The Anticorruption Campaigner’s Guide to Asset Seizure

Anticorruption campaigners have long argued that Western governments should be more aggressive in freezing and seizing the assets of kleptocrats and corrupt oligarchs. While targeting illicit assets has been part of the West’s anticorruption arsenal for many years, attention to this tactic has surged in response to Russia’s invasion of Ukraine. Almost as soon as Russian troops crossed the border into Ukrainian territory, not only did Western governments impose an array of economic sanctions on Russian institutions and individuals close to the Putin regime, but also—assisted by journalists who identified dozens of properties, collectively worth billions—Western law enforcement agencies began seizing Russian oligarchs’ private jetsvacation homes, and superyachts.

Many people who are unfamiliar with this area—and even some who are—might naturally wonder about the legal basis for targeting these assets. And indeed, the law in this area has some important nuances that are not always fully appreciated in mainstream media reporting and popular commentary.

First, even when a government has a sound legal basis to freeze or seize an individual’s assets, it needs to establish that the individual in question in fact owns the assets being targeted. This can be challenging, because most sophisticated criminals, including oligarchs and kleptocrats, hold their assets through vehicles designed to obscure ownership, such as anonymous shell companies and overseas trusts. Although journalists and civil society groups have untangled some of these ownership structures, law enforcement must independently demonstrate a reasonable basis for believing that the targeted individual owns at least 50% of the assets in question. Establishing presumptive ownership usually requires a global investigation that includes reviewing property and financial records as well media sources.

Next, it is important to keep in mind the difference between freezing assets and seizing assets. Freezing property prohibits the transfer, destruction, or movement of that property; seizing property effects a transfer of ownership rights to the government. (This is why, before assets allegedly stolen by kleptocrats can be returned to the “victim” country, the government with jurisdiction over the assets must seize them, not merely freeze them.) In the case of the Russian oligarchs targeted in the wake of the Ukraine war, so far Western governments have mostly frozen, rather than seized, their assets; the legal authority for these asset freezes have generally been sanctions programs administered by the USEU, and the UK. Sanctions prohibit businesses from engaging in transactions with their targets, including individuals and corporations. Therefore, once law enforcement officials establish that a sanctions target owns an asset or an account, they can obtain a court order to freeze the account or impound the asset to prevent its relocation. Such restrictions are sometimes referred to as seizures in the press but do not generally involve transferring ownership rights.

An asset seizure, by contrast, does effect an actual change in ownership. And merely sanctioning an individual—say, a kleptocrat or Russian oligarch—does not mean that the government applying the sanctions can go ahead and seize any assets owned by that individual in the sanctioning country’s jurisdiction. To seize the assets, law enforcement authorities must convince a court to order the property’s forfeiture, and to do that they must establish that the asset was involved in criminal activity. This can be very difficult to do. For example, most of the sanctioned Russian oligarchs can point to legitimate sources of income to justify their ownership of their Western-based assets. (I use the term “legitimate” loosely here—many of the oligarchs made their fortunes under suspicious circumstances, but to get a forfeiture order from a court, this general cloud of suspicion would likely be insufficient.) 

There is, however, another way to justify a forfeiture order. If a sanctioned individual violates or attempts to violate sanctions, governments can seize their property. This is what French customs authorities did when Rosneft CEO Igor Sechin’s yacht prepared to leave port. It is also the strategy that the U.S. Justice Department is employing to seize Viktor Vekselberg’s 275-foot yacht, which was impounded by Spanish and U.S. officials in Mallorca. U.S. law subjects property involved in criminal activity to forfeiture; the Justice Department argues that after the United States sanctioned Vekselberg in 2018, the magnate had laundered money and evaded sanctions to maintain his yacht, and this allows the U.S. government to seize it. Succeeding in this claim will require the Justice Department to establish that it was more likely than not that there was a “substantial connection” between the property and the underlying crime. Time will tell whether Justice Department succeeds, but it’s certainly the case that American prosecutors will have an easier time proving that the yacht was involved in sanctions violations than that it was purchased using the proceeds of corruption.

The U.S. Justice Department could and should use the same legal strategy against other corrupt oligarchs and kleptocrats around the world. While some criticize U.S. forfeiture rules as exceedingly punitive or lacking adequate process, sanctioned oligarchs have ample resources to defend themselves, and U.S. authorities must still prove both their ownership and the underlying criminal activity beyond a reasonable doubt. Seizing the property of corrupt officials who evade sanctions by laundering money is a legally complex strategy for fighting corruption that will require international cooperation and a substantial outlay of investigative and prosecutorial resources. Yet it offers the U.S. a potent and public means of denying corrupt individuals the benefits of corruption while giving those who believe that the government wrongly took their property their day in court.

American and European seizures of Russian assets have drawn important attention to the vast wealth acquired by the world’s kleptocrats—and the importance of targeting this wealth as a central component of an effective anticorruption strategy. The invasion of Ukraine has prompted a wider deployment of aggressive legal strategies for identifying and seizing ill-gotten gains, as well as a renewed emphasis on multilateral cooperation in and investigation of corruption. To be sure, the targeting of illicit assets has its limits as a political tool. Seizing the luxury properties of those closest to Vladimir Putin is unlikely to fatally weaken his grip on power. And even when effective, this tool must be used judiciously and with due regard for the rule of law and human rights. Law enforcement officials must be careful and thorough lest procedural failures sink sanctions-related asset forfeiture actions. But one can acknowledge these caveats and still recognize that seizing assets and freezing accounts offers Western governments a powerful weapon, not only for attacking the most visible symbols of Russian corruption, but also for fighting kleptocracies around the world.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.