Ever since Russia invaded Ukraine nearly a year ago, and the West implemented unprecedented sanctions against Moscow, its financial sector, government officials, and oligarchs, there’s been an effort to seize and confiscate the assets that Russian oligarchs have squirreled away in the West and use them to rebuild Ukraine.
The desire is understandable, and the use of those assets to reconstruct the country that Moscow has unilaterally tried to destroy may seem justified. In some cases, it is, but we need to be cautious.
First, what is an oligarch? This is something I discussed at length with colleagues at the Association of Certified Anti Money-Laundering Specialists (ACAMS) conference in October, where I was a panelist in a discussion titled, “How to Catch an Oligarch.”
My esteemed co-panelist, Gabe Hidalgo of FTI Consulting, made a good point – that we tend to think of oligarchs as a Russian phenomenon, but oligarchs exist everywhere.
They exploit their government ties to generate vast amounts of wealth.
They benefit from corruption, using their political connections to secure sweet deals for their companies worth billions of dollars.
They often repay the ability to profit from government corruption with support for government officials—whether helping fund government projects or moving funds on behalf of their government benefactors.
In the more current Russia context, oligarchs get profitable government contracts to build infrastructure (the Kerch bridge was constructed by sanctioned Russian oligarch Arkady Rotenberg’s Stroygazmontazh) and secure exclusive government deals (after Treasury designated Bank Rossiya as Putin’s personal wallet, and a financial institution that helped Russian elites hide assets offshore, he announced that he would open a ruble-only account with the bank, that Rossiya would become the primary bank in the illegally annexed Crimea, and that it would service payments on Russia’s $36 billion wholesale electricity market).
They serve the Kremlin as high-level government officials, and then graduate to plum positions in state-owned or controlled companies to continue siphoning money and enrich themselves.
Freezing sanctioned oligarchs’ assets in the West is one thing. But seizing them and using them for Ukraine’s reconstruction is quite another, and it borders on expropriation, according to the Basel Institute for Governance’s Gretta Fenner.
In our zeal to help Ukraine, we don’t want to become Russia—an authoritarian regime that confiscates assets by force. Freezing assets is a temporary measure that suspends the right of the individual to access those assets. Confiscation is another, permanent matter. So we need to ensure that if assets are confiscated, they are indeed the proceeds of crime.
Confiscation should require a criminal conviction, and although OFAC evidentiaries are pretty comprehensive and conform to a very high standard to include an individual or entity on the SDN list, they are not criminal convictions, so we do need to be cautious not to become the very thing we are punishing.
So, how to go about it?
I’ll say up front that I’m not an attorney, so this is just my amateur opinion.
If we are to start confiscating assets, we need to have evidence of a crime. Sanctions evasion is a crime, and we have imposed penalties—both criminal and financial—on individuals and entities who facilitate sanctions evasion and criminally prosecute evaders and their facilitators. So, perhaps it would make sense to confiscate the assets that are proven to be proceeds of this crime.
The Justice Department in October unsealed anindictmentagainst five Russian nationals who were allegedly acting as “criminal enablers for oligarchs, orchestrating a complex scheme to unlawfully obtain U.S. military technology and Venezuelan sanctioned oil through a myriad of transactions involving shell companies and cryptocurrency.”
The EU in November voted to include sanctionsevasion on the list of official EU crimes. It would also make sense that the proceeds of that crime could be subject to confiscation.
As much as I would love to paint every oligarch penny as a criminal proceed, some of those assets are the result of normal business activities. Yes, they can be frozen and seized, if the oligarch in question is on a sanctions list, but non-attorney me doesn’t see any authority to permanently confiscate those assets and used them for the very noble goal of rebuilding Ukraine.
I fully admit I could be wrong here. I fully admit that my heart wants to take all those assets and use them to rebuild what the Russians have destroyed—almost certainly with the help of these oligarchs who move money for sanctioned Russian officials, who help obscure ownership and control, and who help fund Russia’s war in Ukraine.
But we have a thing called “due process” here. Let’s make sure we don’t let that fall by the wayside in our zeal to follow our hearts.
— Irene Kenyon is a former U.S. Treasury Department intelligence officer, special advisor for the Joint Task Force for Anti & Counter Corruption, and an Army Veteran. She writes Into the Void on Substack.