The Money Laundering Methods Of The Oligarchs

How Does the Ruble Roll Past Sanctions?

More than 800 people are now on the sanctions lists of the EU and Switzerland. The West’s economic sanctions are intended to hit Putin’s business elite above all. What possibilities are there for the oligarchs close to the Kremlin to circumvent the sanctions?

There is a Lack of Transparency

Assets must be precisely allocated in order to freeze them. This is a Sisyphean task in the distinct straw man culture of Russian oligarchy: tangled company structures, corporations in tax havens, investments in real estate, or offshore accounts. It is extremely difficult to reconstruct ownership structures and financial flows. Such loopholes are not new, but they make it all the more difficult to trace the owners.

The German citizens’ movement “Finanzwende” has been calling for a long time to introduce a comprehensive transparency register and “the immediate introduction of an open, digital and European-linked real estate register with the true owners of land and real estate.”

Numerous countries have set up their own task forces to enforce the sanctions. The German Chancellor’s Office is now leading a task force involving 14 agencies.

Using Cryptocurrencies to get Around the Sanctions?

Cryptocurrencies have also been ubiquitous in news coverage since the war began. With cryptocurrencies, Putin’s elite has another option to divert their wealth and undermine international sanctions. The mere suggestion that Russian oligarchs are now increasingly relying on digital currency caused the Bitcoin price to rise rapidly.

Moscow has been considered a center for cryptocurrency laundering not only since the sanctions were decided. According to Chainalysis, the criminal center can even be narrowed down to one specific building: the Federation Tower in Moscow. From here, dozens of Russian companies would launder funds using cryptocurrencies.

Fraud Schemes and Darknet Exchanges

Experts have long accused Russian authorities of remaining completely inactive even when there are indications that funds are coming from criminal sources. Once the money reaches these Russian companies, there is no way to cooperate with authorities and seize the funds, explains Michael Gronager of Chainalysis.

From 2019 to 2021 alone, he said, $700 million was proven to have flowed to the said companies in Moscow from criminal activities. The proceeds came mainly from fraud schemes and darknet exchanges, Gronager explains. That these companies specializing in cryptocurrency laundering are now helping sanctioned individuals move their assets to safety via cryptocurrencies seems obvious, to say the least.

Lawmakers Take Increased Aim at the Crypto Industry

In an effort to limit these possibilities, U.S. Senator Elizabeth Warren recently introduced a bill called the Digital Asset Sanctions Compliance Enhancement Act of 2022. The bill would allow the U.S. Treasury Department to stop transactions with Russian crypto wallets. In addition, U.S. President Biden would have the authority to initiate action against foreign crypto companies that help Russia evade sanctions. The assets of these companies could then be frozen. They would also be prohibited from doing business with U.S. citizens.

However, the proposed law also targets offshore companies, going as far as what money-laundering experts in this country are calling for. Transactions with offshore companies in excess of $10,000 would have to be reported to the Financial Crimes Enforcement Network (FinCEN).

Cryptocurrencies Tracked by Blockchain

Nevertheless, the extent to which Russia will be successful in the long term with the laundering of crucial sums via cryptocurrencies may be in doubt. In principle, every transaction can be tracked via the blockchain. Therefore, authorities and trading platforms are required to take a close look and carry out reliable risk assessments.

Michael Gronager sums it up in an interview as follows:

“In recent years, we have successfully helped law enforcement agencies in various countries solve some cases. This shows: If you want to launder money, you should not use cryptocurrencies to do it. If you are a small fish and transfer cryptocurrencies across borders, you might get away with it. But for large sums, it will eventually appear on your radar.”

Future Cooperation Will be Key in Monitoring Transactions

If, on the other hand, virtual assets are already in the portfolio, attempts are currently being made to exchange them for foreign currencies or to invest them in assets. First and foremost, in real estate in Dubai, where numerous Russian crypto owners are currently trying to liquidate their wallets. The United Arab Emirates does not participate in the sanctions against Russia and follows a rather lax control. Hopefully, the cooperation between providers and authorities will be even more digital and thus better in the future, and suspicious transactions will be noticed before the money has disappeared into anonymous channels.

Feel free to contact us with any questions you may have regarding the requirements of the recently adopted sanctions.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

Posted in Articles

Leave a Reply

Your email address will not be published. Required fields are marked *