1669292996 Social

U.S. Prosecutors Target Russian Assets, but Legal Hurdles Loom

WASHINGTON—Federal prosecutors have issued a stream of subpoenas in recent months in an effort to uncover Russian oligarchs’ assets stashed in the U.S., laying the groundwork for seizing real estate, cash accounts and trust funds, people familiar with the matter say. familiar with the matter.

Many of the subpoenas seek business, bank and trust records that they say will help prosecutors cut through layers of complex ownership structures meant to disguise oligarchs’ holdings.

The action across several federal courts, including in New York and Houston, is part of a broad Western effort to force Russia to pull out of Ukraine and find new sources of funding for Ukraine’s war effort and eventual reconstruction.

Since February, Western authorities have frozen more than $330 billion in Russian assets, Western officials say. About $300 billion of that is reserves held by Russia’s central bank in foreign bank accounts. Much of the rest includes oligarchs’ companies, bank accounts, trusts, yachts, jets, real estate and jewelry.

But administration officials run into a forest of investigative and legal problems, from finding assets hidden by sophisticated lawyers, accountants and financial planners, to seizing and handing them over to Kiev. Seizure transfers ownership of assets to the government, while freezing only blocks the owner’s use of them.

Russia’s Oligarchs: Lifestyles of the Rich and Sanctioned

The administration has asked Congress to pass legislation expanding its authority to seize Russian assets and to establish a legal channel to send captured funds to Ukraine. The European Commission has proposed similar legal changes.

“We have no dedicated mechanism to transfer the proceeds of seized oligarch assets to the Ukrainian people,” Sen. Sheldon Whitehouse, a Rhode Island Democratic member of the Senate Judiciary Committee who is sponsoring a bill to address the issue, said in a September Senate. Bench Committee Hearing.

While the U.S. effort has bipartisan support, some lawmakers said Congress should take a closer look at the measures and their potential legal impact.

The European Commission, the Ukrainian government and the World Bank recently said that the current cost of reconstruction and recovery in Ukraine stands at $349 billion and is likely to grow in the coming months. Western officials have said the effort to rebuild Ukraine could take generations, while Kiev has stepped up its requests for economic and military support.

To help cover these costs, the US and its allies launched what they called the Russian Elites, Proxies and Oligarchs, or REPO, to track down assets they say represent ill-gotten gains that help President Vladimir Putin’s regime support.

Im 671931

Sen. Sheldon Whitehouse, a Rhode Island Democrat, is sponsoring a bill to expand the US government’s authority to seize Russian assets.


Photo:

EVELYN HOCKSTEIN/REUTERS

“Governments are starting to get nervous about increasing demands on their budgets,” said Camino Mortera-Martinez, head of the Brussels office at the Center for European Reform, a London-based think tank.

US officials say among the many challenges in expropriating oligarchs’ assets for rebuilding in Ukraine is just finding the property in the first place.

Oligarchs transfer assets out of their direct ownership and control into trusts, to family members and associates, or in shares held in shell companies in various jurisdictions, said Cari Stinebower, a former senior official at the US Treasury Department’s Office of Foreign Affairs. asset management, said.

SHARE YOUR THOUGHTS

What impact will sanctions have on Russian oligarchs? Join the conversation below.

Andrew Adams, the head of the Justice Department’s KleptoCapture task force, which issued the subpoenas, said simply tracing the assets could take years of investigation.

“The difficulties of conducting transnational investigations, of piercing often opaque jurisdictions that have an interest in concealing, or providing a haven for those who would conceal illegal activity, is a difficult task,” he said in the September hearing said.

The U.S. Treasury Department has introduced a series of new anti-money laundering rules that could help track down those assets, including requiring companies to disclose the identities of their owners and expanding property reporting requirements for cash transactions in several metropolitan areas.

Im 671938

Western officials estimate that the cost of rebuilding Ukraine after Russian attacks like this one in Mykolaiv this month will reach at least $349 billion.


Photo:

Virginie NGUYEN HOANG for The Wall Street Journal

Some industry analysts and former officials say that may not be enough. The ownership reporting rules—which don’t take effect until 2024—do not include some investment vehicles or require the ultimate beneficiaries of trusts to be named, only trustees.

Current US law provides limited authority to seize the frozen assets, officials say.

For the US to expropriate the $300 billion in Russian central bank reserves held in offshore accounts, Congress would have to pass a new law, Western officials say. Some Western authorities say they are wary of setting a precedent that would violate long-standing international monetary principles.

In the absence of statutory authority, courts may question prosecutors’ legal basis for seizing oligarchs’ assets, Ms. Stinebower, now with the law firm Winston & Strawn, said.

“Moving from frozen assets to forfeited assets is challenging,” Elizabeth Rosenberg, assistant US Treasury secretary for financial crimes, said at the September hearing.

And considering the scale of Ukraine’s needs, it’s not clear that all the yachts, expensive apartments and houses, securities and other possessions would do much.

“Confiscating the assets of Putin’s elite would be a fraught process — and not profitable enough to make a big dent in Ukraine’s reconstruction bill,” Ms. Mortera-Martinez said.

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Related Posts