The Cyprus haircuts for bank deposits in excess of $130,000 demonstrates to Russian oligarchs and other monetary-haven seekers that the European Central Bank and the International Monetary Fund can quickly convert a quiet resting place for cash into quicksand.

The curbs on extracting money that are part of the rescue and reorganization of Cypriot banks has sent a message worldwide to be wary of offshore banking. The fact that the deposits were in a hard currency, the euro, was no protection either. So where can a plutocrat...