The onset of a global regime for international information exchange - namely the Common Reporting Standard - is helping to prompt wealthy Russians to come clean about foreign accounts. Many, however, are taking a different approach in handling accounts.

A recent survey of private bankers and advisors by an international property brokerage firm, Tranio, shows that the number of Russian high-net-worth individuals disclosing their foreign accounts to Russian authorities has risen by more than fourfold since after the country signed up in 2016 to the Common Reporting Standard regime of information exchange. A significant share of such persons are still not declaring accounts, however, in many cases choosing to change tax residency.

The research was undertaken at a conference at which 60 private bankers, lawyers and tax advisors working with Russian HNW individuals attended.

In accordance with the CRS, Russia will automatically receive information on its residents' foreign bank accounts from 2018 onwards. Some 40% of such citizens with foreign accounts declared them to the authorities, whereas only 10% did so before.

Individuals who declare their foreign bank accounts usually open new accounts with a clear transaction history for such purposes. Previously owned accounts are closed and the funds from them are transferred through 'back channels' to avoid any connection between their old and new accounts, according to Tranio managing partner George Kachmazov.

What do Russian citizens who do not want to declare their foreign accounts do? According to a survey from last year, 48% of the respondents said that such individuals would most probably change their tax residency, while in 2017 this figure increased to 78%. One-third of respondents said that Russian HNWIs were becoming de-facto tax residents of other countries, 27% said that they were changing their residences using foreign residence or citizenship-by-investment programmes, and 18% of the respondents mentioned both.

About one-third of respondents said that Russian HNWIs most often closed their foreign accounts and transferred their capital to Russia (37% in 2016 and 33% in 2017). The proportion of respondents who said that owners of foreign bank accounts are transferring their capital to jurisdictions not participating in the CRS is significantly lower: 20% in 2016 and 17% in 2017.

The most popular of such jurisdictions are the United Arab Emirates and Singapore, which had not yet joined the CRS Multilateral Competent Authority Agreement at the time of the survey. Even after joining the agreement in June 2017, Singapore plans on exchanging tax information only with jurisdictions that are able to guarantee the confidentiality of the information and prevent its misuse. Singapore's authorities do not consider Russia to be one of these countries.

Many Russian HNWIs also transfer their capital to the US (28% in 2017 and 15% in 2016).