Them and Usmanov: following the trail of hidden funds and London property

In March 2022, following the Russian invasion of Ukraine, several Russian oligarchs were placed on sanctions lists with all of their assets frozen by the UK. 

Alisher Usmanov was one of them. Dubbed ‘one of Putin’s favourite oligarchs’, Uzbek-born Usmanov has a (known) minimum net worth of US$19B. Several U.S. senators describe him as “one of Russia’s most politically influential oligarchs, with close ties to the Kremlin.”

Sanctions are for schmucks

Making his wealth during the collapse of the Soviet Union, investing in metal and mining operations, Usmanov has a long history of having fingers in various Russian and British pies. Some of the most notable include large financial stakes in English football clubs Arsenal and Everton, Beechwood House in Highgate, worth an estimated £48 million, and the 16th century Sutton Place estate in Surrey. He also co-owns Russia’s second largest mobile operator MegaFon and is a majority shareholder in numerous other companies.

So when faced with travel bans and international sanctions, Usmanov would not be deterred. This is just one story of how Usmanov tried to sidestep efforts to stop him continuing to do business with various property companies across the UK. 

Usmanov vs. First AML

A ‘simple’ transaction

On the surface it was a simple transaction; the sublease of a London property by a company entity. 

However, given the geopolitical situation and the fact the director of the company entity was Russian, the real estate firm responsible for the subleasing decided to take a closer look. They expected there would be some red flags, but not much more. 

This expectation quickly changed when compliance specialist Will (name changed for privacy reasons) first opened the case. “I initially received the company structure from Luke (name changed for privacy reasons,) the director of the original company subleasing the London property. We thought he would come up with a red flag on the PEP check but he didn't. He was squeaky clean.”

The director, Luke, provided an ownership structure chart, and he himself passed all checks and didn’t appear in any adverse media. 

 A flimsy façade

As per procedure, Will did a deep dive analysis of the company structure chart to identify the root entity. 

About 10 layers deep, Will found that Russian oligarch Alisher Usmanov was an ultimate beneficial owner (UBO) with 49% of the root entity. As a UBO, his identity needed to be verified. 

“I immediately knew the name Alisher Usmanov. I follow football and knew he owned some of the big football clubs here in the UK”, said Will. “I knew he was a big deal; he owned the biggest yacht in the world and a lot of big companies,” remarks Will. 

“I knew he was a big deal; he owned the biggest yacht in the world and a lot of big companies.”

To confirm that the entity was connected to the correct individual, Will sourced online articles referencing the specific root entity that Usmanov owns. 

Those articles also showed that he circumvented the UK sanctions list by selling his stake in a London mansion which was owned by that company… three days before the invasion of Ukraine. 

“I considered asking Luke to put me in contact with someone that can give me a photo ID and proof of address for Usmanov, but obviously that was going to be extremely hard.”

Putin’s right hand man

Because of Usmanov’s high profile, Will knew it would be difficult to obtain certified documents from him. “It would take Luke himself six months to get documents from Usmanov, let alone me, an analyst he’s never heard of,” says Will.

Usmanov circumvented the UK sanctions list by selling his stake in a London mansion which was owned by that company… three days before the invasion of Ukraine. 

Despite being on multiple global sanctions lists, he managed to continue doing business in the UK by exploiting a loophole. Usmanov utilised the tactic of owning 49% of the companies conducting business on his behalf, keeping himself just below the 50% threshold for being flagged by the sanctions.

“He conveniently only owned 49%, so ultimately, he knew what he was doing,” says Will.

The nitty gritty

As Usmanov was so well known, an ID wasn’t necessary to run an AML check against. Will ran his name and date of birth through the PEP and sanctions screening.  “And he popped every red flag.” 

But the verification red flags weren’t enough. Will needed to connect Usmanov to the property transaction. After analysing several sources, Will concluded that Usmanov should be flagged as a politically exposed person (PEP.)

Will found that Usmanov lawfully transferred his shares in a London-based property firm, which served as a root entity on February 21st, three days prior to the invasion of Ukraine and the implementation of a complete asset freeze. Will deduced that Usmanov had a substantial stake in the company, which allowed him to establish a connection to the subleasing case. 

Not all crime fighters wear capes

Will felt both shock and excitement once he made the connection.

“It felt good to actually stop these kinds of transactions going through, and let others know the good work that AML analysts do behind the scenes. It’s also kind of exciting. I’ve done this role for a long time, and you do - in the UK, especially - come across these kinds of instances where bad people are profiting from illegal sources.”

The client had just started using the First AML platform and this was the first case. It’s a testament to see that they caught one of the top three oligarchs on their first go. 

Not above the law

“Being a savvy businessman, Usmanov assumed he was able to evade the sanctions, but it didn't work" said Will.

Based on the results, the relationship did not proceed, with the MLRO commenting: "Don't contact Luke, or anyone else on the case, we cannot proceed." 

This sobering outcome underscores the critical role that AML technology plays in identifying and preventing financial crimes. It also highlights the moral courage needed from individuals when they encounter illicit activities at odds with commercial business interests.

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