This action is linked to a law that was used to combat terrorists and fugitives.
In retaliation to the military invasion of Ukraine, President Joe Biden issued a warning Tuesday night to Russia’s most powerful billionaires and business leaders that the United States will “find and seize” their yachts, luxury apartments, and private jets.
“We’re here for your illgotten gains,” Biden stated during his State of the Union address, to both Democrats and Republicans applause.
The Department of Justice has announced Wednesday that a special unit, Task Force KleptoCapture, was formed to lead the charge for seizing proceeds from “the crimes of Russian Oligarchs”. It will begin by locating U.S.-based assets. This is a difficult task because many people are known to launder money through real estate as well as other assets such as art and jewelry. Financial experts believe that these oligarchs can hide their true identity by setting up shell companies and taking advantage of major disclosure loopholes in private capital and luxury goods.
While it can be time-consuming and tedious to trace money and asset ownership through foreign bank accounts, the Justice Department’s “kleptocracy” unit, which was established in 2010, is already doing this, according to Stefan Cassella. Cassella is a former federal prosecutor who is an expert in asset forfeiture laws. He said that the creation of a task force to specifically target Russian oligarchs was a positive sign because it showed “resources were being added so they can now take on more cases.”
Federal investigators can connect dots between an oligarch’s assets and this person’s wealth. What then is the probability that the U.S. government will swoop in to seize the individual’s wealth sources?
It’s legal under the Civil Asset Forfeiture Reform Act. This law was established in 1821 when America used to seize cargo from foreign vessels that didn’t pay import taxes or customs. It has been used extensively to fight terrorists and fugitives, as well as being a tool for drug law enforcement in the 1980s.
This law allows assets to be forfeited by the federal government to resolve a variety of foreign or federal crimes. However, it is separate from criminal litigation. While civil forfeiture laws are a popular way for local and state governments to increase revenue, critics claim it’s an abuse by law enforcement in order to make a profit from criminal activity.
The law allows prosecutors to freeze or seize assets . This requires a probable cause standard, and possibly a warrant from the judge.
A freeze or blockage of assets means that they can’t be sold, transferred, or used by U.S citizens. This is Jimmy Gurule, a law professor from the University of Notre Dame, and a former undersecretary of enforcement at the Department of the Treasury in the George W. Bush administration.
He said, “You can still live aboard the yacht, but it’s not transferable.”
The asset can be further seized. Prosecutors may also seek to seize the asset if they believe that there is a connection to illegal activity.
The person whose asset has been taken can have it returned through the courts. The burden of proof rests with the U.S. government if the person decides to return the asset. Cassella stated that prosecutors will not need to provide evidence that a Russian oligarch or the asset are directly linked to the conflict in Ukraine, or the funding for attacks.
He said, “They must prove the underlying crime but it doesn’t have to be about war crimes or Ukraine.”
The person could still have access to the asset during court proceedings or the government may get a restraining orders that prohibits the person from touching it. The government might ask for rents to be placed in an escrow until the case is resolved.
Before, the U.S. had taken assets from foreign business leaders and politicians. Teodoro Obiang Mangue was the vice president of Equatorial Guinea. He was accused of using his position as the country’s former minister of agriculture and forest to amass over $300 million through corruption and money laundering. Federal prosecutors also claim that he broke U.S. law.
Obiang was taken to court by the Justice Department. ultimately settled. He had to sell his Malibu, California mansion that he purchased for $30 million. Also, he had to sell a Ferrari and other pieces of Michael Jackson memorabilia. The U.S. forfeited more than $10 million from the settlement.
The government can also seize assets through civil forfeiture. If a person is convicted of a crime, their wealth can be taken during the sentencing phase.
Cassella stated that convicting a Russian oligarch would be harder than the civil forfeiture route because it requires them to come to the U.S. for trial.
What happens to an asset after the U.S. acquires them?
Gurule suggested that it could be sold at an auction, with the proceeds going to the government, or that it could be reused.
He recalls as a federal prosecutor in California that he once flew in a Drug Enforcement Administration plane from Mexico to fly with. It turned out that the plane had been taken by federal officials from a Mexican cartel which used it to transport drugs to America.
