Over a week after Russia invaded Ukraine, much of the western world is taking sides, at least economically. Authorities in NATO member states are calling for assets of Russian oligarchs to be seized, putting pressure on Putin’s cronies abroad and at home. However, all that talk may turn out to be bluster when it comes to real estate. Finding Russian assets is more complex than seizing them. Keeping them may be impossible.
Before war broke out in Ukraine, Western leaders warned Russia against invading. President Joe Biden vowed to seize mansions, luxury condos, and yachts for Putin and his oligarchs. French President Emmanuel Macron, British Prime Minister Boris Johnson, and German Chancellor Olaf Scholz echoed that rhetoric, yet it was not enough to deter Putin. As cities begin to fall and casualties mount, the West’s threat is tested.
While it’s clear is that U.S. real estate is being used to store Russian money, experts say finding it is next to impossible. More than $2 billion is laundered through U.S.-based assets like real estate, jewelry, and yachts, according to Global Financial Integrity reporting. GFI put together a database of more than 100 real estate money laundering cases from the U.S., UK, and Canada over the last 5 years as part of its research. The report found that the U.S. is a favored destination for money laundering because the U.S. is the only G7 country that doesn’t require real estate professionals to comply with anti-money laundering laws.
In America, attorneys, investment analysts, employees, brokers, and agents are trained to look the other way, either ignorant or complicit. Commercial real estate is responsible for 30 percent of the cases, representing an outsized portion, with each deal typically having significantly higher cash values. The prolific use of shell companies and corporate structures makes tracking ownership a rabbit hole. GFI found 82 percent of the cases involved using a legal entity masking ownership. While Russian assets may not explicitly be money laundering, all that makes tracking assets, even legal ones, extremely difficult.
“There are not enough teeth into regulations in terms of making Realtors report,” Louise Shelley, the director of the transnational crime and corruption center at George Mason University, told NBC News. “And there’s not been enough emphasis on commercial real estate. It’s all about oligarchs’ buying real estate for themselves.”
Other NATO member states may have more success targeting Russian assets. Michael Gove, Secretary of State for Housing, Communities and Local Government in the United Kingdom, is busy drawing plans to seize Russian property in the U.K. Gove’s plan targets nine Russian specific oligarchs, freezing their assets and banning them from traveling to Britain. British Foreign Minits Luz Truss said there’d be “nowhere for any of Putin’s cronies to hide” soon.
Last month, British lawmakers passed new legislation to expand the scope of possible sanctions against Russian oligarchs in the event of an invasion. Feeling the heat, Russian billionaire Roman Abromovich announced he would be selling his prized Chelsea Football Club, worth an estimated $3 billion. Everton Football Club severed ties with companies owned by Russian oligarch Alisher Usmanov. Both France and Germany have seized yachts belonging to Russian billionaires. Still, several yachts owned by Russian billionaires have already made it to safe harbor in the Maldives, according to ship-tracking data.
Any assets seizures must happen quickly. Each passing day gives targets time to move assets. Many yachts made it out to sea before legal action could mount against them. Real estate can’t sail away, so sanctioned owners won’t be as fortunate. Activist in New York City has pointed out that Abramovich owns nearly $100 million worth of property across the five boroughs owned and another $92 million the name of his ex-wife, Dasha Zhukova. Another oligarch, Dmitry Rybolovlev, recently paid $8 million for a Central Park West penthouse, which he claims is for his daughter. Blocked and sanctioned by the U.S., Russian billionaires have turned to their relatives to hold assets. Oleg Deripaska transferred ownership of 646th street townhouse in the West Village to family members. All told, roughly 5,5000 high net worth Russian individuals hold an estimated $240 billion in property worldwide, according to WealthQuotient.
Any hope of successful action against Russian oligarchs will take coordination and speed. Leaving any exit unguarded risks savvy Russian billionaires getting their assets or money out. The U.S. Department of Justice is readying to launch operation Kleptocapture. What exactly that will look like is closely held secret so as not to tip off the targets of legal action. “We will leave no stone unturned in our efforts to investigate, arrest and prosecute those whose criminal acts enable the Russian government to continue this unjust war,” U.S. Attorney General Merrick Garland said.
Even if NATO states successfully find and seize Russian assets, keeping them will be even harder. Each government may block and temporarily seize assets, but confiscating or transferring ownership of the assets will be a tricky legal question sure to be hung up in courts. Permanently taking control of the ownership of Russian assets will require lawyers to make the case the assets were used in the commission of a crime, obtained through criminal activity, or could be used to compensate victims. A similar case involving an Iranian owned office building, 650 Fifth Avenue, took nine years to resolve. If assets can’t be seized, the most realistic hope is for NATO’s member states to freeze Russian assets and pray the war ends before more severe legal measures need to be taken.