The U.S. government was so pleased with its quick seizure of a 255-foot yacht by a Russian oligarch on the Mediterranean island of Mallorca last month that it posted a video on YouTube as FBI agents and Spanish authorities climbed the ladder. The $ 90 million yacht, owned by Victor Vekselberg, called Tango, was the government’s first major award in a campaign against billionaires with close ties to the Kremlin.
Tango is just a fraction of the $ 1 billion in yachts, planes and works of art – not to mention hundreds of millions in cash – that the United States has identified as belonging to wealthy allies of Russian President Vladimir Putin since Ukraine’s invasion. U.S. Magistrate Judge Zia M. Farooqi, who approved the seizure, called the pursuit of the yacht by a new Justice Department team, calling the kleptcapture task force “just the beginning of the retribution that awaits those who would facilitate Putin’s atrocities.”
The calculation may take some time.
Confiscating assets, whether a yacht or a bank account, is the easy part. To confiscate them forever, the government usually has to go through a potentially cumbersome process, known as civil confiscation, which requires proving to a judge that the assets were obtained from the proceeds of crime or money laundering. Only then does the government actually own the assets and have the power to liquidate them.
All of this can take years, especially if the former owner is willing to fight a foreclosure lawsuit.
Hoping to speed things up – and quickly receive proceeds from confiscated assets handed over to the Ukrainian government – the White House announced a plan last week that would make it easier for US authorities to prosecute some of the oligarch’s assets through an administrative procedure led by the Treasury Department. Although he did not provide details of his plan, administration officials said the new procedure would ensure an adequate due process and allow for an “accelerated” review by a federal court.
The White House proposal would significantly change the way the government handles the confiscation of high-value dollar assets. In general, administrative foreclosures are used in lower-profile cases for assets worth $ 500,000 or less. Such efforts are not really meant for luxury homes or massive yachts, let alone the huge sums of money that wealthy Russians are believed to have hidden in US bank accounts or invested in hedge funds and private equity companies.
“The idea of a yacht or plane valued at hundreds of millions seized and liquidated administratively is new territory,” said Franklin Monsour Jr., a former Orik federal prosecutor and lawyer in New York.
Mr Monsour said the administration and Congress could argue that many Russian oligarchs would not oppose a new, accelerated process because it would risk falling under US jurisdiction.
“It will probably be no challenge,” he said. “And the government knows that.”
Even if prosecutors are forced to continue in some cases through the more typical civil confiscation process, the trial may go faster than normal for the same reason, Mr Monsour said.
There are indications that the rate of seizures is increasing. Prosecutors said on Thursday that Fiji authorities working with the task force had seized a $ 300 million megayacht belonging to Suleiman Kerimov, a Russian gold tycoon. But as a sign that the working group may in some cases be reluctant to reveal its trades in asset tracking, the 24-page affidavit presented to a federal judge in support of the confiscation has been heavily edited.
The more expensive assets the government seizes, the more reason there is to speed up the confiscation process: luxury properties must be properly maintained, otherwise their value will fall before they can be sold to someone else in the small set of people who can afford them.
“For yachts sinking in ports, there will be money spent on vehicle maintenance,” said Daniel Tanebaum, a financial crime expert at consulting firm Oliver Wyman and a former Treasury Department official. “Some of these assets can last an extremely long time.”
But US authorities are trying to do more than deprive the oligarchs of their valuable possessions. Elizabeth Rosenberg, assistant secretary for finance of terrorism and financial crime at the Ministry of Finance, said one of the goals was to “undermine the financial architecture that Russia uses to move money.”
Over the years, Russia and its oligarchs have become able to use a parade of front companies in places like the British Virgin Islands to transfer money from Cyprus to the Cayman Islands to Jersey, the Channel Islands, all places with a history seen by investors as tax havens. The working group will look for evidence of oligarchs taking steps to illegally evade sanctions by secretly transferring money and property to an unauthorized person or business entity.
Last month alone, federal prosecutors in Manhattan filed criminal charges against Konstantin Malofeev for illegally transferring $ 10 million from a US bank to a business partner in Greece. Mr Malofeev, who recently described Russia’s invasion of Ukraine as a “holy war”, was sanctioned by the Finance Ministry in 2014 following Russia’s invasion of Crimea, part of Ukraine, which it eventually annexed. .
In October, federal agents raided a mansion owned by Russian billionaire Oleg Deripaska in Washington and seized a wide range of assets, including a painting by Diego Rivera. Authorities have responded to suspicions that Mr Deripaska tried to evade sanctions by moving some of his money, Bloomberg reported last month.
US authorities are pursuing assets belonging to Mr Deripaska, an industrialist with close ties to Mr Putin, following a sanctions order in 2018, which was partly in response to Russia’s interference in the 2016 presidential election. Mr Deripaska later filed a lawsuit against the US government, alleging that the sanctions were based on rumors and made him “radioactive” in the business community. Six weeks ago, a federal appeals court rejected his claims.
The Russia-Ukraine war and the global economy
Map 1 of 7
Extensive conflict. Russia’s invasion of Ukraine has had a ripple effect around the world, adding to stock market problems. The conflict has sparked dizzying spikes in gas prices and food shortages, prompting Europe to rethink its dependence on Russian energy sources.
Global growth is slowing. The aftermath of the war has thwarted major economies’ efforts to recover from the pandemic, creating new uncertainty and undermining economic confidence around the world. In the United States, inflation-adjusted gross domestic product fell 0.4% in the first quarter of 2022.
Russia’s economy is facing a slowdown. Although pro-Ukrainian countries continue to impose sanctions on the Kremlin in response to its aggression, Russia’s economy has so far avoided a crippling collapse thanks to capital controls and rising interest rates. But the head of Russia’s central bank has warned that the country is likely to face a sharp economic downturn as its inventories of imported goods and parts dwindle.
Trade barriers are rising. The invasion of Ukraine has also unleashed a wave of protectionism as governments, desperate to provide goods for their citizens amid shortages and rising prices, raise new barriers to stopping exports. But restrictions make products more expensive and even harder to find.
Prices of base metals are rising. The price of palladium, used in car exhaust systems and mobile phones, is rising amid fears that Russia, the world’s largest metal exporter, could be cut off from world markets. The price of nickel, another key Russian export, is also rising.
Since Russian forces invaded Ukraine in February, the finance ministry has imposed sanctions on more than 530 well-connected Russians. Andrew Adams, the federal prosecutor in charge of the new klepto-capture task force, said much of his team’s early work involved “unprecedented” sharing of information about these individuals with US financial firms, Treasury officials and foreign law enforcement groups.
Even without seizing an asset, the task force can make it difficult for the owner to use it, said Mr Adams, a veteran federal prosecutor in Manhattan who focuses on money laundering and asset forfeiture.
“In the past, I thought victory was a condemnation,” Mr Adams said. “Now an insurance company can be forced to cancel the cover of an oligarch’s yacht policy.
Although it is possible for the government to confiscate assets as part of a criminal case, Mr Adams said, it is unlikely that the government will take this path. This will require the arrest and conviction of their owners – an even more intimidating process than the civil process or the accelerated administrative procedure that the White House is considering.
But even the process of civil confiscation requires the government to show evidence of criminal behavior.
Approving the confiscation of Tango, Judge Farooki said that the federal authorities had shown a probable reason why Mr Vekselberg had bought the yacht – held through a series of fictitious companies – with “illegal proceeds and money laundering”. The permanent confiscation will require prosecutors to establish that Mr Vekselberg has in fact committed bank fraud, money laundering or any other crime.
Although the United States imposed sanctions on wealthy Russians soon after the invasion, global efforts to seize their assets took place mostly in Europe and the Caribbean.
The European Union has frozen about $ 30 billion in assets traced to Russian oligarchs since February. A few weeks ago, British officials said they had frozen assets worth about $ 13 billion …
Add Comment