The new US task force, KleptoCapure, along with the IRS and its global partners, is not only trying to bring down the Russian oligarchs, but pushing to overhaul an opaque and secretive financial system.
Last week, a court in the Pacific island nation of Fiji ordered local law enforcement to detain the 348ft Amedee superyacht, a $325 million vessel, at the request of US authorities seeking to seize the ship. by Amadea The ‘alleged’ or ‘reported’ owner, according to various media outlets, is Russian oligarch Suleiman Kerimov, the gold magnate and Federation Council member sanctioned by the US in 2018 over money laundering allegations. money and tax evasion in France (which he denied, and for which he was never charged).
But is Kerimov really Amedeeis the owner? According to ship tracker VesselsValue, Eduard Khudainatov, the former CEO of state oil giant Rosneft, is the beneficial owner of Nereo Management Ltd, the Isle of Man-based company that is Amedeeis the registered owner. Khudainatov is a close ally of current Rosneft boss, sanctioned Igor Sechin, a longtime friend of Putin.
Khudainatov was also linked with the 460ft Scheherazade in a recent investigation by an Italian newspaper La Stampa. But Scheherazade– one of the largest yachts in the world, worth an estimated $700 million – was also recently accused of belonging to Russian President Vladimir Putin himself, in a widely shared video released by the Anti-Corruption Foundation. corruption of Alexei Navalny in March. Italian financial police are investigating Scheherazade, moored in a Tuscan port since September, but they did not seize it. “It’s unclear if the property belongs to Putin or any other Russian oligarch due to the complicated corporate structure these individuals have put in place to protect their assets,” an unnamed Italian official reportedly told Reuters. FinancialTimes last month.
The obscure ownership of front companies has frustrated US and European prosecutors charged with investigating sanctioned Russian oligarchs. Two months into the war, Western authorities have successfully seized and frozen scores of superyachts, private jets and luxury properties belonging to sanctioned individuals. But an unknown number of luxury assets remain hidden by untraceable companies registered in accommodating jurisdictions. The anonymity offered by shell companies also prevents Western authorities from hitting the oligarchs where it hurts – asset confiscation or seizure.
“To freeze or freeze an asset, all you have to do is sanction, and the level of proof needed is quite limited,” says Adam Smith, a sanctions attorney and a former member of the US Treasury Department’s Office of Foreign Assets Control. “When you actually have to seize something, you have to demonstrate that there is a legal basis; that the asset is linked to an underlying crime… The challenge is to determine who owns what.
With challenge comes opportunity. On March 2, the United States Department of Justice unveiled Task Force KleptoCapture, a law enforcement group dedicated to the “seizure[ing] the assets of individuals and entities that violate” US sanctions, according to Attorney General Merrick Garland. Andrew Adams, a federal prosecutor with experience leading organized crime and asset seizure cases, leads the task force, which is led by the office of Deputy Attorney General Lisa Monaco. He receives help from the IRS Criminal Investigation Unit, which has already been involved in more than 20 investigations since 2017 directly related to illicit money laundering by oligarchs.
KleptoCapture and its international partners have also launched the Multilateral Task Force on Russian Elites, Proxies and Oligarchs (REPO), to coordinate intelligence and conduct asset seizures. (A Justice spokesperson did not respond to Forbes’ requests for comments.)
The task forces’ laser focus on Russian oligarchs has shed light on global financial corruption and the primary role played by anonymous front companies. The problem is not limited to island nations. Switzerland and US states like Wyoming and South Dakota allow individuals to easily register anonymous corporations, which can be used to conceal money laundering, tax evasion and other criminal activity. Advocates – sensing their moment – are pushing for the yacht hunt of oligarchs to spur reforms for transparency around beneficial ownership.
“These working groups are positive initiatives. They might start as something to target Russian oligarchs, but ultimately we want transparency for all oligarchs and offshore wealth,” says Tommaso Faccio, head of the secretariat of the Independent Commission for International Tax Reform. of Enterprises (ICRICT), a non-profit organization. This group – which includes prominent economists like Thomas Piketty and Joseph E. Stiglitz – has been advocating since 2019 for a global asset registry, a kind of digital telephone directory listing all registered legal entities and their beneficial owners.
Italian Prime Minister Mario Draghi endorsed the idea of a global registry during a speech in early March: “The idea is to create a public international registry of people with assets over 10 million euros.” There is also momentum behind a (perhaps more feasible) European asset register. The EU Tax Observatory, a research group at the Paris School of Economics, proposed the idea in March. It was quickly approved by the liberal Greens-ALE group, the fourth party in the European Parliament.
In the United States, which ranks second among the most secretive countries in the Tax Justice Network’s Financial Secrecy Index, lawmakers and government officials are working to accelerate reform efforts. House Financial Services Speaker Maxine Waters (D-California) prepares to introduce anti-corruption legislation focused on oligarchs, and Treasury’s Financial Crimes Network is drafting regulations targeting money laundering real estate money, yields Politics. Congress passed provisions to ban anonymous front companies and implement a registry of beneficial owners in January 2021, as part of the Defense Appropriations Bill; these efforts are now receiving renewed attention.
The hunt for assets owned by oligarchs not only spurs transparency reform efforts, but forces law enforcement to prosecute financial corruption and white-collar crime more broadly, sanctions lawyers say. All of this was exposed on April 4, when Spanish authorities, working under the direction of American investigators, seized Tango, a $90 million superyacht owned by sanctioned Russian oligarch Victor Vekselberg. The entry of Tango was the first asset forfeiture resulting from the work of the KleptoCapture Task Force.
In their 33-page seizure warrant, US prosecutors alleged that Vekselberg concealed his property from Tango through Arinter Management, Inc., a company registered in the Cook Islands. They say Vekselberg – who was first sanctioned by the US in 2018 – committed US bank fraud and money laundering to conceal his ownership of Tango, in addition to illegally evading sanctions. Vekselberg’s alleged criminal plot and its implications for the future of Western law enforcement’s hunt for ill-gotten assets caught the attention of several sanctions lawyers who spoke with Forbes.
“I thought that was extraordinary,” says Ari Redbord, a former U.S. attorney in the Treasury’s Office of Foreign Assets Control division, who now works for blockchain analytics firm TRM Labs. “It’s not just, ‘Here’s a Russian oligarch and here’s the sanctions designation.’ It’s, “Here’s a Russian oligarch and here’s the money laundering conspiracy he’s been engaged in for a while.”
“It goes far beyond the issue of sanctions,” adds Viktor Winkler, an EU sanctions lawyer who was previously responsible for global sanctions standards at German banking giant Commerzbank AG. “It’s terrific intelligence on money laundering, bank fraud and, so to speak, classic white-collar crime.”
The indictment of Vekselberg for non-sanctions crimes reflects the trap of using shell companies by sanctioned individuals. For the sanctions against the oligarchs to have the desired effect, US and European prosecutors must seize their assets. But to seize those assets (rather than temporarily freeze them), prosecutors must tie the assets to a case of underlying criminal activity — which is what US KleptoCapture did in the case of Tango.
the Tango seizure “will not be the last” seizure of assets belonging to sanctioned oligarchs, Attorney General Merrick Garland promised at a press conference. It’s not just words: The Internal Revenue Service’s Criminal Investigations Division recently requested more funding, citing its work investigating sanctioned oligarchs and similar white-collar criminals.
“The task forces mean so much, and not just in the context of sanctions. They could lead to a whole new era of prosecuting white-collar crimes,” Winkler says. “The more you connect task forces to more general and broader white-collar investigations, the better it is for all of us.”