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Oligarch Yacht Hunting Is Energizing The Battle Against Financial Corruption

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The U.S.’s new task force, KleptoCapture, with the IRS and its global partners, is not only trying to bring down Russian oligarchs but pushing to overhaul an opaque, secretive financial system.


Last week, a court in the Pacific island nation of Fiji ordered local law enforcement to detain the 348-foot Amadea superyacht, a $325 million vessel, at the request of U.S. authorities seeking to seize the vessel. Amadea’s “suspected” or “reported” owner, according to various media reports, is Russian oligarch Suleiman Kerimov, the gold tycoon and Federation Council member sanctioned by the U.S. in 2018 for alleged money laundering and tax evasion in France (which he has denied, and for which he was never charged).

But is Kerimov actually Amadea’s 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 Amadea’s registered owner. Khudainatov is a close ally of Rosneft’s current boss, the sanctioned Igor Sechin, a longtime Putin pal.

Khudainatov was also linked to the 460-foot Scheherazade in a recent investigation by Italian newspaper La Stampa. But Scheherazade—one of the world’s largest yachts, worth an estimated $700 million—was also recently alleged to belong to Russian President Vladimir Putin himself, in a widely shared video published by Alexei Navalny’s Anti-Corruption Foundation in March. Italian financial police are investigating Scheherazade, which has been moored in a Tuscan port since September, but they have not seized it. “It is unclear whether the property is Putin’s or any other Russian oligarch’s because of the complicated company structure these individuals set up to shield their assets,” an anonymous Italian official reportedly told the Financial Times last month.

The murky ownership of shell companies has frustrated the U.S. and EU prosecutors tasked with investigating sanctioned Russian oligarchs. Two months into the war, Western authorities have successfully impounded and frozen many of the superyachts, private jets and luxury estates owned by individuals hit with sanctions. But an unknown number of luxury assets remain hidden by traceless corporations registered in accommodating jurisdictions. The anonymity afforded by shell companies also prevents Western authorities from hitting oligarchs where it hurts—asset forfeiture, or seizure.

“To block or freeze an asset, you just need to sanction, and the level of evidence needed there is fairly limited,” says Adam Smith, a sanctions lawyer formerly of the U.S. Treasury Department’s Office of Foreign Assets Control. “When you actually have to seize something, you need to demonstrate that there is a legal basis; that the asset is related to an underlying crime… The challenge is figuring out who owns what.”

With challenge comes opportunity. On March 2, the U.S. Department of Justice unveiled Task Force KleptoCapture, a law enforcement group dedicated to “seiz[ing] the assets of individuals and entities who violate” U.S. sanctions, according to Attorney General Merrick Garland. Andrew Adams, a federal prosecutor with experience leading organized crime and asset seizure cases, helms the task force, which is being run out of Deputy Attorney General Lisa Monaco’s office. It is getting an assist 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 Russian Elites, Proxies, and Oligarchs (REPO) task force, to coordinate intelligence and carry out asset seizures. (A spokesperson for Justice did not respond to Forbes’ requests for comment.)

Task forces’ laser-focus on Russian oligarchs has cast a bright spotlight on global financial corruption and the starring role played by anonymous shell companies. The problem is hardly limited to island nations. Switzerland and U.S. states like Wyoming and South Dakota make it easy for individuals to register anonymous companies, which can be used to conceal money laundering, tax evasion and other criminal activity. Advocates—sensing their moment—are pushing for oligarch yacht hunting to spur pro-transparency reforms around beneficial ownership.

“These task forces are positive initiatives. They could start as something to target Russian oligarchs, but ultimately we want transparency for all oligarchs and offshore wealth,” says Tommaso Faccio, head of secretariat for the Independent Commission for the Reform of International Corporate Taxation (ICRICT), a non-profit. That group—which includes prominent economists like Thomas Piketty and Joseph E. Stiglitz—has been advocating since 2019 for a Global Asset Registry, a sort of digital phone book listing of all registered corporate entities and their beneficial owners.

Italian Prime Minister Mario Draghi endorsed the idea for a global registry during a speech in early March: “The idea is to create a public international register of those with assets over 10 million euros.” There’s also momentum behind a (perhaps more feasible) European asset registry. The EU Tax Observatory, a research group at the Paris School of Economics, proposed that idea in March. It was quickly endorsed by the liberal Greens-EFA group, the European Parliament’s fourth-largest party.

In the United States—which ranks as the second most secretive country in the Tax Justice Network’s Financial Secrecy Index—lawmakers and government officials are moving to speed up reform efforts. House Financial Services Chair Maxine Waters (D-Calif.) is preparing to introduce oligarch-focused anti-corruption legislation, and Treasury’s Financial Crimes Enforcement Network is developing regulations targeting real estate money laundering, reports Politico. Congress passed provisions to ban anonymous shell companies and set up a beneficial ownership registry in January 2021, as part of the Defense appropriations bill; those efforts are now receiving renewed attention.

The hunt for oligarch-owned assets is not only boosting transparency reform efforts, but compelling law enforcement to prosecute broader financial corruption and white-collar crime, according to sanctions lawyers. That much was on display April 4, when Spanish authorities, working at the direction of U.S. investigators, seized Tango, a $90 million superyacht found to be owned by sanctioned Russian oligarch Victor Vekselberg. The seizure of Tango was the first asset forfeiture resulting from the KleptoCapture task force’s work.

In their 33-page seizure warrant, U.S prosecutors alleged that Vekselberg concealed his ownership of Tango through Arinter Management, Inc., a company registered in the Cook Islands. They say that Vekselberg—who was first sanctioned by the U.S. in 2018— committed U.S. bank fraud and money laundering to conceal his ownership of Tango, in addition to unlawfully evading sanctions. Vekselberg’s alleged criminal conspiracy, and its implications for the future of Western law enforcement’s hunt of ill-begotten assets, caught the attention of several sanctions lawyers who spoke with Forbes.

“I thought it was extraordinary,” says Ari Redbord, a former U.S. lawyer in the Treasury’s Office of Foreign Assets Control division, who now works at blockchain analytics firm TRM Labs. “This is 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 that he was engaged in over a period of time.’”

“It goes so much beyond the sanctions issue,” adds Viktor Winkler, an EU sanctions lawyer who was previously head of global sanctions standards at German banking giant Commerzbank AG. “It’s tremendous intelligence on money laundering, bank fraud and, so to speak, classic white-collar crime.”

The indictment of Vekselberg on non-sanctions-related crimes reflects the catch-22 facing sanctioned individuals’ use of shell companies. For sanctions against oligarchs to have their intended effect, U.S. and EU prosecutors need to seize their assets. But in order to seize those assets (rather than just temporarily freezing them), prosecutors need to tie the assets back to an instance of underlying criminal activity—which is what the U.S. 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 in a press conference. It’s not just words: the Internal Revenue Service’s Criminal Investigations division recently requested more funding, citing its work in 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 totally new era of prosecuting white-collar crime,” says Winkler. “The more you connect the task forces with more general and broad white-collar investigations, the better for all of us.”

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