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The invasion of Ukraine has revived interest in Russia’s kleptocratic governance model as a source of potential leverage to deter and punish Vladimir Putin. A groundswell of commentators and politicians are calling for the U.S. to “sanction Putin’s oligarchs” and “seize their mansions and yachts.” In doing so, they often suggest that this would shatter Putin’s status and motivation by depriving him of his personal wealth; or alternatively, that targeting the oligarchs who really run Russia will cause them to immediately remove Putin from power.

The reality is more complicated. This briefing sets out the evolution of Putin’s kleptocracy, whether international efforts to target Russian overseas wealth can influence his conduct, and if so what measures can be most effective.

The Evolution of Putin's Kleptocracy

Putin was a product of, and elevated to the presidency by, the murky cast of crooked businessmen, compromised politicians, intelligence and security officials, and organized crime bosses who shaped Russia’s post-soviet development and would come to dominate it under his rule. His pact with the new oligarchs–especially a close-knit group with whom he had, and in many cases still has, close personal ties–was that they would be allowed to divide Russia’s newly-privatized industries and national wealth between them, stealing as much for themselves as they could–so long as they did not challenge him politically. Those who did were gradually outmaneuvered, exiled, imprisoned or assassinated.

But Putin’s rule has become an increasingly personalist dictatorship since those days, something reflected not only in the dismantling of independent media and democratic opposition but the composition of his own inner circle. We have no idea what influence the surviving “oligarchs” possess over Putin’s decision-making. But it is clear that they are largely tamed and probably no longer "oligarchs" in the literal meaning of that word. Despite the collapse in their fortunes, none has dared criticize Putin personally even as they begin to call vaguely for an end to the war.

Instead, Putin has surrounded himself in the Kremlin with siloviki strongmen drawn from Russia’s military, security and intelligence services. These are hardliners who share his nationalist and revanchist impulses, but they are also yes-men whose only useful purpose is to obediently enact his will.

Putin himself is therefore not now a “kleptocrat” in the conventional sense. His personal motivations, which certainly prioritized illicit personal enrichment in the past, now appear to be focused on regime survival and securing his legacy as a great Russian leader. The fates of other authoritarians across the region who attempted power transitions after presiding over similar post-soviet kleptocratic governance models shows that it never ends well for them. Putin must understand that he will never retire peacefully to St. Tropez, nor does he want to. He will die in office, either of old age or with bullets in his back.

The growing public focus on his “personal wealth,” including estimates that variously put it somewhere between $100-200 billion, might have been helpful in the past but now confuses the picture. A better way to look at it is that he personally owns next to nothing at all because he now controls everything.

The oligarchs, who are internationally exposed, currently appear to have no “veto” influence over Putin or his decisions. The siloviki and others who surround him in the Kremlin are also corrupt but not so internationally exposed, often boasting of U.S. sanctions as a mark of loyalty; and in any case, have no influence over him either.

The uncomfortable conclusion is that Putin and his immediate inner circle are probably far less vulnerable to targeted Western sanctions on their personal wealth than the outdated representations of his kleptocracy currently circulating in the media would suggest. This also makes him less vulnerable to palace coups.

To have a chance of influencing events within Russia, the threat of targeted sanctions on the country’s political, business, and security elite will need to be expanded beyond those in Putin’s immediate orbit. And we should not expect such threats to topple Putin overnight. This is not an argument against doing so–quite the contrary–but a call to temper expectations and refocus efforts on what can be effective given what the the war against Ukraine was has revealed about how Putin’s regime now operates.

Recent Developments

It is important to understand that, in taking on Putin’s kleptocracy, the U.S. and its allies are not starting from scratch. The U.S. has a long history of global anti-corruption leadership, from the flagship Foreign Corrupt Practices Act (1977); to anti-money laundering provisions of the Bank Secrecy Act (1970) and PATRIOT Act (2001); to the explicit focus on Russia in the Sergei Magnitsky Act (2012) and Countering America’s Adversaries Through Sanctions Act (2017); and sanctioning corruption directly through the Global Magnitsky Act (2016). President Obama’s Global Anticorruption Agenda saw the launch of counter-kleptocracy initiatives that have gone on to seize and repatriate billions of dollars, including the famous 1MDB case in Malaysia. The Trump administration, meanwhile, waged the first “maximum pressure” campaign against a kleptocracy in the form of Nicolas Maduro’s regime in Venezuela, rolling up the chavistas’ US assets and even going so far as to indict the dictator himself.

For the most part, U.S. departments and agencies have the experience, tools and resources they need to lead allies in waging a global financial and law enforcement war against Putin’s kleptocracy. (Suggestions on how to strengthen their capabilities are outlined in the section below). In a timely development, the Biden administration had elevated fighting global kleptocracy to a “core U.S. national security concern” in its Issued in December 2021, this was received favorably across the U.S. political spectrum and widely seen as a landmark moment for U.S. global anti-corruption leadership.

• The invasion of Ukraine has also prompted the U.S. and its allies to accelerate several key anti-corruption measures as they intensify pressure on the Kremlin. These include, in the few days since the invasion began alone:
• New targeted sanctions on Russian oligarchs.
• Plans to limit so-called “golden passports,” investor visas that provide a pathway to citizenship for Russian elites.
• A new transatlantic task force that will coordinate efforts to target the Russian elite’s overseas wealth with sanctions and asset forfeiture.
• Bans on Russian aircraft over many countries, including oligarchs’ private jets.
• A major new U.S. Department of Justice-led interagency initiative to freeze and seize Russian elites’ assets, and complement the transatlantic task force.

What the U.S. Should Do Next

The unspoken objective of U.S. anti-corruption policy towards Russia (indeed, all U.S. policy towards Russia), should be the removal of Vladimir Putin and the dismemberment of the transnational kleptocracy that has spread outwards from Russia under his rule.

However, we should be wary of suggestions that pursuing Putin’s personal wealth, or that held in trust by his closest supporters, is likely to produce immediate leverage in the context of the Ukraine crisis. A man that responds to crippling Western sanctions with measures that accelerate the complete isolation of his national economy is clearly not interested in protecting a jet-setting lifestyle with mansions and yachts scattered worldwide. Putin’s intended future for himself, his “oligarchs,” and for Russia, appears to be autarky.

But that is not necessarily the case for the remaining oligarchs and many lesser members of Russia’s elite, for whom access to the West was not only a matter of luxury lifestyles but an emergency exit to personal safety for themselves and their families.

U.S. measures against Russian kleptocracy should be based on three priorities: supporting Ukraine’s resistance; isolating Putin from other elites in hopes of provoking a palace coup; and ending our own role in laundering Russian dirty money–along with the risks to our democracy, prosperity and security that comes with doing so.

Priority #1: Supporting Ukraine

• Strengthening sanctions on Russia’s central bank and all financial institutions, together with ejecting them from the SWIFT system, should remain the top priority for the US and allies. These are not yet full blocking sanctions, and there is further room for escalation. Russia’s energy sector should also now be in play as the Russian military’s brutality against Ukrainian civilians enters a new phase. Significant Russian exports not related to energy or finance should also have been blocked by now, for example minerals, plastics and polymers, machine equipment and timber.
• Emptying Putin’s war chest and fomenting discontent among the wider Russian population are the most powerful outcomes that financial measures can achieve. Targeted sanctions on oligarchs are important and necessary, but in terms of possibly influencing events on the ground they are no substitute for broader economic sanctions.
• That said, these economic sanctions will also contribute to elite discontent. All of Russia’s major financial institutions and companies are controlled by Putin’s elites, and measures that target them will also affect their personal wealth and standing.

Priority #2: Isolating Putin

• As the ruble collapses, the U.S. and its allies should announce that a further stage of financial pressure will be a major escalation of targeted sanctions against Russia’s elite. This should include not only major oligarchs but hundreds of business, political and security leaders. It must be made explicitly clear that these sanctions are contingent on continued support for Putin’s aggression in Ukraine, and will be lifted immediately from those who publicly oppose Putin’s continuation of hostilities.
• The purpose is to increase frustration among those with influence in Russia, however limited, and spread fear over their future ability to travel and do business outside the country should he remain in power. This will hopefully cause Putin to become distracted by the possibility of spreading discontent among his powerbase, which left to fester could result in challenges to his rule.
• The first tranche of targeted sanctions should ensure that everyone around Putin has been designated, though as noted above they will be fully expecting this. It should include the so-called all permanent and non-permanent of the Security Council of Russia, every business leader summoned to Putin’s at the Kremlin, and all members of the State Duma who voted to recognize Donetsk and Luhansk. This group–which includes many individuals already under sanctions–can continue to be built out, working its way down the power structure of Putin’s regime until it collapses or he is removed.
• The U.S. should also intensify efforts to indict and extradite Russian financial and cyber criminals worldwide. As with sanctions, the U.S. dollar’s status as a global currency gives law enforcement, uniquely, a jurisdictional reach that extends far beyond U.S. borders. This is more of a gamble because unlike sanctions, criminal indictments are not lifted according to foreign policy priorities and could drive Russian elites to hide behind Putin’s regime rather than oppose it. On the other hand, watching the U.S. pursue other Russian criminals aggressively as a response to Putin’s ongoing aggression might prompt them to act before they find themselves in the crosshairs. Moreover, the possibility of cooperation and a plea bargain with US authorities might one day be the only option for survival for those closely associated with Putin.
• Congress should appropriate approximately $150 million in funds to adequately resource the Justice Department and Treasury Department for participation in the transatlantic task force and U.S. Task Force KleptoCapture.
• The U.S. also needs to intensify efforts to strengthen allies and partners’ anti-money laundering capabilities and cooperation, both bilaterally and through international fora such as the Financial Action Task Force. While their physical assets remain vulnerable, Russian elites with any sense will have long since begun moving financial assets to jurisdictions that provide shelter from sanctions and other measures, notably the United Arab Emirates.

Priority #3: Reducing U.S. Exposure to Russian Financial Influence

• These measures are not as urgent as the sanctions mentioned above, and will do little to help the people of Ukraine. But in short order, the U.S. should move to accelerate implementation of the Biden administration’s In particular, it should:
• End anonymous ownership of U.S. shell companies and trusts–not only by ensuring diligent implementation of the Corporate Transparency Act, but by considering the benefits of a publicly accessible beneficial ownership register (with appropriate measures to preserve privacy and safety). This would both implement FATF recommendations and align the U.S. with EU and UK measures already in place.
• Extend anti-money laundering responsibilities beyond banks to include the legal, real estate, fund management, lobbying, art and antiquities, and luxury goods sectors that are also routinely exploited for money laundering purposes. Again, this is an important FATF recommendation that has not been implemented by the U.S. and would bring it into alignment with the EU and UK.
• Introduce legislation that makes it harder for oligarchs to launch vexatious legal proceedings against journalists and researchers investigating Russian corruption. The purpose of Strategic Lawsuits Against Public Participation (SLAPP) is to intimidate and bankrupt those exposing Putin’s kleptocracy in the West, not settle valid legal issues. It will be especially important to pressure the UK to update its draconian defamation laws, which have made it the global capital for so-called “libel tourism.”
• Update the Foreign Agents Registration Act to capture more useful information and remove legal ambiguities that allow hostile foreign governments to mask their activities. Again, as a leader on lobbying disclosure the U.S. should work with allies and partners to ensure they have similar provisions in place.
• Introduce a U.S. Unexplained Wealth Order, modeled on the UK version. Implemented correctly in the U.S. context this could make it easier for federal authorities to seize illicit funds from foreign criminals, while removing the scope for abuse that has made some other forms of asset forfeiture controversial.
• The new Kleptocracy Asset Recovery Rewards whistleblower program could be a powerful incentive to turn lawyers, bankers and other professionals who have helped launder Russian illicit finance against their criminal clients. However, only $450,000 was appropriated for the rewards fund (though this can be topped up by Treasury), and individual awards are capped at $5 million. No payments have yet been made under the scheme. Congress should appropriate further funds and raise the cap to encourage participation.
• Assets seized from Russian oligarchs and other state-linked entities by the U.S. through civil or criminal forfeiture proceedings should be placed in a new fund to eventually be disbursed for Ukraine’s reconstruction needs. In certain circumstances the U.S. should also consider seizing Russian assets frozen by U.S. sanctions to be placed in the fund, though doing so is more legally complicated.