Back in March, DOJ launched Task Force KleptoCapture and, with the Treasury Department, announced a multilateral partnership to identify and seize assets of sanctioned individuals and companies around the world. The past few weeks have shown those initiatives at work.
On April 4, Task Force KleptoCapture got the green light to make its first international seizure. In a ruling that may offer a legal framework for Task Force KleptoCapture, a DC federal magistrate judge signed a seizure order for sanctioned Russian oligarch Viktor Vekselberg's $90 million, 255-foot yacht located in Spain's Balearic Islands. The seizure warrant detailed Vekselberg and his associates' use of shell companies to transfer US dollar payments through US banks to support and maintain the yacht. The order explained the basis for US jurisdiction to seize the property and for venue to issue the seizure warrant in the District of Columbia. The order further explained that the US government did not need a search warrant to search the documents, electronics, and items located on the yacht because the Fourth Amendment does not apply to property owned by a nonresident alien located in a foreign country. Finally, it held that forfeiture of the yacht would not violate the Excessive Fines Clause of the Eighth Amendment.
Meanwhile, European authorities have moved aggressively on asset seizures. For example, the Dutch finance ministry froze over $428 million in transactions and deposits in March. Italian law enforcement has seized physical assets, including at least three yachts and villas worth over $863 million. German law enforcement has seized at least one mega yacht. Spanish law enforcement has seized at least three luxury yachts linked to sanctioned individuals. Switzerland froze $6.2 billion in bank accounts. French law enforcement has seized at least one yacht, a cargo ship, and approximately 33 homes, including a $120 million French Riviera mansion and a dozen other French properties owned by Russian oligarch Roman Abramovich. The French Ministry of Culture also seized two Russian paintings that were recently featured at Paris's Fondation Louis Vuitton: one piece is on loan from a Russian museum but ultimately belongs to a sanctioned Russian oligarch, and the other piece belongs to Dnipro Fine Arts Museum in Ukraine and was seized at the request of Ukrainian authorities. Moreover, Belgium has frozen nearly $2.9 billion in bank accounts and $7.8 billion in transactions.
These seizures frequently implicate not only the sanctioned individuals and entities but also a variety of third parties that may have interests in the assets.
On April 14, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) released an Advisory on Kleptocracy and Foreign Public Corruption, "urg[ing] financial institutions to focus efforts on detecting the proceeds of foreign public corruption, a priority for the U.S. government." FinCEN observed that "Russia's actions in Ukraine are supported and enabled by Russia's elites and oligarchs who control a majority of Russia's economic interests . . . [and who] are believed to be directly financing off-budget projects that include political malign influence operations and armed interventions abroad." The advisory describes various methods used by kleptocrats to launder their illicit proceeds, including by using "shell companies to obscure the ownership and origin of illicit funds" and the purchase of real estate, luxury goods, and other high-value assets. FinCEN also reminded financial institutions of relevant Bank Secrecy Act (BSA) obligations and tools, such as Suspicious Activity Reports (SARs), due diligence on senior foreign political figures, private banking accounts held for non-US persons, correspondent accounts, and information sharing under Section 314(b) of the USA PATRIOT Act.
New Sanctions Designations and Prosecution for Evading Sanctions
On April 20, the Treasury Department's Office of Foreign Assets Control (OFAC) sanctioned several individuals and entities "involved in attempts to evade sanctions imposed by the United States and its international partners on Russia." OFAC announced that the list includes the first ever designation of a virtual currency mining company (BitRiver), a Russian bank (Public Joint Stock Company Transkapitalbank), and Russian oligarch Konstantin Malofeyev, among others.
Earlier this month, DOJ announced the unsealing of charges against Malofeyey for conspiracy to violate and violation of US sanctions originally imposed on him in 2014 following Russia's invasion of eastern Ukraine. Malofeyey is accused of illegally hiring a US citizen to work for his television network in Russia and transferring a $10 million investment in a US bank.
For more on the "sweeping sanctions, export restrictions, and economic countermeasures" related to Russia that the United States has imposed over the past couple months, please refer to Arnold & Porter's coverage here; for more on DOJ's investigations into the misuse of cryptocurrency, see our coverage here; and for more information on compliance, feel free to reach out to the authors or our trade sanctions team, including John Barker, Soo-Mi Rhee, and Tal Machnes.
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