As the war in Ukraine wears on, more Russian assets are now subject to seizure in the U.S., the U.K. and the EU, but finding them may be difficult. A former CIA agent, a former U.S. Treasury Department sanctions chief and a Pandora Papers investigative reporter discuss how to trace Russian assets, understand the widening sanctions regime and which sources may help. Transcript | Video
5 takeaways:
➀ Open-source investigations are easier than ever, ex-CIA officer says. Alex Finley, a former journalist and former officer of the CIA’s Directorate of Operations, is now publishing scoops about Russian oligarchs’ yachts under the hashtag #YachtWatch using open-source materials and on-the-ground reporting from the harbor in Barcelona, Spain. Her go-to websites are MarineTraffic.com and VesselFinder.com. MarineTraffic allows you to see any vessel on earth and build your own fleet of vessels you’d like to watch.
“I created a fleet of the Russian yachts, the ones that we think we know belong to certain oligarchs, and I can track where they are each day,” Finley said. A paid account offers information on ownership – but it’s highly obfuscated, she said. The listing is likely for the yacht management company, not the owner, but it is a thread to pull on to begin peeling away the layers of companies and who is running them. VesselFinder sometimes has more information, she said. Talking to the people who sell or service yachts and villas and their guests is invaluable, Finley said. “Oftentimes, people don’t realize that they have information or they don’t realize that the information they have is of value.”
➁ The U.S. government’s new sanctions enforcement program, Task Force KleptoCapture, is offering rewards for information. Journalists may qualify. Spencer Woodman, who reported on the Pandora Papers with the International Center for Investigative Journalism, recommends probing the corporate registries of countries and territories around the world, especially in tax havens – and most of the registries are available online. “It’s funny, on the one hand, places like Cyprus and the Isle of Man and the British Virgin Islands, these are secrecy jurisdictions that are hotspots for money laundering, and they’re very good places for people to move money, illicit money in a secret fashion,” he said. “On the other hand, they do have corporate filings.” For example, a shell company that has been active in Cyprus for a dozen years might have been less cautious in its early filings than after sanctions were imposed on Russians following the 2014 annexation of Crimea. “And a journalist, paying 10 euros for the file on that company, might be able to find someone who signed corporate documents back then,” who can be tracked down now, Woodman said. Besides corporate registries, journalists should check old news clippings, talk to registration agents, and check traditional open sources like stock market filings, customs records, court records, property records and lawsuits, he said.
➂ The U.S. sanctions regime has expanded greatly over the last 20 years. After 9/11, the U.S. focus was on halting the financing of weapons proliferation, said Juan C. Zarate, a former Treasury official responsible for those sanctions and now a global managing partner at K2 Integrity, a risk, compliance and investigations consultancy. That focus expanded to cases tied to rogue regimes and activity, then criminal groups, those responsible for malicious cyber activity, and finally, with the Global Magnitsky Act, to officials responsible for corruption and human rights abuses. At the same time, the global system to fight money laundering has also been expanding for the past 20 years. The Biden Administration’s strategy is a convergence of all these strategies for “maximalist financial sanctions to try to unplug and cripple the Russian economy,” targeting Russian Central Bank reserves and oligarchs and their assets and putting psychological pressure on Vladimir Putin and the Kremlin, he said.
➃ Understand the differences between asset seizure and asset forfeiture in your country. In the U.S., if someone is on the Treasury sanctions list, it is illegal to do business with them and their assets are ordered frozen. The next step is hunting down and recovering those assets and converting their ownership, which is the realm of civil and criminal authorities, Zarate said. “That’s more complicated because that generally requires more proof, there’s more process involved, there’s usually litigation or there could be litigation, different parties claiming, ‘Look, that’s my villa, that’s not that person’s villa. This is my yacht, it’s not their yacht,’” he said. But not all frozen assets are equal. For example, central bank assets tend to stay frozen in perpetuity, but can’t easily be converted to, say, relief funds for Ukraine, he explained. Ill-gotten gains that were used to purchase a yacht, villa, bank account or shell company can be converted, and there will be pressure in the U.S. and Europe to put them into an escrow account for victims of Russian aggression. Attorney General Merrick Garland told Congress that Russian oligarch money should go directly to Ukraine, but the legal structures to allow that are not yet in place.
➄ The art world is a rich and under-covered target for investigative reporting on money laundering and Russian assets. Freeports, where art treasures, including works of murky provenance, are stored in vast warehouses never to be seen by the public, are worth investigating, Woodman suggested. The art in these vaults has become an asset to be traded with little public scrutiny, he said. “And they’re traded just like any financial asset and that actual tangible thing isn’t moving physically,” he explained. “It’s just being treated in essentially digital finance between shell companies while it’s sitting in a vault.” Freeports have “been pretty hard to crack for journalists. And I know that U.S. authorities have also had a lot of trouble with illicit activity and money laundering in the art trade.”
Zarate agreed that the freeports have been “a bit of a black box in the international system,” but can be investigated through the holdings of specific oligarchs or their shell companies and can be prosecuted if they are using artwork to launder money or store illicit capital.
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