Secret Documents Show It’s Not Going To Be Easy To Seize Russian Oligarchs’ Money

As the US takes aim at Putin’s inner circle, the FinCEN Files show how easily Russian billionaires have been able to game the system of financial regulations.

BuzzFeed News; Getty Images

Russian President Vladimir Putin with Arkady Rotenberg (top), Alisher Usmanov (bottom left), and Oleg Deripaska (bottom right).

As part of the sweeping financial repercussions of Russia’s invasion of Ukraine, the White House last week announced it would launch a transatlantic task force to “detect and disrupt” the billions of dollars that Russia’s sanctioned oligarchs and political leaders stash in the West.

But secret documents obtained by BuzzFeed News show how unsuccessful the US has previously been at tracking their wealth, and how great a challenge Biden’s task force faces as it commits to enforcing the rules. These documents, known as suspicious activity reports, or SARs, offer abundant evidence that Russian oligarchs hide their ownership of companies, aircraft, homes, and yachts, moving their money into and out of prestigious financial institutions in New York, London, and Paris with few questions asked.

Mikhail Svetlov / Getty Images

Left: Usmanov; right: Deripaska

American and European authorities say billionaires Alisher Usmanov and Oleg Deripaska act as proxies for the Kremlin and maintain close ties to Russian President Vladimir Putin. As a result, banks are supposed to subject their financial transactions to special scrutiny. But the British bank Standard Chartered discovered in 2017 that Usmanov was able to send $2.5 million to a steel company in the United Arab Emirates by routing it through his sister, an obstetrician. In 2014, Deripaska’s company sought a line of credit from Citibank and listed his office manager in New York as the company’s owner.

SARs, which banks file to the Treasury Department’s Financial Crimes Enforcement Network, commonly known as FinCEN, to flag possible criminal activity, were designed to be a crucial tool in the fight against money laundering. (The documents are never supposed to come into public view, but Natalie Mayflower Sours Edwards, a whistleblower who at the time was a senior FinCEN official, gave BuzzFeed News more than 2,100 of them after her efforts to raise concerns about a wide range of issues through official channels failed.) To avoid running afoul of regulations, however, banks flood FinCEN with a vast number of alerts, knowing that few will ever be read, let alone investigated. Then, despite their stated concerns, the banks in most cases just wave the money along.

Although they are supposed to scrutinize anonymous shell companies to establish who is behind them and why they are conducting transactions, banks often fail to do even basic background checks on their clients.

Alexander Nemenov / AFP via Getty Images

Putin decorates Rotenberg on March 18, 2020.

When a company called Ayrton Development Limited opened an account with Barclays UK Wealth, it didn’t mention its owner was Arkady Rotenberg, a billionaire construction magnate and close friend of Putin’s.

At the time, the US had banned Rotenberg from sending money into its financial system because of his alleged role in the 2014 annexation of Crimea in southern Ukraine. But Ayrton Development was able to send or receive 40 wire transfers for $2.5 million before Barclays alerted the Treasury Department.

It is difficult to identify the oligarchs’ holdings “precisely because of the anonymous companies, or the ways in which investments can be made in advanced economies without any kind of true disclosure, transparency,” said Gary Kalman, director of the US office of Transparency International, which tracks global corruption.

In the hunt for Russian billions, the wealth of Putin himself may be the ultimate quarry. The documents show that FinCEN has been trying to track Putin’s assets for years. One of the groups inside the agency’s intelligence unit is tasked with doing research about how people close to the Russian president are moving funds around the globe. They publish some of their conclusions in a bulletin called Kleptocracy Weekly, which is disseminated to law enforcement agencies.

Kalman noted that some of what the world knows about oligarchs’ wealth has come as a result of “exposés, like the FinCEN Files, the Pandora Papers, Panama Papers, etc., but there’s a lot that we probably don’t know about.”

It was only after the publication of the Panama Papers, an investigation by the International Consortium of Investigative Journalists, that Société Génerale, a French bank, said it learned that the ultimate recipient of $185 million in payments it had processed — on behalf of shell companies owned by Rotenberg — was a firm controlled by a close associate of Putin’s.

None of the individuals involved in these transactions responded to questions from BuzzFeed News.

The White House did not explain how the new task force will work, but it expects the UK, France, Germany, Italy, and Canada to contribute. Separately, the Justice Department set up its own task force called KleptoCapture. Attorney General Merrick Garland announced this morning that he has marshaled prosecutors, law enforcement agents, and analysts from at least six federal agencies to find and seize assets of those who violate sanctions.

“To those bolstering the Russian regime through corruption and sanctions evasion: we will deprive you of safe haven and hold you accountable,” said Deputy Attorney General Lisa Monaco, who will oversee the task force. “Oligarchs be warned: we will use every tool to freeze and seize your criminal proceeds.”

A spokesperson for the White House’s National Security Council told BuzzFeed News the transatlantic task force will target “Russian officials and elites close to the Russian government, as well as their families and their enablers, to identify and freeze the assets they hold in our jurisdictions.”

It is not clear how either task force will go about identifying these assets or how its approach will differ from that of the many groups already charged with stopping financial crimes. One such entity is the Egmont Group, a little-known coalition of financial intelligence units from more than 160 countries and territories that facilitates the sharing of data and intelligence. Another is the Financial Action Task Force, a group of countries that sets standards to investigate things like money laundering or terror financing.

Experts told BuzzFeed News that pulling back the veil on the true ownership of shell companies, yachts, real estate, and other assets of the Russian financial elite is enormously complicated. Banks, which are meant to be the first line of defense, may be constrained by local secrecy laws. The US government has more options, but to find out who truly owns an anonymous shell company, it often has to go to the source — Russia — for more information.

“Even if law enforcement authorities in the US, the UK want to go seek that information,” said Jack Margolin, a program director at the Center for Advanced Defense Studies in Washington, DC, “that is going to slow down the process tremendously because it’s possible that they’re going to have to either engage with the jurisdiction in question through mutual legal assistance, or they’re going to have to basically go to court.” ●

  • Anthony Cormier

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