Sanctioning an Oligarch Is Not So Easy: Why the Money Trail of Alisher Usmanov, One of Russia’s Wealthiest Men, Is Difficult to Follow

Alisher Usmanov, who has been close­ly tied to top Russian lead­ers, hides behind trusts, secre­tive off­shore com­pa­nies, Swiss bank accounts, and his fam­i­ly mem­bers to detach his name from his billions.

In response to the Russian inva­sion of Ukraine, Russian oli­garch Alisher Usmanov — one of the world’s 100 wealth­i­est peo­ple — has been sanc­tioned by the United States, the United Kingdom, and the European Union.

As a par­tic­u­lar­ly well-con­nect­ed fig­ure, Usmanov is an obvi­ous tar­get. He has been accused of being close to President Putin, pro­vid­ing lux­u­ri­ous homes to for­mer Prime Minister Dmitry Medvedev, and oth­er­wise sup­port­ing Russia’s rul­ing regime. As the own­er of the busi­ness dai­ly Kommersant, he fired an edi­tor and a top man­ag­er who over­saw its report­ing on elec­tion vio­la­tions com­mit­ted by the rul­ing United Russia party.

Western sanc­tions against Russian oli­garchs are meant to deny them the enjoy­ment of their wealth and, in effect, to pun­ish them for their sup­port of the Putin regime. But as the world is rapid­ly dis­cov­er­ing, it’s not so sim­ple to sanc­tion an oligarch.

Usmanov’s $19-mil­lion Sardinian vil­la may have been seized by the Italian gov­ern­ment. But German author­i­ties appear to have strug­gled to for­mal­ly impound his infa­mous $600 mil­lion yacht, the Dilbar, which is moored in Hamburg.

“The yacht is reg­is­tered in the Cayman Islands and owned through Klaret Continental Leasing, a com­pa­ny based in Malta,” Forbes report­ed, “mak­ing it dif­fi­cult to tie direct­ly to Usmanov for the pur­pose of sanctions.”

On paper, Usmanov holds only a 49-per­cent stake in his main busi­ness con­glom­er­ate, mak­ing it a dif­fi­cult tar­get because the U.S. Treasury uses a 50-per­cent thresh­old when impos­ing sanc­tions. (He has described this arrange­ment as a “coin­ci­dence.”)

And he has bil­lions in assets that will be even hard­er to trace. The Uzbek-born busi­ness­man has spent years shuf­fling mon­ey around the world among var­i­ous rel­a­tives, shell com­pa­nies, and trusts.

Given Usmanov’s skill in exploit­ing the glob­al finan­cial sys­tem and its built-in loop­holes, it’s unclear whether even iden­ti­fy­ing all of his assets is pos­si­ble, much less sanc­tion­ing them.

Using infor­ma­tion from sev­er­al large leaks of finan­cial doc­u­ments and data, includ­ing Suisse Secrets, the Panama Papers, and FinCEN Files, reporters from OCCRP and the Guardian have pieced togeth­er a par­tial pic­ture of how Usmanov has hid­den his assets in secre­tive havens like Cyprus, Bermuda, and the British Virgin Islands — and how his mon­ey con­tin­ued to flow through off­shore enti­ties for years, even as gov­ern­ment offi­cials made inquiries and bank­ing insti­tu­tions raised red flags about its hid­den ori­gins and signs of pos­si­ble mon­ey laundering.

Though some of the data dates as far back as 2004, at least some of the shell com­pa­nies Usmanov used were oper­a­tional as recent­ly as 2021.

In response to ques­tions sent by reporters, an Usmanov rep­re­sen­ta­tive denied that “Mr. Usmanov has ever dis­trib­uted his wealth among his rel­a­tives in order to con­ceal it from any gov­ern­ments” and said that this alle­ga­tion is “base­less and unsubstantiated.”

In an ear­li­er com­mu­ni­ca­tion, how­ev­er, Usmanov’s press ser­vice wrote that his U.K. real estate and his enor­mous yacht were a “long time ago trans­ferred into irrev­o­ca­ble trusts” whose ben­e­fi­cial rights now belong to his family.

“All of Mr. Usmanov’s busi­ness­es have been audit­ed by Big 4 [audit] com­pa­nies, since their incep­tion, as well as were his per­son­al tax returns and expens­es,” his press ser­vice wrote. “All of his invest­ments, his expens­es and his income have gone through strict com­pli­ance procedures.”

The Origins of Usmanov’s Billions

Unlike the for­tunes of many oth­er Russian oli­garchs, there is no evi­dence that Usmanov’s bil­lions have their ori­gins in shady post-Soviet pri­va­ti­za­tion schemes. But there is no ques­tion that he has ben­e­fit­ted from close gov­ern­ment ties, espe­cial­ly with state gas giant Gazprom.
After first becom­ing wealthy sell­ing plas­tic bags in the last years of the Soviet Union, he grew his assets into the bil­lions of dol­lars on the back of a vari­ety of busi­ness­es and invest­ments in the sub­se­quent decades.
While often described as an oli­garch, Usmanov tries to dis­tance him­self from the term, which implies dubi­ous finan­cial gain.
“All the assets my part­ners and I bought in Russia were from the sec­ondary mar­ket, not in any so-called pri­va­ti­za­tion process­es,” he told the Financial Times in 2020. “No one ever gift­ed any­thing to me.”
Usmanov’s busi­ness suc­cess in the 1990s led the state-owned gas monop­oly Gazprom to appoint him head of its invest­ment arm. In that role, he direct­ed the com­pa­ny to pur­chase stakes in Russian steel enter­pris­es, crit­i­cal for pro­duc­ing pipes for trans­port­ing gas.
Later, when Gazprom deemed these assets “non­core,” Usmanov and his busi­ness part­ners pur­chased them from his employ­er — a con­flict of inter­est that the tycoon did not deny in his Financial Times inter­view.
In 2017, Russian anti-cor­rup­tion activist Alexey Navalny accused Usmanov of hav­ing de fac­to pri­va­tized Russian steel enter­pris­es with the help of an off­shore com­pa­ny. Several months lat­er, cit­ing doc­u­ments from the Paradise Papers leak, which con­tained mate­r­i­al from off­shore cor­po­rate ser­vice providers, Navalny alleged that Usmanov had loaned mon­ey from Gazprom’s invest­ment arm — where he still served as gen­er­al direc­tor — to an inter­me­di­ary off­shore com­pa­ny run by his part­ner in order to make a large invest­ment in Facebook.
At one point, Usmanov claimed to own 8 per­cent of the social net­work­ing company’s shares. Usmanov has also invest­ed in Russian inter­net ser­vices and in the mobile phone provider MegaFon, part­nered with Chinese tech firm Alibaba, and report­ed­ly pur­chased a $100 mil­lion stake in Apple.

The World’s Wealthiest Gynecologist?

Saodat Narzieva is a 56-year-old obste­tri­cian and gyne­col­o­gist who lives in Uzbekistan.

She has prac­ticed med­i­cine for over thir­ty years, pre­sum­ably earn­ing a com­fort­able income as the deputy chief doc­tor of Maternity Hospital Number 6 in Tashkent.

Even so, her lifestyle is unusu­al­ly chic for an Uzbekistani doctor.

Her Facebook pho­tos show that she has trav­eled to Venice, Sardinia, and Dubai, fly­ing on a pri­vate jet, enjoy­ing a VIP air­line lounge, and cruis­ing on a yacht.

She has also vaca­tioned on the Costa Smeralda, a stretch of land along the north­east coast of Sardinia known for its excel­lent beach­es and turquoise waters.

And if that weren’t enough, leaked data from Credit Suisse shows that Narzieva is list­ed as the ben­e­fi­cial own­er of 27 Swiss bank accounts through which bil­lions of dol­lars have passed over the years. At its max­i­mum bal­ance in April 2011, just one of these accounts held over $2.1 bil­lion. Many of the oth­ers also had max­i­mum bal­ances in the hun­dreds of millions.

Obviously, Narzieva is no ordi­nary gynecologist.

In fact, she is the sis­ter of Alisher Usmanov.

Her lifestyle is an exam­ple of the kind of lux­u­ry acces­si­ble to oli­garchs’ rel­a­tives. But her rich­es — and those Swiss bank accounts in par­tic­u­lar — are also evi­dence of how even high­ly-respect­ed Western banks can help obscure the con­nec­tions between oli­garchs and their money.

It’s not clear why Narzieva would be list­ed as a ben­e­fi­cial own­er of these accounts. The data shows that they are cor­po­rate accounts — and six­teen of them list con­tact infor­ma­tion asso­ci­at­ed with USM Group, the mas­sive hold­ing struc­ture her broth­er uses to unite his busi­ness interests.

The leaked Credit Suisse data does not name the spe­cif­ic legal enti­ties that own the accounts. But one of Narzieva’s account num­bers match­es an account num­ber found in the FinCEN Files, a leak con­tain­ing reports about sus­pi­cious finan­cial trans­ac­tions. This allowed reporters to iden­ti­fy the enti­ty as Gallagher Holdings, one of the main hold­ing com­pa­nies Usmanov used to con­trol his fortune.

Since Usmanov is known to have been the ben­e­fi­cial own­er of Gallagher Holdings, the Credit Suisse records list­ing his sis­ter as the ben­e­fi­cial own­er of its bank account rais­es questions.

Moreover, ten of the Credit Suisse accounts were opened in 2013, a peri­od when Usmanov was restruc­tur­ing his busi­ness empire and open­ing com­pa­nies for Narzieva, his oth­er sis­ter Gulbakhor Ismailova, her hus­band, and two busi­ness associates.

“This is a strange sto­ry,” wrote Graham Barrow, a spe­cial­ist on finan­cial crime, after reporters con­veyed these findings.

“From my expe­ri­ence, it is quite unusu­al for so close a fam­i­ly mem­ber to be used as a proxy,” he wrote. “It is hard to tell why they should have done so in this case, but maybe the fact of the sis­ter not being well known, and poten­tial­ly a close and sup­port­ive rela­tion­ship between the bank and Usmanov, led to a fail­ure of robust due diligence.”

Enhanced Due Diligence

Barrow fur­ther explained how Credit Suisse should have treat­ed Usmanov’s accounts, and why the arrange­ment uncov­ered by reporters rais­es ques­tions.
“Because Alisher Usmanov would need to be dealt with as a PEP [Politically Exposed Person] (and there­fore a high risk client), the bank is also required to treat his rel­a­tives and close asso­ciates in the same way,” he said.
“This means per­form­ing enhanced due dili­gence, which includes (amongst oth­er things) obtain­ing and con­firm­ing the client’s source of wealth as well as ver­i­fy­ing the ben­e­fi­cial own­er­ship of cor­po­rate vehi­cles. If [his sis­ter] is list­ed as [ben­e­fi­cial own­er], then it ought to fol­low that she was the ben­e­fi­cial own­er of the under­ly­ing enti­ties. If not, then it would require some work to explain why her name appears on the paper­work and not her brother’s.”
“[I]f the sis­ter tru­ly was the [ulti­mate ben­e­fi­cial own­er], this rais­es all sorts of ques­tions. Was the sister’s lifestyle, as ben­e­fi­cial own­er of these com­pa­nies with huge trans­ac­tions, com­men­su­rate with that finan­cial activ­i­ty. If not, was it like­ly she was being used as a proxy for Alisher in which case, they should have respond­ed accord­ing­ly.”
“Where it was clear that the ben­e­fi­cial own­er was dif­fer­ent from the one on their records, it strong­ly sug­gests that robust [enhanced due dili­gence] had not tak­en place.”
“This is, of course, entire­ly sup­po­si­tion and the true answer may nev­er be known.”

Usmanov’s press ser­vice sim­ply denied the find­ings: “We cat­e­gor­i­cal­ly deny that Ms Saodat Narzieva had any pos­ses­sion or con­trol of any accounts in Swiss banks on behalf of her broth­er, Mr Alisher Usmanov, nor did she have any sig­na­to­ry con­trol over any accounts relat­ed to Mr Usmanov,” he wrote.

In a state­ment emailed to reporters, a rep­re­sen­ta­tive of Credit Suisse said that the bank “can­not com­ment on poten­tial client rela­tion­ships,” not­ed that it “applies all sanc­tions, in par­tic­u­lar those issued by the EU, the United States and by Switzerland,” and reject­ed “alle­ga­tions and insin­u­a­tions about the bank’s pur­port­ed busi­ness practices.”

Suspicious Activities

Though 27 Swiss bank accounts may sound like a lot, they rep­re­sent just a frac­tion of the Usmanov-asso­ci­at­ed accounts held at Credit Suisse and oth­er bank­ing insti­tu­tions around the world.

The FiNCEN Files leak — which con­sists of over 2,100 Suspicious Activity Reports (SARs) sub­mit­ted to the U.S. Treasury Department by banks and oth­er finan­cial play­ers — show that Usmanov and his com­pa­nies held dozens more accounts at Credit Suisse, and at oth­er banks in Cyprus, Russia, and Latvia.

While some of these were Usmanov’s per­son­al accounts or belonged to his real Russian busi­ness­es, many oth­ers were held by his off­shore hold­ing com­pa­nies or shell com­pa­nies that appeared to have no clear busi­ness pur­pose and were reg­is­tered in secre­tive juris­dic­tions like Cyprus and the British Virgin Islands.

What’s inter­est­ing about the FinCEN Files data is not just the exis­tence of so many bank accounts, but how Usmanov used them to obscure his wealth.

Even bank­ing pro­fes­sion­als had trou­ble fig­ur­ing out how and why Usmanov’s cash flowed around the world, puz­zled by the sheer num­ber of seem­ing­ly unre­lat­ed com­pa­nies with which he engaged in transactions.

The SARs show how bank offi­cers repeat­ed­ly flagged sus­pi­cious trans­ac­tions totalling bil­lions of dol­lars, many of which had no clear busi­ness pur­pose, exhib­it­ed signs of pos­si­ble mon­ey laun­der­ing, had no clear ori­gin, or raised oth­er suspicions.

For exam­ple, a bank offi­cer with BNY Mellon, a lender head­quar­tered in New York that act­ed as a cor­re­spon­dent bank for Usmanov’s Gallagher Holdings, iden­ti­fied nine bank accounts belong­ing to the com­pa­ny that car­ried out 182 sus­pi­cious wire trans­fers, total­ing over $1.6 bil­lion, between March 2003 and January 2015.

In a report sub­mit­ted to the U.S. Treasury on December 23, 2016, the offi­cer wrote that “the wires are pri­mar­i­ly sus­pi­cious because Gallagher … appears to be a shell enti­ty, incor­po­rat­ed in Cyprus and bank­ing in Cyprus, Russia, and Switzerland, that con­ducts a sig­nif­i­cant amount of wires with numer­ous oth­er shell entities.”

As fur­ther rea­sons for sus­pi­cion, the offi­cer not­ed a num­ber of oth­er points:

As one exam­ple of an espe­cial­ly sus­pi­cious trans­ac­tion, the offi­cer described a $49.5 mil­lion wire trans­fer Gallagher received in April 2004.

The mon­ey came from a Bahamas-based “cor­po­rate lender” called Sevenkey Limited — whose own­er, the offi­cer wrote, “was a trust for the ben­e­fit of Igor Shuvalov, a for­mer top aide to [Russian President Vladimir] Putin.”

Gallagher then used the $49.5 mil­lion to acquire a stake in a British steel­mak­er called Corus Group.

“BNYM … is con­cerned that the funds ulti­mate­ly came from an indi­vid­ual with such close ties to Putin,” the offi­cer wrote.

The Shuvalov Windfall

The BNY Mellon employee’s sus­pi­cions appear to have been well-placed. As report­ed by Barron’s in a detailed 2011 inves­ti­ga­tion and then con­firmed by the Financial Times, the loan to Usmanov’s com­pa­ny result­ed in a large finan­cial wind­fall for Shuvalov.
Having loaned Usmanov’s com­pa­ny the $49.5 mil­lion, ini­tial­ly at a 5 per­cent inter­est rate, Shuvalov’s Sevenkey end­ed up earn­ing back $119 mil­lion a few years lat­er after an amend­ment to the loan terms. This rep­re­sent­ed a 40 per­cent annu­al­ized rate of return.
As not­ed by Barron’s, Gallagher’s draft finan­cial reports showed that the com­pa­ny “was able to bor­row from banks at a rate of about 9 per­cent dur­ing that peri­od. That invites the ques­tion of why it bor­rowed from Sevenkey [at such a high rate].”
Having been named Russia’s First Deputy Prime Minister, Barron’s also not­ed, Shuvalov approved the government’s back­ing of near­ly $1 bil­lion in loans to a com­pa­ny con­trolled by Usmanov.
This was not Shuvalov’s only busi­ness arrange­ment that appeared to involve a con­flict of inter­est. In 2004, Sevenkey bought an $18 mil­lion share in the state gas giant, Gazprom, just before the Russian gov­ern­ment relaxed its invest­ment rules to allow for­eign­ers to invest in the com­pa­ny. The reform led to a surge in its stock price, earn­ing Sevenkeys more than $100 mil­lion on its pur­chase by 2008.
In response to inquiries from both Barron’s and the Financial Times, Shuvalov denied any wrong­do­ing.
By the 2010s, Shuvalov was known as one of Russia’s wealth­i­est pub­lic ser­vants. In 2016, Russian oppo­si­tion leader Alexei Navalny pub­lished an inves­ti­ga­tion show­ing that Shuvalov used a pri­vate jet worth over $50 mil­lion to trans­port his wife’s cor­gis to dog shows across Europe.

While these trans­ac­tions involved exter­nal senders and recip­i­ents, a sep­a­rate report filed by Deutsche Bank in July 2017 shows that Usmanov also moved mon­ey around with­in his own busi­ness empire in ways that raised suspicions.

Deutsche Bank report­ed six trans­fers, total­ing over $190 mil­lion, that Usmanov sent to him­self over a peri­od of three months in 2017. The trans­ac­tions moved “through mul­ti­ple per­son­al accounts and accounts for off­shore enti­ties that [Usmanov] con­trols … with no appar­ent eco­nom­ic pur­pose,” the report reads.

“Although the trans­ac­tion details indi­cate that the pay­ments … were for ‘TRANSFER OF OWN FUNDS’ and ‘DIVIDEND RESOLUTION,’” Deutsche Bank wrote that it was “unable to con­firm the com­mer­cial pur­pose of any of these trans­ac­tions through inde­pen­dent research.”

In anoth­er report from February 2017, Deutsche Bank showed how Usmanov sent mon­ey to his sis­ter, Narzieva, in a way that raised ques­tions about his true intent. The bank offi­cer list­ed two wires, total­ing over $667,000, he had sent to her the pre­vi­ous year under the description“family funds transfer.”

“This appears to be an unusu­al­ly large sum of mon­ey exchanged to a fam­i­ly mem­ber,” the bank offi­cer wrote.

A May 2017 report filed by JP Morgan Chase Bank high­light­ed a 2012 trans­fer of $3 mil­lion to Narzieva marked sim­ply: “gift.”

Five months lat­er, she sent $100,000 back to her broth­er in two trans­fers. The pay­ment details stat­ed that the funds had been sent “to the broth­er for cur­rent expens­es” — an amus­ing claim, con­sid­er­ing that Narzieva’s broth­er is a world-famous multi-billionaire.

Another report, this one filed by Standard Chartered Bank in October 2017, shows what Narzieva appears to have done with most of the $3 mil­lion her broth­er sent her.

“After receiv­ing the $3M gift,” the bank offi­cer wrote,” she “remit­ted funds total­ing over $2.5M to [Shokhrukh] NASIRKHODJAEV,” who has been “iden­ti­fied as the direc­tor of a steel com­pa­ny in the UAE.”

“The pur­pose of the wire trans­fers between NARZIEVA and coun­ter­par­ty NASIRKHODJAEV … could not be estab­lished,” Standard Chartered Bank wrote, “as they appear to be engaged in dif­fer­ent lines of busi­ness as a doc­tor and man­ag­ing direc­tor of a steel com­pa­ny, respectively.”

What the report does not men­tion, but OCCRP con­firmed through com­ments that appear in her Facebook account, is that Nasirkhodjaev is Narzieva’s son-in-law.

Trusts and Secrets

Usmanov’s more con­crete assets — shares in his busi­ness empire, real estate, and a megay­acht — are hid­den away in trusts or owned by off­shore com­pa­nies whose pre­cise own­er­ship, and con­nec­tion to him, is dif­fi­cult to establish.

In 2018, after Russia faced a new round of U.S. sanc­tions, Usmanov reor­ga­nized his cor­po­rate struc­tures, putting 49 per­cent of USM’s core assets under his own imme­di­ate con­trol through Russia. The remain­ing 51 per­cent are still scat­tered across mul­ti­ple busi­ness asso­ciates and off­shore com­pa­nies across the world, mak­ing it impos­si­ble to sanc­tion under cur­rent rules.

Thanks to Usmanov’s prof­li­gate use of secre­tive off­shore com­pa­nies, the per­son­al assets he and his fam­i­ly mem­bers have acquired over the years are also hard to firm­ly link to him.

Although the $600-mil­lion “Dilbar” supery­acht is wide­ly known to belong to Usmanov, the own­er­ship of an Airbus H175 heli­copter that sits on the yacht was trans­ferred in 2018 to a Cayman Islands com­pa­ny that can­not be traced to him.

The heli­copter can be defin­i­tive­ly linked to Usmanov after that date only because it has been pho­tographed phys­i­cal­ly present on the yacht.

The yacht itself, Usmanov’s press ser­vice wrote reporters, has been trans­ferred into an “irrev­o­ca­ble trust” that he does not own and whose ben­e­fi­cial rights had been “donat­ed” to his family.

Also belong­ing to a trust, his rep­re­sen­ta­tive wrote, is real estate held by Usmanov in the United Kingdom. The best-known of his prop­er­ties is Sutton Place, a 16th-cen­tu­ry Tudor manor house in the English coun­ty of Surrey.

The prop­er­ty, worth at least $40 mil­lion when it was list­ed for sale in the 1990s, is so famous­ly tied to Usmanov that even its Wikipedia page lists him as its own­er. But the two Cyprus com­pa­nies that hold it are them­selves owned by a trust ser­vices firm that can­not be linked to Usmanov through paper­work. The Financial Times devot­ed an entire inves­ti­ga­tion to the ques­tion of whether Usmanov “real­ly owns” Sutton Place, and was unable to arrive at an answer.

Finally, as part of OCCRP’s Russian Asset Tracker project, reporters iden­ti­fied six coastal vil­las con­nect­ed to Usmanov on the Italian island of Sardinia.

He owns just one of them direct­ly. Two more are owned by his sis­ter Gulbakhor Ismailova. The rest are held through com­plex cor­po­rate struc­tures that lead to a com­pa­ny incor­po­rat­ed in Bermuda.

The trail would have gone cold there — if not for a billing spread­sheet tying the com­pa­ny to Usmanov that was unearthed in a set of leaked records from an off­shore ser­vices provider.

These are the lengths it takes to con­nect one of Russia’s most infa­mous bil­lion­aires to his own possessions.

Original source of arti­cle: https://www.occrp.org/en/