US prosecutions of Russian oligarchs focus on assets, associates

Consider the voyage of a US probe into a yacht named Tango and its owner, a Russian billionaire.

The 255-foot vessel, worth an estimated $90 million, was designed and built for Viktor Vekselberg, who has been sanctioned by the US since 2018. The Tango was seized last spring off the coast of Mallorca pursuant to a US warrant. Early this year, the US also indicted a British man and a Russian businessman for keeping the yacht operating in the time since Vekselberg was designated. The British man allegedly used the false name “Fanta” for the yacht to hide the US-dollar payments made for its benefit.

The Tango is still moored off Mallorca, according to vessel tracking services.

US investigations of sanctioned Russian oligarchs in the year since Moscow began its invasion of Ukraine have taken this network-style approach, primarily going after their assets and associates, according to a review of cases by MLex.

Scrutiny of Vekselberg’s real estate in New York and Florida took a similar path. After raids in the fall, his close friend Vladimir Voronchenko, who had managed the properties and even lived in a couple of them, was charged this month with money laundering, sanctions violations and contempt of court after he allegedly fled a grand jury subpoena. And today, the US filed a civil forfeiture complaint to seize the properties.*

The US and dozens of other countries have imposed sweeping sanctions on Russia since its troops entered Ukraine the morning of Feb. 24, 2022. The sanctions have targeted major sectors of the Russian economy, oligarchs with vast corporate empires, and other key facilitators. They have levied additional measures as well, such as export restrictions, import bans and a cap on the price of Russian oil. More were announced today.

The sanctions have created challenges for Russia but not delivered a knockout blow to its economy, according to a December Congressional Research Service report. But in a speech this week, Deputy US Treasury Secretary Wally Adeyemo said the US and its allies are planning to “launch a renewed effort” to enforce measures already in place.

“We will use all of our economic tools to give countries, companies and individuals a choice: to do business with a coalition representing half of the global economy, or to provide material support to Russia,” Adeyemo said. “Officials from the US and the governments of our coalition partners are also engaging with companies and banks in these jurisdictions to tell them directly that if they do not enforce our sanctions and export controls, we will cut them off from access to our markets and financial systems.”

KleptoCapture

Prosecutions in the US, including against Vekselberg’s associates, are being coordinated by Task Force KleptoCapture, an interagency panel set up in the wake of the invasion to enforce the sanctions, export controls and other economic measures. "Strawmen, corrupt professionals, and shell companies may be the hallmarks of money laundering and sanctions evasion, but they are obstacles that diligent, dedicated investigators and prosecutors will surmount," said Andrew C. Adams, director of the task force, in a statement today about the forfeiture of Vekselberg's property.

The task force notched its first major win this month when a US judge ordered the forfeiture of $5.3 million belonging to Konstanin Malofeyev. He had sought the help of an associate to transfer the funds, held in a Texas bank, to a Greek business partner, according to a complaint. In response to the forfeiture order, Malofeyev accused the US of stealing his money and vowed to sue in Russian court.

Malofeyev was charged in April 2022 with sanctions violations and, weeks later, the US expanded its existing designation to cover his “vast global network,” including companies around the world and a pro-Russia propaganda influence operation. The indictment of Malofeyev followed charges filed against his American employee, a former Fox News producer.

The task force has handled multiple other investigations, including the seizure of a $300 million yacht in Fiji owned by another Russian oligarch, as well as a complex case involving a German front company allegedly used to smuggle Venezuelan oil and to export US-origin components to the Russian defense sector.

“The sweeping reach of the task force and the US government’s corresponding enforcement priorities — particularly the focus on procurement networks and facilitators — underscore the risk to companies that fail to maintain adequate compliance and screening programs,” the law firm DLA Piper said in a client note. “The risk is especially high for companies active in the electronics, security, aerospace, energy, transportation and defense sectors currently being targeted by Russia-based procurement networks.”

But perhaps the task force’s highest profile investigation involves the network of Russian billionaire Oleg Deripaska, a man the US has cited as saying he doesn’t separate himself from the Russian state.

Deripaska, who was sanctioned in 2018, fought his listing to the US Supreme Court, which in October 2022 refused to hear his case.

Days before the Supreme Court denial, though, Deripaska was indicted on sanctions evasion charges.

The case against Deripaska focused on his use of facilitators, who were also charged, including for allegedly managing his girlfriend’s travel to the US to give birth to his child so the baby could obtain US birthright citizenship.

The sprawling US investigation of Deripaska has ensnared others as well: A UK man was charged with violating sanctions for managing Deripaska’s real estate in the US and UK and attempting to transfer his artwork by misrepresenting its ownership.

And last month, the US indicted a former FBI counterintelligence chief and a court interpreter, alleging they conspired to provide services to Deripaska in violation of sanctions, including through an effort to investigate a rival oligarch on his behalf.

In electronic communications, according to the indictment against the FBI official and the court interpreter, they did not name Deripaska, but rather referred to him using labels such as “the big guy” or “the client.”

* Updated on Feb. 24, 2023 at 16:00 GMT: Adds information about today's civil forfeiture complaint against Vekselberg's properties.