Russian Oligarchs: What Did They Know, and When Did They Know It?
Irene Kenyon – January 18, 2023
The Internet has been abuzz with the news that in early February 2022, the ownership of secretive offshore trusts that belonged to UK- and EU-sanctioned Russian oligarch, Roman Abramovich, was quickly reshuffled before Russia began its invasion of Ukraine. Abramovich’s seven children were listed as beneficiaries of these trusts that held billions of dollars in assets before he was designated.
The reorganization suggests that Abramovich knew that an invasion was coming and that he was going to be designated in its wake as an oligarch connected to the Kremlin. What did he know? When did he know it?
I would submit that neither Abramovich nor any of the other oligarchs who moved their assets around prior to the invasion had any close or special knowledge of the events ahead. And there were plenty who started making moves to protect and hide their assets before being sanctioned.
Financial crimes experts several months before the invasion, noted an increase in transfers of Russian assets. CEO of financial analytics firm, Elucidate, Shane Riedel said that some appear to have used informal transfer systems known as hawalas to obscure their funds. And because the hawala system does not actually involve the physical movement of cash and exists outside the formal banking system, it’s a solid vehicle to obscure the movement of assets:
“We saw money coming from offshore to onshore with some money coming from onshore to offshore, which was disproportionate – more than 10% directed to or from shell companies or entities that we assessed to be shell companies.”
“That is way out of line with the market, as your typical transaction flow on any given day would be less than 1% involving shell companies,”
The hawala system is not something that Russian oligarchs can use to move all their assets. The billions of dollars would have to be smurfed, or transferred in smaller amounts, so chances are that sanctioned individuals were using these informal transfer systems to complete transactions and purchases.
But numerous now-sanctioned Russian oligarchs ceded control of their companies and other assets to their children or other family members, much like Abramovich did in advance of the attack.
US-designated oligarch Oleg Deripaska in 2018 also gave his cousin, Pavel Ezubov, control of Terra Services, his real estate firm that was linked to the Robert Mueller special investigation.
Bank Secrecy Act data from FinCEN also indicates that several Russian oligarchs took steps to protect their assets right before Russia’s invasion began or shortly after, probably anticipating that they would be designated and wanting to ensure their billions stay in the family.
…several Russian oligarchs transferred beneficial ownership of their companies, trusts, or accounts to their children, other family members, or close business associates. Some of these transfers also occurred right before sanctions were imposed on several oligarchs related to the Russian invasion, including sanctions by the United States, the European Union, the United Kingdom, and other countries. Financial institutions indicated that transferring ownership could potentially help oligarchs evade sanctions or possible seizures of assets by law enforcement. Several oligarchs sent large wire transfers to their children, specifically those studying in the United States, and these wires funded large purchases, usually for residential real estate and luxury items in the United States.
Were these oligarchs all in the loop about Putin’s invasion?
I judge that probably not.
More likely than not, they simply saw where the wind was blowing and took steps to protect themselves, emulating those who anticipated previous designations that the United States and allies imposed on certain Kremlin-linked oligarchs after Russia illegally annexed Crimea in 2014.
Close Putin associate Gennady Timchenko was sanctioned in March 2014 and sold his share of commodities trader Gunvor to his Finnish partner, Torbjorn Tornqvist, the day before sanctions were imposed on him. Did he know that Treasury was going to put him on the SDN list? Or was the sale part of the contingency plan, as Gunvor officials claim at the time?
Regardless, Timchenko took precautions to protect Gunvor before sanctions took effect, knowing that he—a close Putin associate—was likely in the crosshairs.
The current crop of oligarchs almost certainly decided to take similar preventive measures.
Did they know the attack was coming?
Given the amount of intelligence that was declassified in advance of the Russian attack, no one keeping a close eye on the news could claim that the writing was not on the wall.
The Biden administration released unprecedented amounts of information prior to the attack, probably as much in hopes that the Russians would be deterred from invading or at least delayed to give Ukraine and the West time to prepare, as to ready everyone involved for the battle.
The biggest success of the U.S. information offensive may have been delaying the invasion itself by weeks or months, which officials believe they did with accurate predictions that Russia intended to attack, based on definitive intelligence. By the time Russia moved its troops in, the West presented a unified front.
So what did the oligarchs know? Probably no more than the average person that is keeping an eye on current events.
Between Russia amassing troops on its border with Ukraine and the steady stream of declassified intelligence indicating that an invasion was imminent, these ultra-rich Russian citizens likely judged that based on previous sanctions imposed after the illegal annexation of Crimea, they were going to be sanctions targets as well.
And given the amount of money they already lost—with some reports indicating that Abramovich’s fortune shrunk by 57 percent last year—the moves to hide their assets were probably smart.
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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.