Seizing Russian yachts is US goal. But it’s not easy
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?” Rep. Sean Patrick Maloney (D-N.Y.) asked FBI Director Christopher Wray.
“I mean, that sounds great. Are we going to see some of the stuff taken out of their hands?”
In a far-flung conflict where President Biden has pledged to refrain from military intervention, the U.S. 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.
“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’re 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 U.S. 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 U.S. 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 U.S. 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 U.S. 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.
U.S. 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 mindshift.
“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.”
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