Editor’s Note: Casey Michel is a writer and investigative journalist covering kleptocracy and dark money networks across the globe. He is the author of “American Kleptocracy: How the US Created the World’s Greatest Money Laundering Scheme in History,” and is at work on a book investigating foreign lobbying in Washington. The opinions expressed in this op-ed are his own. Read more opinion at CNN.com.
CNN —
Two months into Moscow’s brutal invasion of Ukraine, the United States continues to roll out unprecedented sanctions against a rogues’ gallery of Russian oligarchs, including many of the country’s most affluent and influential men.
Washington’s latest round of sanctions came just last week, targeting Russia’s virtual currency mining industry and slapping new sanctions on a raft of Russian institutions and individuals, including Konstantin Malofeyev – an oligarch accused by US authorities of providing financial backing for Moscow’s separatist designs on Crimea and who has links to the American far-right.
The United States is casting a wide net with its sanctions, hoping to ensnare some of Russian President Vladimir Putin’s closest associates, in a bid to dry up vital sources of revenue linked to the Kremlin and potentially even pressure Putin to change his calculus on Ukraine. There has been an unprecedented level of sanctions placed against Russian oligarchs since the February 24 invasion: Oligarchs have been divested of their American mansions and dispossessed of yachts that resemble floating fortresses.
But there are still a number of major oligarchs who have yet to be specifically sanctioned, among them notorious figures like Roman Abramovich, who is notable for previously owning the Chelsea football club. Abramovich reportedly hasn’t been sanctioned yet by the US because of his role as a potential back channel between Kyiv and Moscow. Also untouched by sanctions thus far is Russia’s wealthiest billionaire, Vladimir Potanin.
While seizures of yachts and fancy homes may grab headlines – and may send some oligarchs scrambling to offload similar assets – the reality remains that industry after industry in the US remains wide open to anonymous, oligarchic wealth.
The reason oligarchs are able to continue acquiring, spending and enriching themselves can be summed up in one word: anonymity.
For years, a number of American industries have provided oligarchs access to anonymous financial flows needed to hide their wealth, preventing investigators and journalists from tracking their investments. This has permitted Russia’s oligarchs to hide billions of dollars from the prying eyes of government officials and regulators, allowing them to use their money for anything they wish – including expenditures that might help their benefactor Putin.
The idea that this wealth is somehow “offshore” is an outdated one; rather than looking to traditional havens like the British Virgin Islands or Cyprus for financial anonymity, oligarchs around the world have increasingly set their sights on American shores. In fact, no country has provided more anonymity for this wealth in recent years than the US.
Even while countries like the United Kingdom and Malta have attracted Russian capital, the US offers not only the same anonymous services but far bigger markets for unending financial secrecy, attracting corrupt oligarchs like moths to a flame. The Tax Justice Network recently ranked the US as the country with the highest financial secrecy score, just behind the British territory of the Cayman Islands. Or as Treasury Secretary Janet Yellen said last year, “There’s a good argument that, right now, the best place to hide and launder ill-gotten gains is actually the United States.”
For decades, the US has been the effective capital of anonymous shell company formation, with states like Delaware and Nevada effectively stripping any identifying information from the assets in question to anyone who wanted one – no questions asked.
While wealthy Westerners initially took advantage of these anonymous shells to hide their own wealth via offshoring networks, it was the oligarchs who have rushed to use them in recent years, stashing their money across the US. In a momentous move last year, Congress finally passed legislation that will effectively ban anonymous shell company formation – but those restrictions haven’t yet been implemented, and we’re still waiting for the final language in the new regulations.
These kinds of anonymous financial vehicles and under-the-table investments have allowed oligarchs to plow vast amounts of wealth into the US – and not only keep that wealth hidden from anyone searching it out but further use it to upend American policy and threaten American national security in the process. Even the federal government remains completely in the dark about the scope and extent of these investments.
As the 2021 Pandora Papers revealed, corrupt figures from around the world have raced to the United States to set up these anonymous tools. In fact, that release of millions of documents revealed states like South Dakota have also gotten in on the action; thanks to the state’s anonymous trusts, it currently hides hundreds of billions of dollars of untraceable wealth – money some suspect could be linked directly to Russian oligarchs.
And that’s not the only area where this anonymity allows oligarchs to conceal vast fortunes. American real estate has enjoyed a two-decade-long exemption from basic anti-money laundering checks, meaning that the entire industry – worth tens of trillions of dollars, in every jurisdiction around the country – is effectively open for untraceable, anonymous oligarchic wealth.
In the realm of real estate, it’s not just mansions and penthouses that have caught the attention of oligarchs. Commercial real estate buildings, steel factories, manufacturing plants – all of them have already been connected to assorted oligarchs. And it doesn’t stop there. Port facilities and timberland, agricultural holdings and mining investments, entire apartment buildings and sports arenas and oil fields – nearly anything that can be classified as American real estate is open to oligarchs looking to hide their wealth. And they do so in perfect anonymity.
Private equity and hedge funds – investment vehicles worth trillions of dollars – have also enjoyed a two-decade-long exemption from basic due diligence checks. Unsurprisingly, they’ve also become favorite homes for oligarchic investments. For instance, Abramovich is already connected directly to American hedge fund holdings, while Potanin secretly controlled a private equity firm that oversaw the voting database in Maryland. And those are only two cases in an exploding industry that still provides all of the anonymity Russian oligarchs need.
It seems there is no end to the number and variety of American industries that have provided all of the anonymity and services Putin’s associates require to hide their wealth.
But much remains to be done. For now, oligarchs from Russia – and equally wealthy and notorious figures from other countries – will continue to use all tools of financial secrecy in the United States to bankroll dictators threatening American national security and global stability.