Düsseldorf, Brussels, Athens, New York, Rome The game of hide-and-seek began two weeks before the Russian invasion. Suddenly the yacht “Graceful” disappeared from the port of Hamburg, although the prestigious ship was being rebuilt there. It later entered a port in Kaliningrad, Russia. The yacht is said to belong to Vladimir Putin.
Like the Russian president, several oligarchs have brought their luxury ships to safety in recent weeks. The “Eclipse” of Russian billionaire Roman Abramovic, for example, raced across the Atlantic at 17 knots, according to radio data from its transponder, as if it were being pursued by European financial authorities.
In fact, investigators have had a number of successes. Various luxury yachts have been detained in the Mediterranean ports of Spain, France, Italy and Croatia. So far, the EU states have frozen assets of sanctioned persons and institutions from Russia and Belarus worth around 30 billion euros, the EU Commission announced in an interim report. These include ships, helicopters, real estate and art.
But beyond these reports of success, the balance sheet looks more sober. The oligarchs have long since protected numerous luxury apartments, villas and entire companies from access by western states. Whether it’s the 500 square meter apartment in London’s posh Chelsea district or the Art Nouveau property on Lake Tegernsee – its owners managed to disguise ownership through a complicated network of shell companies, foundations and straw people.
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“Don’t doubt,” Ursula von der Leyen said after Russia’s attack. “We will also freeze your other assets,” said the EU Commission President, “be they yachts, fancy cars or luxurious properties.” But it is not that simple. Hardly any country is prepared to hunt down super-rich oligarchs and confiscate their assets.
Italy is a role model
In 2019, the German Ministry of Finance found in a risk analysis that the responsibilities are completely unregulated when it comes to freezing assets. The problem has not been resolved since then.
According to the “Spiegel”, the “Task Force Sanctions Implementation” of the Federal Ministry of Economics and the Federal Ministry of Finance has identified “a number of weaknesses” in the implementation of the sanctions so far. A legal basis must be created to track down sanctioned assets. At the same time, the exchange of data between the authorities must be improved. And in cases in which the real owners of assets are concealed, special intervention authorizations are necessary.
Freezing assets has only a limited effect. That’s why we need a confiscation law that also makes it possible to confiscate oligarchs’ assets. Philipp Haellmigk, foreign trade expert
Italy is a role model. The Guardia di Finanza is one of the most powerful financial authorities in Europe. The construct, which is a mixture of financial police and customs authority, has 58,000 employees. By the end of March, officials had already frozen 848 million euros in Russian oligarchs’ assets, including villas, cars and luxury yachts.
For years, the authority has specialized in investigating tax offenses and unraveling complicated company constructs, especially in the fight against the mafia, which is increasingly infiltrating supposedly clean companies. The police officers use comprehensive databases and have recently also started using artificial intelligence.
A special foreign exchange police unit, originally established after the September 11, 2001 terrorist attacks, currently focuses primarily on Russians on the sanctions lists. The unit, which is spread across the country, has 480 employees.
However, the skills of financial investigators in Italy do not go as far as some might imagine. While mafia properties are first confiscated and then transferred to state ownership, there is no basis for Russian oligarchs to do so. their assets are only frozen, so remain the property of the sanctioned.
The reason: Mafiosi can clearly be attributed to a criminal organization whose assets are demonstrably illegal. Investigators say that it is far more difficult to prove that the Russians are on the sanctions list.
>> Listen here: Podcast Handelsblatt Crime – The cat and mouse game of the Russian oligarchs with the EU authorities
Hence the villas and yachts in Italy only temporarily in the care of the agency that manages state real estate. The state can only decide to sell the assets if the ongoing maintenance costs become too high. Such a step is still a long way off, according to an insider from the authority.
Sanctions lists could be changed at any time if Russia gives in. Frozen assets would also be free again in one fell swoop and would be returned to their original owners.
Some oligarchs are also EU citizens
The Russians are even allowed to continue using their property. “Freezing” just means that money and assets are not allowed to be moved. Also, no profit may be made with it, for example by renting out a house. But friends and relatives can continue to live in the properties. Sometimes the oligarchs themselves.
The only thing that keeps the sanctioned from doing so is the entry ban associated with the sanctions. But even there, some rich Russians have taken precautions by buying EU citizenship. Thirteen EU countries have historically granted permanent residency status to non-EU nationals if they brought enough money with them.
In Latvia such a residence permit was already available for an investment of 60,000 euros, in the Netherlands you had to bring at least 1.25 million euros with you. Most countries have now stopped issuing these visas to investors from Russia and Belarus.
Ownership is often concealed.
(Photo: REUTERS)
Three countries even granted citizenship to guests keen to invest: Malta, Cyprus and Bulgaria. According to a study by the European Parliament, by 2019 almost 9,000 people had obtained citizenship in this dubious way and more than 120,000 had received a residence permit.
A full four weeks after von der Leyen’s threat to confiscate luxury cars and mansions, the Commission published an urgent recommendation for member states to end this practice of “golden passports”.
Sanctions are largely ineffective against Russians with citizenship. The EU’s foreign service confirms that sanctions cannot prevent people who are citizens of a Schengen country from traveling within the Schengen area. “Anyone who can travel freely can also use their possessions,” says lawyer Bärbel Sachs from the law firm Noerr, who has been advising clients on the subject of sanctions for 15 years. Those sanctioned can even have funds released from their blocked accounts to meet basic needs. Legal advice can also be paid for in this way.
>> Read here: The West blocks the credit cards of the Russian billionaire caste and confiscates their yachts. Do the oligarchs stand by Putin?
For years, the EU Commission has been trying to stop the golden passport programs and has launched infringement procedures against Malta and Cyprus. Now she is demanding that at least those who have been sanctioned have their passports revoked. Cyprus announced on Friday that it would revoke the citizenship of four Russian citizens. The island state did not name names.
Since 2007, Cyprus has naturalized nearly 7,000 third-country nationals, mostly Russians. Between 2017 and 2019 alone, around 1000 of them acquired Cypriot citizenship. In return, they undertook to invest at least two million euros in real estate or companies on the island.
The ship fled across the Atlantic at high speed.
(Photo: dpa)
According to current law, it is only possible to withdraw a passport if the holder provided false information when submitting the application or if criminal activities can be proven. EU sanctions are not foreseen in the law as grounds for deprivation of citizenship. Those affected could therefore appeal to the Cypriot courts with some chance of success if their passports are revoked.
Malta has announced that it will no longer sell citizenship to Russians and Belarusians. According to estimates, around a quarter of all Golden Passports issued in Malta went to Russians. However, Malta does not want to confiscate the passports issued so far. The government said in February that none of the Russians or Belarussians on the EU sanctions list had applied for or received “golden passports” in the past.
However, the Times of Malta reports that a naturalized person has had his citizenship revoked after appearing on a US sanctions list. The person is said to have connections to Russian secret services. Three companies based in Malta are also on the sanctions list. The Interior Ministry of Malta declined to comment on who has had their citizenship revoked.
Politicians want to confiscate oligarchs’ fortunes permanently
There are more and more voices calling for sanctions against individuals to go much further.
“Freezing alone is not effective,” criticizes Polish Prime Minister Mateusz Morawiecki. It should be possible to confiscate the assets of the oligarchs. Then it could also be used to finance expenses for Ukrainian refugees. “We have to confiscate their assets,” Morawiecki demanded. The Finnish Foreign Minister Pekka Haavisto made a similar statement. “We need clarification on how the enormous war damage will be compensated,” he told the Handelsblatt. “Such funds can be used for this.”
The instruments against sanctioned oligarchs are “too weak,” says Munich foreign trade expert Philip Haellmigk. “The asset freeze has only a limited effect. That is why we need a confiscation law that also makes it possible to confiscate oligarch assets.”
The USA is proceeding more consistently than most EU countries. Companies would be told much more clearly that even the most indirect business relationship with an oligarch would be looked at very carefully, says Haellmigk.
A cross-party group of senators now wants to go further. Politicians want to make it easier for the government to confiscate and monetize the assets of Russian oligarchs. Then, the initiators hope, the resistance in Ukraine could be strengthened with this money.
More: What turns rich Russians into oligarchs