The banking transactions, totaling more than $700 million, were considered sufficiently suspicious for Bank of New York Mellon officials to sound the alarm bell to the U.S. Treasury Department.
But officials were unaware of who was behind the transactions, according to copies of the reports filed. Indeed, their attempts to identify the companies listed on the wire transfers were, in some cases, spectacularly flawed, with one report linking - without evidence - a $100 million wire transfer to a British merchant "specializing in the sale of fruit and vegetables."
LETTER BY LTER ALL DEVELOPMENTS
In fact, the transferred funds were part of a vast offshore empire associated with Russian billionaire Suleiman Kerimov. His connection to these transactions - nearly a decade ago - can only be documented in some detail in classified financial records obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with the Washington Post.
Kerimov is one of Russia's wealthiest individuals, a political ally of President Vladimir Putin and a member of Russia's upper house of parliament, representing his native Dagestan. He first found himself on the US sanctions list in 2018, while Britain and the European Union followed the US lead just last month as part of the West's retaliation for the invasion of Ukraine.
However, these records - which are now in a database maintained by the US Treasury Department - underscore how difficult it is to trace, let alone freeze, assets linked to Kerimov and other Russian oligarchs, which have been transferred to offshore accounts in the past.
U.S. officials have described the task of infiltrating shell companies that hide the activities of many oligarchs as one of the most difficult aspects of the financial offensive against Russia.
"Members of the Russian elite and oligarchs are considered among the best in the world at hiding their wealth," a senior Finance Ministry official said. The official, who spoke on condition of anonymity, noted that luxury yachts, villas and private jets are relatively easy to "catch" because they are "in plain sight." "The more difficult part is identifying places where these people have set up shell companies to hide their assets."
A Bank of New York Mellon spokesman said the firm "takes its role in protecting the integrity of the global financial system seriously," but declined to answer questions about the reports submitted by the firm.
Kerimov is on a list of more than 4,000 Russians whose names have appeared in secret financial records - known as finCEN files - obtained by the ICIJ in recent years. Among them are the Pandora Papers, which formed the basis for a series of investigations.
Russians outnumber other nationalities on lists of people who have turned to law firms and financial advisers serving global elites seeking to protect their assets in Panama, the Cayman Islands and other tax havens.
Exploiting loopholes
The records in WP's possession provide excellent insight into the tactics the oligarchs have used to hide or protect their wealth from the West's economic warfare. Recall that the US imposed sanctions on more than 500 Russians in the six weeks following the invasion of Ukraine.
However, despite unprecedented cooperation between Western governments, there are still differences in the sanctions lists adopted by the United States and its allies, as well as several loopholes exploited by the oligarchs.
Such vulnerabilities were revealed last month when Alexei Mordasov, recently named by Forbes magazine as Russia's richest man, sold most of his shares in one of Europe's largest travel groups. To a shell company in the British Virgin Islands, shielding $1.4 billion from European sanctions.
Mordasov, 56, is the largest shareholder in Severstal, a steel group that promotes the use of the high-strength materials it produces in Russian armored vehicles.
In fact, as European governments are targeting the superyachts of Russian oligarchs, Italy announced the seizure of the 65-meter-long, $50 million "Lady M."
Mordasov, who also owned 29.9% of TUI's share capital through Unifirm, bailed out the tourism group in the midst of the pandemic. But he transferred that stake to a corporate entity based in the British Virgin Islands, supposedly controlled by Marina Mordasova, his third wife. And he made this transfer on February 28, four days after the Russian invasion of Ukraine and on the same day that the EU announced a series of sanctions against him as well.
In addition, two weeks before he was sanctioned by the UK, he also transferred to Marina Mordasova the majority stake he held in Nordgold, the London-listed mining company. In mid-March, the ultra-luxury yacht Nord, worth $500 million and nearly 142 metres long, was anchored in the Seychelles and then moved to the port of Vladivostok in Russia to avoid seizure.
Suspicious ties to the Kremlin
Two years ago, it was Kerimov who was named by Forbes as Russia's richest man, propelled to that position by a surge in gold prices that boosted the value of his family's 76% stake in Russia's largest gold mining company, PJSC Polyus. His fortune has fallen since then, but stands at $13 billion.
Last Wednesday, Polyus revealed that its largest shareholder, Kerimov's son Sed, had sold 30% of the company's shares. The move reduced the family's holdings below 50%, potentially protecting Polyus from sanctions.
Kerimov, 56, is a lone figure who rarely gives interviews but is known for flaunting his wealth. In the past he has thrown lavish parties that reportedly included performances by Shakira and Beyoncé. In 2006, he was seriously injured after crashing a $650,000 Ferrari in France.
As a trained accountant, he made his initial fortune by acquiring early stakes in Russian companies. He took advantage of the golden opportunities offered by Boris Yeltsin through privatizations of state property. At the age of 27 he founded an investment bank, Fedprombank, which financed the state-owned industries of the former Soviet Union. He made his vast fortune by exploiting faltering former state-owned public companies, which he privatized and sold at multiple prices.
After the Russian crisis, Kerimov found himself with a vast fortune and an unshakable position in the state apparatus. He successively bought up oil companies, mining companies, invested in later energy giants, and in 2009 acquired 80% of the largest gold producer in Russia.
According to US officials, Kerimov acquired stakes in companies and became rich with the help of billions of dollars in loans from Kremlin-backed banks.
The ability of an unknown person to borrow such huge sums gave rise to speculation among Russian experts and Western officials about Kremlin connections. This suspicion became more apparent in 2016 when it was reported that companies linked to Kerimov had paid $200 million to offshore companies linked to Sergei Roldugin, a cellist and old friend of Putin.
In the latest indication of Kerimov's close relationship with Putin, he was among the businessmen invited to meet with the Russian president on the day the country's armed forces launched their invasion of Ukraine.
An effort fraught with obstacles
The information gaps "are one of the [EXISTING] challenges with respect to FinCEN records," according to a top U.S. Treasury Department official. "FinCEN [US FINANCIAL CRIMES ENFORCEMENT NETWORK] and similar agencies in the UK and around the world are probably the key piece [IN THE "PUZZLE"] of tracking oligarchs."
In recent weeks and as new sanctions are announced in response to the Russian invasion of Ukraine, the US Treasury Department has called on banks and other financial institutions to scrutinize money transactions more carefully as well as be more diligent in reporting to FinCEN.
But, as mentioned in the WP article, even organized efforts to expose offshore account owners could end in a dead end.
Source.gr
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