Tinkoff Bank Named Systemically Important Russian Lender, Founder Pays $500M+ Fine in US

Tinkoff Bank has been added to the Bank of Russia’s list of 13 systemically important lenders, the institution said this week. They said the decision was based on such factors as higher than average business growth and an extensive customer base. The move comes days after its founder agreed to pay more than $500 million in fines and penalties to the United States Department of Justice.

13 Banks Carry Weight

The other 12 banks are AO UniCredit Bank, Bank GPB, PJSV Sovcombank, VTB Bank, AO-Alfa-Bank, Sberbank, Credit Bank of Moscow, Bank Otkritie Financial Corporation, PJSCRosbank, Promsvyazbank, AO Raiffeisenbank, and JSC Rosselkhozbank. Together the 13 account for around 77 per cent of Russian total banking assets.

“The addition of Tinkoff Bank to the Bank of Russia’s list of systemically important lenders is, without doubt, an indication of Tinkoff’s quality and recognition of its role in the country’s financial system; it’s a result of our business development and of our growing number of customers,” Tinkoff Group CEO Oliver Hughes said. “Tinkoff complies with all regulatory requirements set by the Bank of Russia for systemically important banking institutions and will continue its strategy to develop its business and expand its customer base.”

Hughes said Tinkoff Bank has more than 17 million Russian customers. He claims its retail total is the third-highest active total in the country.

“Tinkoff is also the world’s first neobank to be named a systemically important company,” Hughes said. “Today, it’s hard to imagine that, at the start, when we were launching Tinkoff 15 years ago, we were ranked 822nd on the list of banks in Russia. Now we are among the 13 largest and most reliable banks in the country.”

Oleg Tinkoff Pays Big for Filing False Returns

Earlier this month Tinkoff Bank owner Oleg Tinkoff (aka Oleg Tinkov) pled guilty to filing a false United States tax return after being accused of concealing $1 billion in assets and income following his renouncing of his American citizenship in 2013. Tinkov agreed to pay $507 million in taxes, interest and penalties for filing the false tax return.

“In 2013, when the value of Oleg Tinkov’s investment in his bank’s stock rose to over a billion dollars, Tinkov quickly renounced his U.S. citizenship and then lied to the IRS in a ploy to evade ‘exit taxes’ he knew were due,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Today, Tinkov has entered a plea to a felony and agreed to pay more than $500 million in taxes, interest and penalties, more than double the amount of money he sought to escape paying to the U.S. Treasury through his fraudulent scheme.”

“Oleg Tinkov brazenly violated United States tax law,” added Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California. “No one who enjoys the immense benefits of United States citizenship, as Tinkov did, may avoid the corresponding obligation to support the country he chose. Tax evaders should take notice of the long reach of U.S. law enforcement.”

In the mid-2000s, Tinkoff founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares, the DoJ said. In 2013 the company held an IPO on the London Stock Exchange, and as part of the process Tinkov sold a small share of his personal stake for $192 million. Follow the IPO his assets were valued in excess of $1.1 billion. Three days later the DoJ said Tinkoff renounced his American citizenship at the U.S. embassy in Moscow.

As part of that process, he had to file a U.S. Initial and Annual Expatriation Statement which requires ex-pats with a net worth of at least $2 million to report the constructive sale of their assets worldwide to the IRS as if they were sold on the day before expatriation. The taxpayer must then pay the required taxes.

The DoJ said Tinkoff was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant. 

“When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million,” the DoJ said in a statement. “When his accountant later inquired whether his net worth was under $2 million, rather than answer the question, Tinkov filled out the expatriation form himself falsely, reporting that his net worth was only $300,000.”

Combined the false claims caused a tax loss of $248,525,339.

Tinkov was arrested on Feb. 26, 2020, in London but has been contesting extradition on medical grounds. He claims to be suffering from acute myeloid leukemia and graft versus host disease.

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