Key Aspects:
 

• OFAC has imposed sanctions on one Russian individual and three companies involved in an “attempted sanctions evasion scheme” connected to the Russian tycoon Oleg Deripaska.
• The scheme reportedly concerns a recently aborted bid by the Austrian Raiffeisen Bank International (RBI) to buy a EUR 1.5 billion industrial stake linked to Deripaska. The deal was reportedly canceled as the bank had not obtained “the required comfort” from regulators to proceed with the transaction. 
• Several typologies traced in the scheme have been highlighted in a Global Advisory on Russian Sanctions Evasion issued jointly by the multilateral REPO Task Force, as well as an Alert document issued by FinCEN.

Analysis

On 14 May, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on one Russian individual and three Russia-based companies involved in an “attempted sanctions evasion scheme” connected to the Russian tycoon Oleg Vladimirovich Deripaska. The scheme reportedly concerns a recently aborted bid by the Austrian Raiffeisen Bank International (RBI) to buy a EUR 1.5 billion (ca. USD 1.6 billion) industrial stake linked to Deripaska.

Several typologies can be traced in the scheme that have been highlighted in a Global Advisory on Russian Sanctions Evasion issued jointly by the multilateral REPO Task Force, as well as an Alert document issued by FinCEN.

Context

Earlier, RBI had wanted to acquire a 25% stake in the Vienna-based construction group Strabag from a company that Strabag identified as being controlled by Deripaska. Strabag was once held by Deripaska, who has been sanctioned by the USA, the EU, UK, Australia, Canada, and New Zealand. Deripaska has denied having any current links to Strabag. The U.S. Treasury reportedly opposed this deal, because Deripaska is sanctioned. As per media reports, the U.S. Treasury had warned RBI that its access to the U.S. financial system could be restricted because of its Russian dealings.

Last week, the RBI announced its decision to abort the deal. The reported reason behind this step was that the bank had not obtained “the required comfort” from regulators to proceed with the transaction. 

The Scheme

According to the U.S. Treasury, in June 2023, Deripaska coordinated with Russian national Dmitrii Aleksandrovich Beloglazov, who owned Russia-based financial services firm OOO Titul, to sell Deripaska’s frozen shares in a European company. A Russia-based financial services firm AO Iliadis was established as a subsidiary of OOO Titul. In early 2024, Iliadis acquired Russia-based investment holding company MKAO Rasperia Trading Limited, which reportedly holds Deripaska’s frozen shares. 

Beloglazov and the three entities - OOO Titul, AO Iliadis, and MKAO Rasperia Trading Limited have been sanctioned by the OFAC for operating or having operated in the financial services sector of the Russian Federation economy. 

In March 2023, the Global Advisory on Russian Sanctions Evasion Issued jointly by the multilateral Russian Elites, Proxies, and Oligarchs (REPO) Task Force, highlighted some typologies which can be traced in this scheme. The document addressed various complex ownership structures that Russian individuals use to disguise their connections to particular assets or entities. Below we summarize the key aspects of the document. 

Similarly, in March 2022, the Financial Crimes Enforcement Network (FinCEN) issued an Alert, which addressed the use of corporate vehicles to obscure ownership and source of funds and the use of third parties to shield the identity of sanctioned persons. The document, which we also summarize below, aims to assist financial institutions in identifying potential Russian sanctions evasion attempts.

Global Advisory on Russian Sanctions Evasion Issued Jointly by the Multilateral REPO Task Force 
 

The Russian Elites, Proxies, and Oligarchs (REPO) Task Force is a multilateral effort that was launched by Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Commission following Russia’s invasion of Ukraine in February 2022.

The REPO Task Force has identified certain typologies of Russian sanctions evasion tactics and has issued recommendations to mitigate the risk of exposure to continued evasion. 

Typologies of Russian sanctions evasion include:

1. Use of family members and close associates to maintain control and access to wealth.
2. Utilization of real estate investments to hold and launder wealth, often through complex ownership structures.
3. Creation of complex ownership structures, such as shell companies or trusts, to avoid detection.
4. Engagement of enablers, including professionals like lawyers and accountants, to facilitate sanctions evasion.
5. Utilization of third-party jurisdictions and false trade information to facilitate the shipment of sensitive goods to Russia.
    

The advisory stresses ongoing international cooperation on illicit finance issues related to Russia and recommends actions for regulated entities, including:

1. Compliance with national rules, incorporating Financial Action Task Force (FATF) recommendations.
2. Implementation of robust compliance programs and regular reviews.
3. Participation in existing public-private partnerships to prevent sanctions evasion.
4. Leveraging information sharing protocols among regulated entities.
5. Updating risk assessments to reflect changes in illicit finance risks.
6. Increasing awareness of sanctions risk for non-regulated entities and investing in sanctions compliance measures.

FinCEN Advises Increased Vigilance for Potential Russian Sanctions Evasion Attempts

In March 2022, the Financial Crimes Enforcement Network (FinCEN) published an alert to all financial institutions regarding the need to be vigilant against attempts to evade sanctions related to Russia's further invasion of Ukraine. It outlines various red flag indicators to help identify potential sanctions evasion activities, such as:

1. Use of corporate vehicles (i.e. legal entities, such as shell companies, and legal arrangements) to obscure (i) ownership, (ii) source of funds, or (iii) countries involved, particularly sanctioned jurisdictions. 
2. Use of shell companies to conduct international wire transfers, often involving financial institutions in jurisdictions distinct from company registration. 
3. Use of third parties to shield the identity of sanctioned persons and/or PEPs seeking to hide the origin or ownership of funds, for example, to hide the purchase or sale of real estate.
4. Accounts in jurisdictions or with financial institutions that are experiencing a sudden rise in value being transferred to their respective areas or institutions, without a clear economic or business rationale. 
5. Jurisdictions previously associated with Russian financial flows that are identified as having a notable recent increase in new company formations. 
6. Newly established accounts that attempt to send or receive funds from a sanctioned institution or an institution removed from the Society for Worldwide Interbank Financial Telecommunication (SWIFT). 
7. Non-routine foreign exchange transactions that may indirectly involve sanctioned Russian financial institutions, including transactions that are inconsistent with activity over the prior 12 months. For example, the Central Bank of the Russian Federation may seek to use import or export companies to engage in foreign exchange transactions on its behalf and to obfuscate its involvement.