After more than a year-long investigation, the Treasury Department has frozen a billion-dollar fund owned by a Russian government official that was invested in American public companies, reports The Hill.
A blocked property notice was issued by the Treasury Department to Heritage Trust, a Delaware-based fund that the department claims is owned by Suleiman Kerimov, a representative of Russia’s Federation Council. Kerimov is a member of the Federal Assembly. After initially receiving a warning in 2018, the FBI assisted in the seizure of one of Kerimov’s yachts in Fiji in May.
According to a senior Treasury official, funds from the trust were transferred through a number of shell companies, European foundations, and other identity-obscuring legal entities before being invested in numerous significant U.S. public corporations and private businesses.
The official chose not to address the possibility that any American accounting, law, or consulting firms may have assisted the fund in operating and managing its investments.
The Office of Foreign Assets Control (OFAC) of the Treasury has issued a blocked property notice, but this does not imply that Kerimov’s assets are being taken by the American government. This makes any transactions involving the funds or property of the trust unlawful and punishable by law.
The department issued a statement saying that “all transactions by U.S. persons within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons are prohibited.”
After Russia invaded Ukraine in late February, the United States established an international task force called REPO (Russian Elites, Proxies, and Oligarchs) to hunt down the assets of the Russian elite and exert pressure on Russian President Vladimir Putin and the planners of Russia’s foreign and military policies.
The task force, which reflected broader cooperation among Western powers as a result of the conflict in Ukraine, included the financial and legal wing of the governments of Australia, Canada, Germany, France, Italy, Japan, the United Kingdom, and the European Commission.
According to a statement from Treasury Secretary Janet Yellen, “Even as Russian elites conceal themselves behind proxies and intricate legal frameworks, Treasury will actively implement the multilaterally coordinated sanctions imposed on those who fund and benefit from Russia’s war against Ukraine through our broad enforcement authorities, as well as our partnerships through the REPO task force.”
Last year, at a State Department summit, Yellen criticized the convoluted system of laws in the United States that permit the concealment of illicit funds.
“In the popular imagination, the money laundering capitals of the world are small countries with histories of loose and secretive financial laws. But there’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States. And that’s because of the way we allow people to establish shell companies,” said Yellen.
In a ranking of the world’s most financially secretive nations published earlier this year, the United States came out on top, surpassing Switzerland, the Cayman Islands, and other infamous tax havens.
The supply of financial secrecy services, such as those used by Russian oligarchs, tax evaders, and dishonest politicians, has continued to decline globally as a result of transparency reforms, according to a May report by the British advocacy group Tax Justice Network. The US, UK, Japan, Germany, and Italy are the only five G7 nations responsible for more than half of the global progress against financial secrecy.
While Kerimov’s asset freezing demonstrates that foreign authorities can occasionally make it through the legal minefields of the United States, it is unclear how much more Russian money may be stashed away in the American financial system.