New US sanctions target trust companies and corporate service providers for the first time

While the indus­tries are now barred from work­ing with any­one inside Russia, pro­fes­sion­al enablers of finan­cial secre­cy in states like Wyoming and Alaska have opposed pro­pos­als to increase transparency.

The United States has for the first time sin­gled out trust com­pa­nies and cor­po­rate ser­vice providers in a sanc­tions pack­age, bar­ring the indus­tries from future work with any­one inside Russia.

The U.S. Treasury announced its ban on Sunday as part of a coor­di­nat­ed glob­al response to Russia’s inva­sion of Ukraine. The deci­sion will “cut off access to ser­vices that are used by the Russian Federation and Russian elites to evade sanc­tions,” the depart­ment said.

To the best of my knowl­edge this is the first time we’ve sin­gled TCSPs out like that,” said Morgan Finkelstein, the U.S. Treasury spokesper­son on ter­ror­ism and finan­cial intel­li­gence, refer­ring to trust and cor­po­rate ser­vice providers.

The announce­ment comes five months after the release of the Pandora Papers, a media inves­ti­ga­tion pub­lished in October by the International Consortium of Investigative Journalists, The Washington Post and more than 150 oth­er media out­lets. The sto­ries exposed how oli­garchs, polit­i­cal elites and oth­ers hide wealth in tax havens around the world, includ­ing the United States.

The inves­ti­ga­tion iden­ti­fied U.S.-based trust com­pa­nies that helped cre­ate more than 200 trusts hold­ing com­bined assets worth more than $1 bil­lion. Nearly 30 trusts, many of which were in South Dakota, held assets linked to peo­ple or com­pa­nies accused of fraud, bribery or human rights abuses.

Photo tak­en on Feb. 28, 2022 shows the U.S. Department of the Treasury in Washington, D.C., the United States. The Treasury Department on Monday announced a fresh round of sanc­tions tar­get­ing Russia’s cen­tral bank, the coun­try’s finan­cial tools as well as a rel­e­vant indi­vid­ual, in response to Moscow’s ongo­ing mil­i­tary oper­a­tions in Ukraine. (Photo by Liu Jie/Xinhua via Getty Images)

One cor­po­rate ser­vice provider in Jackson, Wyoming, helped Russian oli­garch Igor Makarov cre­ate a secre­tive trust and com­pa­ny in 2016, records show. Makarov has since been sanc­tioned by Canada and Australia for his alleged ties to the Kremlin. Makarov pre­vi­ous­ly denied hav­ing ties to President Vladimir Putin.

The Pandora Papers inves­ti­ga­tion and Russia’s inva­sion of Ukraine prompt­ed law­mak­ers across the coun­try to con­sid­er changes to state laws that allow own­ers of trusts and lim­it­ed lia­bil­i­ty com­pa­nies to oper­ate in almost total anonymity.

One bill before the leg­is­la­ture in Alaska requires trusts to share with the state the names of so-called set­t­lors and ben­e­fi­cia­ries. A sep­a­rate bill in New York goes fur­ther, propos­ing a pub­lic reg­is­ter of own­ers of lim­it­ed lia­bil­i­ty com­pa­nies, a pop­u­lar cor­po­rate struc­ture that also has a long his­to­ry of abuse by klep­to­crats, drug and arms traf­fick­ers and fraudsters.

Trust and cor­po­rate ser­vice providers have opposed reform, argu­ing that the 2021 Corporate Transparency Act will large­ly solve the prob­lem. Requiring own­ers of trusts and com­pa­nies to dis­close their iden­ti­ties in one U.S. state will lead them to relo­cate else­where, lob­by­ists and trust providers have warned.

There’s noth­ing this body can do to resolve this prob­lem,” Christopher Reimer, a part­ner with law firm Long Reimer Winegar, told Wyoming law­mak­ers dur­ing a hear­ing last month in response to ques­tions about bad actors exploit­ing trusts and companies.

Lawmakers called the hear­ing in response to ICIJ and the Washington Post’s rev­e­la­tions that showed how Russian bil­lion­aire Makarov set up a trust and com­pa­ny in Wyoming to own a pri­vate jet and real estate projects in Europe.

Makarov, who made his for­tune sell­ing Russian gas, was includ­ed in a 2017 U.S. Treasury Department list of oli­garchs and polit­i­cal fig­ures close to the Russian gov­ern­ment. Last month, Canada and Australia sanc­tioned Makarov. In a state­ment, Canada’s gov­ern­ment called a hand­ful of Russians, includ­ing Makarov, who made his for­tune sell­ing Russian gas, “close asso­ciates of the Russian regime … who were sanc­tioned for their com­plic­i­ty in Russia’s unjus­ti­fi­able inva­sion of Ukraine.” Makarov is not sub­ject to sanc­tions by the United States.

Records show Frontier Registered Agency Services LLC, an affil­i­ate of Long Reimer Winegar, rep­re­sent­ed Makarov’s trust com­pa­ny in Wyoming from 2016 until ear­li­er this year.

Long Reimer Winegar did not respond to requests for comment.

Makarov’s U.S. attor­ney, Brian Wolf, did not respond to ques­tions about sanc­tions or why the trust com­pa­ny was closed months after the Pandora Papers investigation.

Mike Yin, a Democratic law­mak­er in Wyoming who attend­ed the hear­ing, said he would have pre­ferred to know about Makarov’s con­nec­tion to Long Reimer and Winegar before Reimer’s pre­sen­ta­tion on the Pandora Papers.

Sure, there have been some eco­nom­ic ben­e­fits from the trust indus­try,” said Yin, who rep­re­sents areas of the town from where Makarov’s trust and com­pa­ny were man­aged. “But I’m a lit­tle skep­ti­cal that any issues we have with ter­ri­ble peo­ple who hold mon­ey here are just going to mag­i­cal­ly end.”

Original source of arti­cle: www.icij.org

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