(Bloomberg) – In the dark of the night of March 4, Italian police surrounded a 215-foot superyacht belonging to Alexei Mordashov, Russia’s fourth richest man, in the Ligurian port of Imperia.
The European Union approved the billionaire in February. 28, days after Russia’s invasion of Ukraine. His extensive holdings in Europe – including “Lady M”, with its swimming pool and beauty salon – were frozen by the authorities.
However, Mordashov had already made his move.
The same day the steel tycoon was approved, he transferred control of a nearly $1.1 billion stake in London-based mining company NordGold to his wife, Marina Mordashova. He transferred a portion of his $1.7 billion stake in holiday tour-business TUI AG from Cyprus Holding Company to one incorporated in the British Virgin Islands.
As lawmakers around the world pressure some of Russia’s elite to press President Vladimir Putin, they have often pointed to blocked superyachts, luxury real estate and sports clubs as saying their efforts are working.
But the truth remains unclear – revealed in mysterious corporate filings that may take days to go public. They show that Russian billionaires have transferred ownership stakes, relinquished board roles and relinquished control, all part of a race to overtake officials in the US, UK and EU, and restructure their wealth as they are now. can also do.
Read more: Approved Russian tycoon transfers stake in his major asset
An example is Mikhail Fridman, who was sanctioned by the European Union along with Mordashov and his business partner Petr Aven. The filing shows he handed over control two days later to at least three companies in the UK, where he has not received approval. He transferred those shares to a former employee of LetterOne, the investment firm he co-founded.
The list goes on – and it includes those who are subject to a new round of EU sanctions this week.
Before the sanctions, Vadim Moshkovich reduced his stake in the agricultural conglomerate Ross Agro plc to less than 50%. Andrey Melnichenko withdrew as a beneficiary of his nearly $17 billion stake in fertilizer producer Eurochem and thermal coal supplier Suec, effective March 9 – the day he and others were approved.
That didn’t stop Italian authorities from seizing Melnichenko’s $580 million-euro superyacht in Trieste, Italy. There is no justification for Melnichenko being on the EU sanctions list, and he will challenge the measures, a spokesman for Melnichenko said in an email on Saturday after the seizure was announced.
Read more: Italy Sixteen $580 Million Russian Superyacht Over Sanctions
The sanctions require compliance from industries, and companies have to quickly dig through corporate ownership layers to find, freeze, and report relevant accounts. In the US, they share findings with the Office of Foreign Assets Control, or OFAC.
It can take time for financial institutions to identify an approved person’s associated accounts that are not already widely known, said Howard Mendelsohn, chief customer officer at Kharon, which builds networks of relationships around approved parties. For uses of technology and experts.
simple time
Anyone who has been sanctioned can use that as a window to hire lawyers, consider a change of ownership and otherwise move assets around, he said.
“They may be thinking, ‘I might have a little time here before anyone figures out what all my companies are, especially the ones that are majority-owned,'” Mendelssohn said. “I’m going to shuffle. I’m going to get my daughter, my wife, my employee or employees, and I’m going to put this stuff under other names. It’s going to be visible and it’s going to be documented that I am not the owner of the majority.”
In the US, there is an obvious incentive to give up majority control: OFAC’s so-called 50% rule.
It states that property or interests owned by approved persons should be blocked if the total share of those named in the government’s list is 50% or more. This makes stocks a popular maneuver to get under that limit.
The US Treasury has the power to name and sanction the spouses or adult children of persons approved under a 2021 executive order.
east shift
This is not the first time the Russian tycoon has resorted to property reshuffle. Oil mogul Gennady Timchenko sold a nearly 50% stake in a Finnish petroleum distributor before it was approved following Russia’s annexation of Crimea in 2014.
Oleg Deripaska was approved by the US in 2018. To ensure that the aluminum company N+Group International PJSC was removed from the OFAC list, it asked a state-owned bank to reduce its stake from 70% through a complex array of transactions involving a share tender. reduced to 45%. , stock transfers and charitable donations.
OFAC lifted the ban on En+, saying most of the directors on the board were independent.
“When you’re talking about a Russian oligarch, if Oleg Deripaska still has a 33% voting share, would you vote against him?” Eric Sohn, director of Dow Jones Risk and Compliance, said.
Transactions have multiplied in recent days as Russia’s richest sentiment approaches a closing window. For some, it may be too late.
Chelsea football club’s billionaire owner Roman Abramovich said on March 2 that the storied sports franchise is up for sale. Yet a week later, the UK cleared him and six other Russians, leaving the team in limbo.
READ MORE: Britain freezes Abramovich assets, doubts over Chelsea’s future
As for Mordashov, a major shareholder of one of Russia’s biggest steelmakers, he called the Ukraine conflict “a tragedy” and said he did not understand why the EU imposed sanctions on them.
A spokesperson for Mordashov recently confirmed the share transfer, and declined to comment. According to the Bloomberg Billionaires Index, he is worth $19.6 billion.
The invasion of Ukraine has caused more than $90 billion in damage to Russia’s ultra-wealthy people. Kharon’s Mendelssohn said that with no loss of vision, wealthy and connected Russians are trying to defend and protect their interests, as the authorities’ targets have become wider.
“If they are not listed now, they are certainly concerned,” he said.
—With assistance from Andrew Davis.
