John Hardie

Feb 5, 2021


A Moscow court on Tuesday sentenced leading opposition figure Alexei Navalny to almost three years in a penal colony, ruling he violated parole while in Germany recuperating from a recent chemical weapon attack perpetrated by Russian security forces. The sham ruling, almost certainly handed down by the Kremlin, drew swift condemnation from Washington and other Western nations. As Moscow continues to reject Western calls for Navalny’s release, the Biden administration is rightly considering sanctioning Russian officials responsible for poisoning and jailing Navalny.


But while such sanctions would be a good first step, the West’s response cannot stop there. As Navalny himself argues, simply targeting order-followers isn’t enough; to truly hold Moscow accountable and incentivize better behavior among Russia’s elite, Western sanctions must target “the people with the money.” The Biden administration should heed Navalny’s call to crack down on Russia’s dirty money—something Washington and its allies should be doing anyway for national security reasons. In so doing, President Joe Biden can make good on his promises to “hold the Putin regime accountable for its crimes,” fight foreign kleptocracy and illicit finance, and revitalize America’s “commitment to advancing human rights and democracy around the world.”


While convalescing in a German hospital after narrowly surviving the attack, Navalny urged the West to respond by getting tough on the “criminal money” of the Putin regime. “What Putin cares about is power and personal enrichment, and the two are inseparably linked,” Navalny explained. “How many billions can he give to his daughters, his friends? Despite all the sanctions imposed so far, things are still quite comfortable for these people in the West.”


Indeed, while Washington and its European allies have sanctioned dozens of Russian oligarchs, cronies, and corrupt officials in recent years, these efforts have fallen short in several important ways.


For starters, many key figures remain undesignated. Testifying before the European Parliament in November, Navalny specifically highlighted Russian billionaires Roman Abramovich and Alisher Usmanov, both of whom have extensive assets in Europe. In 2018, UK intelligence reportedly concluded the two men do “the Kremlin’s bidding on a whole range of fronts, which includes using their financial muscle on behalf of the Russian state.” Such activity would qualify them for U.S. sanctions, yet neither has been designated. “As long as Usmanov’s yachts are in Barcelona and Monaco, no one in the Kremlin will take sanctions seriously,” Navalny warned.

Furthermore, Western sanctions have often failed to target the close associates who facilitate and profit from the corruption of key regime figures. For example, Navalny has advocated sanctions against Dmitry Patrushev and Denis Bortnikov, high-ranking officials who allegedly serve as a “wallet” for the “ill-gotten gains” of their Western-sanctioned fathers, the respective heads of Russia’s Security Council and Federal Security Service, or FSB. Likewise, as scholar Anders Åslund has noted, “Putin has … parked substantial fortunes of at least half a billion US dollars each with” his close childhood friends Petr Kolbin, Sergei Roldugin, Vladimir Litvinenko, and Ilgam Ragimov, as well as with relatives Igor Putin, Vera Putina, Mikhail Putin, Kirill Shamalov, and Mikhail Shelomov. Yet only Kolbin and Shamalov have been sanctioned.


What’s more, even some designated individuals have managed to evade sanctions, often by exploiting vulnerabilities in U.S. and international defenses against illicit finance. The so-called “FinCEN Files,” for example, revealed that a shell company linked to Putin’s longtime friend Arkady Rotenberg, under U.S. and EU sanctions since 2014, moved at least $77.7 million through London-based Barclays from 2012 to 2016, with many of the transactions occurring after Rotenberg’s designation. A July Senate 2020 report likewise found that shells linked to Rotenberg and his brother Boris, also under U.S. sanctions, continued to access the U.S. market and financial system despite sanctions, including by exploiting anti-money laundering loopholes in the U.S. high-value art industry.


Testifying alongside Navalny in November, Russian pro-democracy activist Vladimir Kara-Murza beseeched the West to finally “stop enabling those corrupt and abusive officials and oligarchs who want to steal from our people in Russia and then come and enjoy their loot” in the West. The Russian people “expect” the free world “to stay true to [its] values,” he said.


Of course, combating Russian dirty money is not just a moral imperative. It’s also a necessary response to the threat posed by Russian illicit finance, which Moscow and its agents weaponize to support rogue regimes, facilitate strategic corruption, and finance active measures abroad. Kremlin-linked businessmen play an important role as both financiers and conduits of Putin’s political warfare against the West.


U.S.-sanctioned Russian billionaire Oleg Deripaska, for example, has long served as both a money launderer for Putin’s personal funds and an agent of Moscow’s influence abroad. In 2016, Deripaska allegedly bankrolled an illicit financial scheme designed to support Montenegro’s pro-Russia opposition and thus derail the country’s subsequent NATO accession. A couple years later, Greece-based billionaire Ivan Savvidis reportedly helped finance a similar operation, aimed at sinking a name-change agreement between North Macedonia and Greece that paved the way for the former’s own NATO accession. European intelligence reportedly indicates that Deripaska continues to control top Russian aluminum producer Rusal and its parent, EN+, thus violating a 2018 agreement requiring him to relinquish control in exchange for U.S. sanctions relief for the companies. Savvidis, for his part, has yet to be sanctioned.


As Biden himself has warned, Russian dark money also poses a threat to American democracy. In 2019, for example, associates of Trump lawyer Rudy Giuliani who worked for Kremlin-connected Ukrainian oligarch Dmitry Firtash were indicted for making $2 million in illegal campaign contributions secretly funded by a Russian businessman.


Biden should rally a multilateral campaign against Russian dirty money, starting by designating key unsanctioned oligarchs, cronies, and their supporting networks. To ensure it has sufficient manpower to support these efforts, Treasury should consider expanding its pool of Russia analysts and investigators. An interagency task force on Russian illicit finance could help break down bureaucratic siloes stifling cooperation. Working with allies, the administration should increase information sharing on Russian illicit finance and push for further internationalization of Global Magnitsky sanctions regimes, which should target corruption as well as human rights violations.


Just as important, Washington must continue working to improve financial transparency both at home and abroad. This year’s annual defense bill took the long-overdue step of banning anonymous shell companies, requiring corporations and LLCs to register their ultimate beneficial owners. In addition to standing up for that registry, Washington should now focus on closing remaining anti-money laundering loopholes, strengthening defenses against foreign dark money in U.S. politics and media, and promoting international adoption and enforcement of relevant global standards.


The U.S. response to Moscow’s treatment of Navalny will be an important early test of whether Biden will make good on his campaign promises. He’s got the playbook. Now’s the time to follow through, beginning by heeding Navalny’s call to crack down on Russia’s dirty money.


John Hardie is research manager and Russia research associate at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). FDD is a Washington, DC-based, research institute focusing on national security and foreign policy.