In a far-flung conflict where Joe Biden has
pledged to refrain from military intervention, the United States has largely turned to
financial sanctions to exact punishment on Russia.
Those efforts have been centered on some of the wealthiest
Russians with ties to Vladimir Putin and the Kremlin — a group whose
connections have led to fortune and an opulent lifestyle directly targeted by
Biden.
As the nation’s intelligence
leaders gathered before lawmakers earlier this month to offer grim assessments
of Russia’s invasion of Ukraine, there was one topic that sparked both
impatience and excitement.
“Are we going to seize some
yachts?” Patrick Maloney asked FBI Director Christopher Wray.
“I mean, that sounds great. Are
we going to see some of the stuff taken out of their hands?”
“We are joining with our European allies to find and seize
your yachts, your luxury apartments, your private jets. We are coming for your
ill-begotten gains,” Biden said during his State of the Union address.
The Department of Justice the next day announced its
KleptoCapture task force to do just that.
But experts say the task force may not be able to
immediately deliver the wins — and the seizures — lawmakers are eager
for.
“It's a bit of the fascination with the luxury of asset
recovery, and what are in essence sort of the shiny exemplars of corruption,
excess, that can be symbols of sort of poetic justice or rightful retribution,”
said Juan Zarate, the first-ever assistant secretary of the Treasury for
terrorist financing and financial crimes under the George W. Bush
administration.
“But asset recovery is more than just the luxury items, and
it gets quite complicated,” added Zarate, who helped seize Saddam Hussein's
fleet of private jets and return them to Iraq.
Investigators are coming up against what’s designed to be a
complex labyrinth.
“These people are extremely savvy when it comes to
protecting their ill-gotten gains,” Dennis Lormel, a former special agent with
the FBI who served as chief of its financial crimes program, told The
Hill.
“They're going to circumvent controls, they're going to
circumvent the system, they are going to be as non-transparent as possible.”
Russia’s uber wealthy seldom directly own their vast
holdings, instead creating layers and layers of shell companies.
“Think of these situations as kind of an asset version of
Russian nesting dolls,” said David Laufman, who oversaw the enforcement of
sanctions at the Department of Justice during the Obama and Trump
administrations.
The result means lots of tracking down records from across
the globe and sifting through piles of paperwork to determine ownership.
Adding to the complication is that many holdings may be
owned by a trusted ally of the person being targeted.
“Russian oligarchs and elites have not openly held their
assets. They've held them through shell companies or nominees or proxies,” said
Sharon Cohen Levin, a partner with Sullivan & Cromwell who led the money
laundering and asset forfeiture unit of the US Attorney’s Office for the
Southern District of New York for two decades.
The combination makes it particularly difficult — not impossible,
but challenging — to unwind and understand the true owners of the property.
“The first challenge that KleptoCapture task force is going
to face is to be able to not just identify the yacht, but answer the question
who actually owns it? The fact that you’ve seen an oligarch on it doesn't
necessarily mean that it's their property,” she said — even if the oligarch
“named the yacht after their mother.”
While the wealth of oligarchs affords a number of luxuries —
high-rise penthouse apartments, private jets, even football clubs — yachts have
remained a top focus.
A Twitter account charting the movement of
oligarch-affiliated yachts created earlier this month has already climbed to
nearly 30,000 followers, while several news outlets have mapped the ports where
they are parked.
“Yachts are fancy playthings for very rich people,” Laufman
said, “They are symbolically representative of the kinds of vast wealth of
these oligarchs and create kind of a feel good ‘we got you’ moment for
governments that are participating in this coalition to counter Russia's
aggression.”
Some countries have already managed to commandeer yachts.
France earlier this month seized Amore Vero, a yacht believed to belong to Igor
Sechin, the head of oil giant Rosneft. Italian authorities have also seized at
least three such vessels.
But there are only so many oligarchs and so many yachts to
seize.
The number of those sanctioned by the US ballooned Thursday,
when the White House announced it would sanction another 400 individuals,
including 328 members of the Duma.
Of the smaller group of those initially sanctioned, however,
The Associated Press compiled a list of some 56 superyachts believed to be
owned by Russian oligarchs. Maps from a number of outlets show the vessels
scattered across the globe — with very few in US waters.
Laufman said the yacht fixation overlooks the vast amount of
wealth otherwise held by Russian elites.
“I’m not dumping on seizing yachts,” he said. “I’m a fan of
seizing yachts, but that’s not even the tip of the iceberg. That’s just two or
three snowflakes on the iceberg compared to the wealth that has likely been
squirreled away in accounts that may currently be evading the visibility of US
law enforcement or intelligence agencies.”
Once the task force identifies assets belonging to
sanctioned oligarchs it can freeze them, but to formally seize them they will
need to go to court.
The distinction may matter little to the public. Freezing an
asset — whether a bank account or boat — blocks its use, cutting off access to
a certain lifestyle.
US law also allows such a status in perpetuity, the reason
some Iranian assets have been frozen since the late 1970s.
But the formal seizure requires proving that the assets were
used in furtherance of a crime or gained through some form of corruption.
For Zarate, even attempting to seize those assets on the
basis of corruption is itself a mind shift.
“We are now judging all of this to be illegitimate or at
least worthy of seizure and investigation in a way that we haven't before,
right? It's not new that these oligarchs all owned yachts. Everyone knew this.
What's different is not just the invasion, but this conversion of an attitude
toward what those assets represent. And they represent the proceeds of illicit
or corrupt activity tied to the Russian economy and tied to the Kremlin,” he
said.
“That's the shift here that's happened both intentionally
and unintentionally.”
To make a case in court, however, Cohen Levin said DOJ’s
task force will need not just prosecutors and investigators but data analysts
and others that can do the hard work to help demonstrate that an asset is
indeed owned by an oligarch.
It’s a case that may have to be built on circumstantial
evidence.
“It's absolutely super complex for them,” Cohen Levin
said.
“What the
government's going to have to do is they're going to have to show — they're
going to have to prove by a preponderance of the evidence, that it's more
likely than not — that this person owns it. So they're going to have to say,
‘This Company is really owned by this company, which is owned by this company,
which is owned by this company, and then this person that runs it really works
for this Russian oligarch,’ ” she said.
Experts warned the process will ultimately take months. But
law enforcement officials did not seem deterred when questioned by lawmakers
watching with anticipation.
“Whatever we can lawfully seize,” Wray told Maloney, “we’re
gonna go after."
