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.
Vladimir Putin and Suleiman Kerimov seen while visiting the Sirius Center for Talented Children on Aug. 6, 2019 in Sochi, Russia.Mikhail Svetlov / Getty Images file
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.
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.
A journalist films the wreck of a black Ferrari driven by a member of the Russian parliament, Suleyman Kerimov after the car hit a tree and burst into flames in the French Riviera city of Nice, on Nov. 26, 2006. Valery Hache / AFP via Getty Images file
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.”
Kerimov’s reported luxury superyacht Amadea sits moored in the harbor at night ahead of the Monaco Yacht Show in Port Hercules, Monaco, on Sept. 24, 2019. Balint Porneczi / Bloomberg via Getty Images
At the center of the $700 million in mystery transfers is a man named Alexander Studhalter, a Swiss financier with close ties to Kerimov.
Billions of dollars passed between firms owned by Kerimov’s family and shell companies owned or administered by Studhalter, according to the leaked Trident Trust records.
In one record, Studhalter listed a Lucerne tattoo artist as the owner of a holding company that the SARs show sent more than $300 million in wires to Kerimov-linked companies in 2013. Another record listed Gadzhiev, Kerimov’s nephew, as the owner of a company that financed two private jets.
When a reporter from the Swiss media outlet Tamedia, a reporting partner on this project, approached the tattoo artist at his studio, he referred all questions to Studhalter.
Gadzhiev, who lives in Switzerland, declined to comment.
In the 2017 money laundering and tax evasion case, French authorities accused Studhalter of acting as a front for Kerimov and purchasing the multimillion-dollar villa and three others on his behalf. Charges against the two men were later dropped, but the company used to purchase the property paid out about $12 million in back taxes and fines.
A lawyer for Kerimov in France said, “After several years of investigation, no incrimination has been brought against our client.”
But an official from the prosecutor’s office in Nice said the investigation had not been closed.
“To put it simply, he has been released from the charges first brought against him but continues to be implicated in the proceedings and likely to be prosecuted in the event of new elements,” the official said.
In a statement to ICIJ, Studhalter said that he is an “entrepreneur and investor” who worked with Kerimov as a partner “and not as a service provider.”
“The whole case was just made up, and remains falsely reported in some media,” Studhalter said.
Studhalter also said that all four of the French villas were owned by him, and that Kerimov was merely renting one. But a bank record that was produced as evidence in the case showed that Studhalter listed Kerimov as the owner of the company that bought the properties and contained the signatures of both men. Studhalter told Tamedia that their signatures were forged.
Studhalter also said that all of his companies were founded in accordance with Swiss law, that he has not worked with Kerimov since 2017, that he and his father owned the companies accounting for most of the $700 million in wire transfers, including the company that listed the tattoo artist as its owner.
The entrance to the Villa Hier in the cap d’Antibes allegedly purchased by Russian oligarch Suleiman Kerimov, on Nov. 22, 2017. Yann Coatsaliou / AFP via Getty Images file
Setting up numerous companies to obscure his ownership stake in various businesses would have been one way for Kerimov to protect his wealth. But he has also used simpler methods, namely moving wealth into the hands of his family members.
In 2015, his company, Polyus, was delisted from the London Stock Exchange during the fallout from Russia’s invasion of Crimea, so Kerimov took measures to insulate his controlling stake in the Russian gold giant, by transferring it to his then-20 year-old son, Said.
The move proved effective. Kerimov was sanctioned by the U.S. in 2018, along with seven other Russian oligarchs, for benefitting “from the Putin regime and play(ing) a key role in advancing Russia’s malign activities,” including the occupation of Crimea and efforts to subvert Western democracies. Kerimov himself was sanctioned for alleged money laundering and for being an official in the government of the Russian Federation, the Treasury Department said at the time.
But the designation did not extend to his son or to various companies linked to his wealth. Trading in Polyus continued unfettered, until it was suspended from the London Stock Exchange in response to the invasion of Ukraine earlier this year.
On April 6, the Financial Times reported that the European Union was considering adding Said to its sanctions list, and within hours Polyus announced that the younger Kerimov had resigned from its board of directors and sold off nearly half of his shares in the company. With Said no longer the majority shareholder, the move was seen as an attempt to shield Polyus from the freezing of its accounts.
Polyus said those decisions took place April 4, two days before press reports of possible sanctions against Said.
The E.U. sanctioned Said on April 8 for being “associated with a leading businessperson involved in economic sectors providing a substantial source of revenue to the Government of the Russian Federation,” according to the sanctions announcement.
Between May and November of last year, Kerimov’s eldest daughter, Gulnara Kerimova, was listed as the “ultimate beneficial owner” of the companies used to purchase the four villas in the south of France that were at the center of the French money laundering case, according to French company register records obtained by reporting partner Radio France and shared with NBC News.
Kerimov’s son and daughter did not respond to requests for comment.
Experts say the changes at Polyus last week match steps taken by other oligarchs in which they transfer their wealth in anticipation of possible sanctions.
“If these bad actors catch wind early enough, they will grab the money and run. That’s how it works,” said Schanzer, who is now a senior vice president for research at the nonprofit Foundation for Defense of Democracies.
Since the start of the invasion of Ukraine, Kerimov has been hit with additional sanctions by Canada, the U.K. and the E.U. But so far his assets have apparently escaped unscathed.
His reported megayacht was last spotted near Fiji, according to MarineTraffic, a maritime analytics provider. French authorities, meanwhile, have made no moves against his sprawling estate on the French Riviera, according to people familiar with the matter.
“Their shell companies are unnamed and their status as the ultimate beneficiary are veiled. That makes it horrendously difficult to enforce sanctions,” Barrow, the money-laundering expert, said.
But sanctions can be felt in other ways, experts said.
“These guys are going to be shunned. They’re going to be pushed out of polite company,” said Schanzer. “I think that might be the real punishment here. Because I don’t think they’re going to lose money. They’re just going to have a harder time moving it.”