Under the current legal framework, the Tax Commissioner cannot investigate the alleged tax evasion through ordinary tax audits if the relevant periods fall outside the applicable statutory limits.
Subject to certain conditions, tax audits can extend back up to 12 years, while the allegations concern events said to have occurred more than 20 years ago.
However, potential criminal offences arising from the case are not subject to a statute of limitations, according to the information provided in the report.
The Audit Oversight Authority has said it is taking the necessary steps within its legal powers and obligations. Further details of any specific investigation or action have not been provided.
Source: CNA
