Ukraine faces cumbersome path to get oligarchs’ assets
The U.S. government was so pleased with its swift seizure of a Russian oligarch’s 255-foot yacht on the Mediterranean island of Majorca last month that it posted a video on YouTube of the moment FBI agents and Spanish authorities clambered up the gangplank.
The $90 million yacht owned by Viktor Vekselberg, called the Tango, was the government’s first big prize in a campaign against billionaires with close ties to the Kremlin.
Tango is just a sliver of the $1 billion in yachts, planes and artwork — not to mention hundreds of millions in cash — that the United States has identified as belonging to wealthy allies of Russian President Vladimir Putin since the invasion of Ukraine. U.S. Magistrate Judge Zia Faruqui, who approved the seizure, called the pursuit of the yacht by a new Justice Department team called Task Force KleptoCapture “just the beginning of the reckoning that awaits those who would facilitate Putin’s atrocities.”
The reckoning may take awhile.
Seizing assets, whether a yacht or a bank account, is the easy part. To permanently confiscate them, the government must usually navigate a potentially cumbersome process known as civil forfeiture, which requires proving to a judge that the assets were obtained from the proceeds of a crime or through money laundering. Only then does the government actually own the assets and have the power to liquidate them.
All that can take years, especially if the former owner is inclined to fight the forfeiture action in court.
Hoping to speed things up — and quickly get the proceeds from seized assets turned over to the Ukrainian government — the White House announced a plan last week that would make it easier for U.S. authorities to go after some oligarch assets through an administrative procedure led by the Treasury Department. Although it has not provided details of its plan, administration officials said the new procedure will provide adequate due process and allow for an “expedited” review by a federal court.
The White House proposal would significantly change the way the government handles high-dollar asset seizures. Generally, administrative forfeiture is used in lower-profile cases, intended for assets worth $500,000 or less. Such efforts are not really designed for luxury homes or massive yachts, let alone the huge sums of money that wealthy Russians are believed to have stashed away in U.S. bank accounts or invested with hedge funds and private equity firms.
“The idea of a yacht or jet valued in the hundreds of millions seized and liquidated administratively is new territory,” said Franklin Monsour, a former federal prosecutor and a white-collar defense lawyer with Orrick in New York City.
Monsour said the administration and Congress may be banking that many Russian oligarchs will not muster a legal challenge to a new, expedited process because that would risk subjecting themselves to U.S. jurisdiction.
“It will likely be without challenge,” he said. “And the government knows that.”
Even if prosecutors are forced to proceed in some cases through the more typical civil forfeiture process, the litigation might go faster than normal for that same reason, Monsour said.
The more pricey the assets that the government seizes, the more reason it has to speed up the forfeiture process: Luxury property must be properly maintained — otherwise, their value will drop before they can be sold off to someone else in the small pool of people who can afford them.
But authorities in the U.S. are looking to do more than just strip oligarchs of their prized possessions. Elizabeth Rosenberg, assistant secretary for terrorist financing and financial crimes at Treasury, said one goal is to “undermine the financial architecture that Russia uses to move money.”