Earlier this month, U.S. Attorney General Merrick Garland used a Justice Department appearance to herald the work of a law enforcement task force he launched last March in response to Russia’s invasion of Ukraine.
Appearing alongside his Ukrainian counterpart, Andrii Kostin, Garland announced that he had authorized the transfer of millions of dollars’ worth of seized Russian assets for Ukrainian reconstruction after a judge had ordered their forfeiture.
The $5.4 million was confiscated from a Denver-based bank account of sanctioned Russian oligarch Konstantin Malofeyev last April, and prosecutors from the Justice Department’s Task Force KleptoCapture were seeking their forfeiture.
U.S. law requires forfeited funds to be spent for law enforcement purposes. But in late December, Congress gave the Justice Department new authority to transfer proceeds of certain assets seized from Russian oligarchs for Ukrainian reconstruction.
A State Department spokesperson said the department expects to receive the funds forfeited from Malofeyev in about 60 days and “will use them to provide assistance to Ukraine to help remediate some of the injury caused by Russia’s aggression.”
As Ukraine marks the first anniversary of the Russian invasion, hundreds of millions of dollars’ worth of Russian assets, seized by Task Force KleptoCapture, remain subject to forfeiture, according to Andrew Adams, the task force head.
The amount is not insignificant but pales in comparison to the hundreds of billions of dollars needed to rebuild Ukraine.
“But the contribution is important,” Adams said, speaking at the Hudson Institute last month.
The interagency task force was launched just six days after Russia’s invasion of Ukraine. Its mission: to seize the assets of oligarchs that U.S. officials say prop up President Vladimir Putin’s regime.
Within four weeks of its launch, the team announced its first major asset seizure. Acting on a U.S. request, Spanish authorities seized a 77-meter-long luxury yacht belonging to sanctioned Russian billionaire Victor Vekselberg on April 4. The boat’s price tag: $90 million.
Two days later, U.S. prosecutors charged Malofeyev with sanctions violation and seized his U.S. bank account.
The following month came the task force’s biggest catch: Fijian authorities seized a $300 million luxury superyacht belonging to another sanctioned Russian oligarch with suspected links to Putin: Suleiman Kerimov.
In the months that followed, the task force has targeted a string of other assets, from luxury properties belonging to Vekselberg and aluminum magnate Oleg Deripaska to private planes that have yet to be seized.
Before the Justice Department can transfer any funds to Ukraine, it must first forfeit the seized assets, meaning take their ownership.
There are two major types of asset forfeiture: criminal forfeiture and civil forfeiture.
Criminal forfeiture, used to take a piece of property used in a crime, requires a criminal conviction. A civil forfeiture complaint, on the other hand, is brought against a piece of property rather than an individual and does not require a conviction.
With most Russian oligarchs indicted by the Justice Department at large, the department is all but certain to pursue civil forfeiture against most seized assets, legal experts say.
Molafeyev’s bank account was forfeited through a civil complaint. On Friday, the Justice Department filed a civil forfeiture lawsuit against six U.S. real estate properties owned by Vekselberg.
Ellen Zimiles, head of financial crime, fraud and investigative services at consulting firm Guidehouse, said the civil forfeiture process varies depending on the type of assets.
Seizing cash or a bank account is “usually easier” than other forms of assets, Zimiles said.
“When it’s a bank account, you usually send a notice to the bank ... and they will freeze the account,” she said.
The more “bespoke” the property, the longer it will take to forfeit it, Zimiles said.
“A yacht will take longer than a bank account. A house will take longer than a bank account,” she said.
But sometimes even seizing a bank account can prove problematic.
“There's a lot of problems involved in trying to determine what part of the money in that account is dirty money that's subject to forfeiture … and what part of it is legitimate,” said David Smith, a lawyer in private practice and a leading authority on forfeiture.
Molafeyev’s representatives did not contest his asset forfeiture. Nor are other oligarchs expected to file legal challenges. But if they do, it could lead to long drawn-out litigation.
Case in point: former Ukrainian Prime Minister Pavlo Lazarenko’s long-running battle with the Justice Department over hundreds of millions of dollars he’s accused of stealing while in office.
“The civil forfeiture case against him has been going on for 18 years and it’s still not over,” said Smith, who once represented Lazarenko.
Editor’s Note: The 3rd paragraph has been updated to correct the money figure to $5.4 million instead of $4.5 mil.
