Confiscation of Russian oligarchs' assets is slowing down
Currently, there are two key ways to seize Ukrainian assets from Russians involved in aggression. The first is confiscation through criminal proceedings. The second is the imposition of a sanction in the form of asset confiscation, writes Elena Shcherban. ZN.UA.
Both methods require a court order to deprive the individual of their property. Although the procedures are fundamentally different, they are often confused.
The key difference between these instruments is time. Confiscating assets through criminal proceedings takes years. This requires a full investigation of a specific crime, gathering evidence, which in complex cases can take years, followed by years of trial. During this time, the asset can be seized and placed under temporary government management, such as ARMA (the National Agency for the Detection, Tracing, and Management of Assets Obtained from Corruption and Other Crimes).
But a seizure in a criminal case is temporary. Experience shows that sometimes it's enough to lift a seizure on property for a few hours, allowing it to be transferred to another person or simply withdraw funds from accounts. And that's not to mention the unfortunate experience of ARMA, where seized assets simply lose their value while under the agency's management.
Moreover, ARMA itself is not immune to corruption. In July, anti-corruption authorities completed an investigation into former leaders of the National Agency for the embezzlement of $400 in seized funds. The suspects reportedly forged a court order purportedly lifting the seizure of cash held by ARMA and then divided the money among themselves.
Thus, when we hear almost daily about numerous seizures of Russian assets and their transfer to the management of ARMA, this does not mean or guarantee the deprivation of Russians of property.
Confiscation through sanctions is also a complex procedure, but it allows for a much faster, state-owned asset recovery within a few months and the investment in victory. By its very nature, a sanction is a countermeasure, a response to aggression. Its essence is to seize assets from the aggressor and their henchmen and use them in the fight against them.
According to the law, sanctions are intended to work as follows: the authorities (the Cabinet of Ministers, the Presidential Office, the Security Service, the National Bank of Ukraine, and others) must compile a list of individuals involved in aggression, identify their assets, and first impose a blocking sanction—or, simply put, freeze their property. Importantly, the asset blocking must occur after May 24 of this year, after the new amendments to the law and the introduction of new sanctions take effect. If the assets of a hypothetical Russian oligarch were blocked by sanctions before May 24, this will not work. In this case, the asset must be blocked again, this time in accordance with the amendments to the law, after May 24.
Then, after the blocking, the Ukrainian Ministry of Justice must work with the list of individuals involved in the aggression, engage other authorities, and seek evidence and confirmation of whether the asset owner actually facilitated aggression against Ukraine. Here, materials from criminal proceedings already opened by law enforcement against Russians can be safely used. Having received the evidence and confirmation, the Ministry of Justice prepares and files a confiscation claim with the High Anti-Corruption Court. In contrast to the long-standing legal delays in criminal cases, the legislature has allocated 10 days for the confiscation hearing due to sanctions.
And most importantly, the law has allowed this to be done since May 24 of this year. This means that the tool should have been operational and producing results for almost four months now. Since May 24, sanctions have been imposed on 892 personsOf these, only a few are businessmen, while the rest have virtually no assets in Ukraine. Therefore, in practice, out of nearly nine hundred people, we have only one successful claim for the recovery of assets, that of the Russian oligarch Yevtushenkov. But that's not the worst of it. Over these months, the state has even managed to impose a freeze on key assets of Russian businessmen. Without a freeze, the confiscation process through the Ministry of Justice and the High Anti-Corruption Court cannot even begin.
Instead of sanctions, the Ukrainian government still prefers arrests in criminal cases with illusory confiscations as the final outcome. Russian officials, oligarchs, and propagandists figure in nearly hundreds of cases.
However, the criminal justice process can prove not only lengthy and ineffective, but also risky. A striking example is the numerous corruption and other crime cases against former President Yanukovych and his entourage. Eight years after the Revolution of Dignity, there are still no convictions, and during the investigation of these crimes, international sanctions against these individuals and even assets in Ukraine that could potentially be seized by the state disappeared for years.
The problems with the criminal cases against Yanukovych and his cronies arose primarily because law enforcement officials simply "dumped" them. In some cases, this was due to corruption, in others, to a desire to "squeeze" assets.
Another example was the case when the Ukrainian Prosecutor General's Office failed to provide its British colleagues with evidence of the illegal origin of more than $23 million of the former minister. ZlochevskyUltimately, the seizure in Britain was lifted. Asset confiscation became impossible. The Prosecutor General's Office even helped secure the funds by providing Zlochevsky's lawyers with a letter stating that he was not under suspicion.
Against this backdrop, numerous reports of Russian assets being seized and transferred to ARMA as part of criminal proceedings instead of sanctions seem more like a hint at the possibility of negotiations with Russians than a genuine desire to confiscate them. It's important to understand, however, that sanctions don't preclude the investigation of crimes committed by Russians. Nothing prevents the rapid confiscation of Russian assets through sanctions, sending the proceeds to the army, and then investigating their crimes and prosecuting them for as long as necessary. Otherwise, Russians have a wonderful opportunity not only to avoid criminal liability but also to keep all their assets.
A number of Russian oligarchs are already being investigated by the State Bureau of Investigation, the Bureau of Economic Security, the Security Service of Ukraine, and the police. All of these agencies, like the Prosecutor's Office, are now effectively under the complete control of the Presidential Office. The Office is directly involved in creating sanctions lists of Russians for the National Security and Defense Council. Why isn't the Presidential Office simultaneously promoting sanctions against these individuals, which would allow for the rapid confiscation of their assets using the case files available to law enforcement?
Why is asset confiscation stalled?
The answer may lie precisely in the desire to exercise control over assets manually and covertly, using them as a bargaining chip with Russian oligarchs. Such bargaining could be politically and economically motivated. If a deal is reached with a Russian, the seizure of their assets can be lifted through the infamous Pechersky Court and a "tame" prosecutor in the Prosecutor General's Office. Oleg Tatarov, the law enforcement supervisor in the Office of the Prosecutor General, can easily enforce such requests manually. Ultimately, the unreformed courts and the prosecutor's office will bear responsibility for the failed confiscation.
A selective analysis of public information on criminal proceedings in which Russian oligarchs and their assets in Ukraine are involved in one way or another was conducted.
Russian oligarch Oleg Deripaska Deripaska appears in the Unified Register of Court Decisions in several criminal cases. These include tax evasion and money laundering, which are being investigated by the police. There is also a case of sabotage and the planning and preparation of an aggressive war against Ukraine, which is being conducted by the Security Service of Ukraine, and even ecocide (the destruction of flora or fauna, the poisoning of the atmosphere or water resources, and other actions that could cause an environmental disaster). All three cases involve the well-known Mykolaiv Alumina Refinery, which, according to investigators, is controlled by Deripaska. In one case, accounts were frozen, and in the other, corporate rights transferred to the management of ARMA.
Asset Forfeiture / Oleg Deripaska
However, neither Deripaska nor his plant, let alone any other assets, have been subject to sanctions, even blocking them, since May 24 of this year (under the new procedure). However, the nature of the criminal investigation suggests that law enforcement does have evidence of Deripaska's involvement in the aggression. Why, then, he hasn't yet been sanctioned by the National Security and Defense Council is a rhetorical question.
Another Russian oligarch Arkady Rothenberg, who effectively owns the well-known Ocean Plaza shopping center in Kyiv and a number of other assets, is also involved in criminal proceedings. He and his accomplices are charged with tax evasion and money laundering. According to investigators, the oligarch transferred funds from Ukraine to an aggressor state in order to finance the aggression. More than 20 properties, including Ocean Plaza, as well as funds in corporate accounts, cash, and corporate rights, have been seized in the case. The seizures in this case have already been partially lifted:
- On August 2, 2022, the investigating judge of the Pechersk Court, Svetlana Grechanaya, abolished arrest in part to prohibit the disposal and use of real estate (20 objects in total), because such arrest allegedly does not allow the company, which has more than 350 tenants and 7000 employees, to carry out economic activities;
- On July 28, 2022, also judge of the Pechersk Court, Tatyana Ilyeva took off arrest from accounts with the exception of expenditure transactions for payments outside of Ukraine, dividend payments to citizens and legal entities of foreign states, payments to accounts opened in foreign banks, and accounts of non-residents of Ukraine.
According to the court's reasoning, the liens on Ocean Plaza and other properties were lifted so that the center could operate. However, firstly, the lifted lien allows the property's ownership to change. Secondly, if the property had been confiscated in favor of the state, it could have been generating profits for the state, not for the Russian oligarch, the entire time.
Asset Confiscation / Arkady Rotenberg
The Cabinet of Ministers initiated sanctions to freeze Rotenberg's assets under the new procedure before the National Security and Defense Council on July 15 of this year. Notably, it was after this that the courts partially lifted the asset freezes, effectively allowing Rotenberg to attempt to evade sanctions: if the asset owner changes, there will no longer be grounds for recovery.
Another Russian oligarch Michael Friedman is also under criminal investigation. Importantly, Fridman owns perhaps the largest amount of both financially and strategically valuable assets in Ukraine. The latter, if managed wisely, could also work for Ukraine and the Ukrainian Armed Forces.
Asset Forfeiture / Mikhail Fridman
In criminal cases affairs Investigators from the Bureau of Economic Security are investigating Fridman for money laundering and the transfer of illegal profits to the Russian Federation. The investigation also concerns Fridman's attempts to conceal his assets in Ukraine, specifically the Morshyn Mineral Water Plant "Oskar" PJSC, the Mirgorod Mineral Water Plant PJSC, Industrial and Distribution Systems PJSC, IVA Private Enterprise, IDS Aqua Service LLC, Moshchnost LLC, and NOVA.COM Subsidiary.
The absurdity lies in the fact that while investigators are investigating how Fridman is hiding his assets in Ukraine, including from sanctions, the authorities are simply not imposing these sanctions. So to speak, they're giving the oligarch the opportunity to complete the concealment process under the close scrutiny of the investigation.
There are many Russian passport holders who support Russian aggression, and society should know them all by name. We are working to make this list public.
The failure to impose sanctions and, as a result, the failure to confiscate Russian assets will undoubtedly become the political responsibility of the president as head of the National Security and Defense Council and head of the Presidential Administration—institutions that have all the tools and influence to deprive Russian oligarchs of their assets now, but which, for reasons unknown to the public, are not doing so.
Russian billionaire Fridman offers Ukraine $1 billion for sanctions relief — WSJ
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