(Fintech Zoom) - On the day Russia invaded Ukraine, Vladimir Putin summoned 37 of his country’s most powerful business leaders to the Kremlin.
The Russian president told them the incursion had been “a necessary measure” and asked them “to be understanding of what is going on.”
Russia’s stock exchange had just closed at a 33 percent loss, wiping out an estimated $71 billion in wealth, with a raft of new sanctions from the United States and the European Union already in effect and more on the way.
For many oligarchs in the room, it would be their first taste of international financial restrictions.
But for others, like Suleiman Kerimov, sanctions were nothing new.
The enigmatic, Ferrari-driving billionaire and his family have gone to great lengths to shield their assets, documents suggest, an effort that would have helped to insulate him when he and other Russian elites were sanctioned by the U.S. in 2018 for benefitting from the country’s “malign activity around the globe.”
A trove of leaked financial records provides a glimpse into how Kerimov and his associates used a maze of corporate structures to obscure his astronomical wealth and financial dealings, which include $300 million in mysterious wire transfers from a holding company registered under the name of a Swiss tattoo artist to companies linked to Kerimov and his family.
“If you’re an oligarch, you are by definition already operating with shell corporations and carve-outs in expectation that this day would come,” said former U.S. Treasury official Jonathan Schanzer.
In collaboration with the International Consortium of Investigative Journalists (ICIJ), NBC News has mined major financial record leaks — including the Pandora Papers and the FinCEN Files — to illustrate the difficulties Western governments will face in enforcing sanctions against Russian oligarchs.
While rich people around the world use creative tactics to protect their wealth, the documents reveal the exceptional steps Kerimov and his associates have taken in the past and highlight the challenges ahead for authorities seeking to stem the flow of money to Putin’s inner circle.
Fast cars, fancy parties
Kerimov is lesser known but wealthier than the likes of Roman Abramovich and Oleg Deripaska. He’s worth roughly $14.3 billion, according to the Bloomberg Billionaires Index, making him the 130th richest person in the world.
Today, much of Kerimov’s wealth is thought to stem from his family’s stake in Polyus — the largest gold producer in Russia. He also has deep political connections. Since 2008, he has served as a senator in Russia’s Federation Council for his native region of Dagestan, in the majority Muslim southeast.
By turns private — Kerimov rarely gives interviews — and flamboyant, he has been called a “Russian Gatsby” for hosting multi-million-dollar parties at his massive villas on the French Riviera, including one soiree that reportedly featured a performance by Beyoncé. He reportedly owns a $325 million megayacht, and his car collection has included such rarities as a Ferrari Enzo, which he crashed into a tree in Nice in a near-fatal accident in 2006.
“That flamboyance, the spending — that’s a part of their persona. But it’s also a way to launder money,” Karen Greenaway, a former FBI agent who worked in the bureau’s International Corruption Unit, said, speaking broadly about oligarchs.
Despite holding diplomatic immunity, Kerimov was arrested in France in 2017 in connection with a tax evasion and money laundering case over the purchase of a nearly $190 million estate in Cap d’Antibes on the French Riviera, an area otherwise known as the Bay of Billionaires.
The year before, the Panama Papers investigation by ICIJ and the Organized Crime and Corruption Reporting Project found that Kerimov-linked companies had transferred $200 million to a financial network associated with Sergei Roldugin, who the European Union has dubbed “Putin’s wallet.”
"The tax case against him was a surprise," Greenaway said, referring to Kerimov. "He must have really triggered something somewhere to get somebody to look at it."
Roldugin has previously denied any wrongdoing.
Banks are supposed to file “suspicious activity reports” — called SARs — with the U.S. Treasury Department’s Financial Crimes Enforcement Network when a transaction raises certain red flags. FinCEN gets more than a million of these reports each year, which are shared with law enforcement and intelligence agencies, and form the basis of investigations into money laundering, tax evasion and other financial crimes.
The leaked financial documents, first obtained by BuzzFeed News and shared with ICIJ and NBC News, include SARs detailing more than 12 suspect wire transfers that flowed through the Bank of New York Mellon between 2012 and 2014.
In the reports, bank officials flagged more than $700 million in wire transfers between opaque companies based in Cyprus, the Cayman Islands, the Bahamas, Switzerland, and the British Virgin Islands, the documents show.
By cross-referencing the names of the mystery companies with previously leaked documents from the Pandora Papers, NBC News and its reporting partners were able to link several companies involved in the $700 million in flagged transactions with Kerimov or his business associates.
“It would not be normal for someone to create shell companies like this,” said Graham Barrow, a London-based anti-money laundering expert who reviewed several of the SARs involving companies linked to Kerimov.
“There is a higher cost and slower speed using multiple entities to run money through the banking system. For the normal flow of capital, this runs against the grain of what would make sense economically.”
In one case from 2013, the Bank of New York Mellon, also known as BNY Mellon, reported to authorities that a company called Fletcher Ventures sent a $100 million wire to a company called LT Trading. In the report, the bank said “internet research” suggested that LT Trading was a U.K. firm that specialized “in the sale of fruits and vegetables.”
Public filings reveal little about LT Trading, but leaked records from Trident Trust, an offshore services provider in the British Virgin Islands, show that the company is in fact a British Virgin Islands-registered firm owned by Nariman Gadzhiev, Kerimov’s nephew. The records were part of a tranche of confidential financial files that were leaked from companies that set up and manage shell companies in tax havens, and shared with NBC News as part of the Pandora Papers.
The suspicious activity reports give no indication that BNY Mellon reached out to the bank where the money originated to get more information on the questionable transactions. Experts say that inaccurate or incomplete reports filed by major U.S. and international banks complicate the already difficult task of federal investigators to crack down on potential financial crimes.
In a statement, a spokesperson for BNY Mellon said the bank could not comment on specific suspicious activity reports, but that it fully complies with relevant laws and regulations and “takes its role in protecting the integrity of the global financial system seriously.”
Trident Trust said it does not discuss its clients with the media, but that it “works diligently to evolve and invest in its compliance processes, in line with relevant regulatory developments and guidance in all the jurisdictions in which it operates.”
By Kenzi Abou-Sabe, Andrew W. Lehren, Yasmine Salam and Nancy Ing
April 11, 2022
