May 22, 2022

Volume XII, Number 142

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May 20, 2022

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New DOJ KleptoCapture Task Force to Enforce Russia Sanctions

On March 2, 2022, the U.S. Department of Justice (“DOJ”) announced the creation of the interagency Task Force KleptoCapture (the “Task Force”) to enforce the sanctions, export restrictions, and economic countermeasures against Russian officials and oligarchs in response to the conflict in Ukraine. The Task Force will consist of prosecutors and agents from numerous federal agencies and will have the authority to investigate and criminally prosecute sanctions violations, as well as seize and forfeit assets belonging to oligarchs and others who violate sanctions.

Background

In response to the conflict, the U.S. government and ally nations have imposed the most restrictive sanctions ever against a major economic power, designed to isolate Russia from global markets. President Biden signaled the creation of a task force to enforce these sanctions in his State of the Union address, stating, “I say to the Russian oligarchs and corrupt leaders who have bilked billions of dollars off this violent regime: no more. The U.S. Department of Justice is assembling a dedicated task force to go after the crimes of Russian oligarchs. We are joining with our European allies to find and seize your yachts, your luxury apartments, your private jets.” The following day, Attorney General Garland announced the launch of the Task Force, stating, “We will leave no stone unturned in our efforts to investigate, arrest, and prosecute those whose criminal acts enable the Russian government to continue this unjust war. Let me be clear: if you violate our laws, we will hold you accountable.”

The formation of the Task Force follows an increased awareness of the destabilizing threat of kleptocracies to national security as a June 2021 White House National Security Memorandum established the fight against corruption as a core national security policy.[1] Recently, Deputy Attorney General Lisa Monaco acknowledged this priority in her April 27th statement to the New York City Bar Association that sanctions are “the new FCPA.”

Structure of the Task Force

The Task Force will be run out of the Office of the Deputy Attorney General and is being led by Andrew Adams, who previously served as co-chief of the Southern District of New York’s Money Laundering and Transnational Criminal Enterprises unit. The Task Force leadership will also include Deputy Directors from the National Security and Criminal Divisions.

It will be staffed by attorneys from those Divisions as well as the Tax Division, Civil Division, and U.S. Attorneys’ Offices across the country, agents and analysts from the Federal Bureau of Investigation, the U.S. Marshals Service, the Internal Revenue Service, the Postal Inspection Service, the Department of Homeland Security, the Secret Service, and other agencies.

Additionally, the Task Force will work cooperatively with the transatlantic task force that President Biden, leaders of the European Commission, France, Germany, Italy, the United Kingdom, and Canada announced on February 26, 2022.  Where violators cannot be detained, assets will be seized and forfeited and information will be shared with foreign partners to further assist with the identification and recovery of assets abroad.

Resources and Tools Available to the Task Force

The Task Force will have access to advanced investigative tools and resources, including data analytics, cryptocurrency tracing, foreign intelligence sources, and information from financial regulators and private sectors partners.

With respect to the Task Force’s mission to “target[] efforts to use cryptocurrency to evade U.S. sanctions, launder proceeds of foreign corruption, or evade U.S. responses to Russian military aggression,” we expect it to coordinate with the recently established National Cryptocurrency Enforcement Team given the complex legal, technical, and policy issues associated with these types of investigations and enforcement actions.

We also expect the DOJ to employ its enhanced subpoena authority under the recently enacted Anti-Money Laundering Act of 2020, which provides a basis for DOJ and the Department of the Treasury to issue subpoenas to foreign banks with a U.S. correspondent account for “any records relating to . . . any account at the foreign bank, including records maintained outside the United States.”[2]

Additionally, the Task Force may receive public assistance as the conflict in Ukraine has met public outcry and further, the Kleptocracy Asset Recovery Rewards Act authorizes the Department of Treasury to reward individuals and entities that aid in identifying and recovering stolen assets connected to government corruption.[3]

Implications of the Task Force

The Task Force has been actively pursuing sanctions violations. On March 3, the day after the announcement of the Task Force, prosecutors unsealed an indictment against former Fox News employee, John Hanick, with allegations that he set up television stations for Russian oligarch, Konstantin Malofeyev, who allegedly violated sanctions imposed in 2014 by providing financial support to Russia. On April 6, prosecutors unsealed an indictment against Mr. Malofeyev as well.

The Task Force has sweeping implications for U.S. and international institutions with Russian clients or partners. U.S. financial institutions must conduct thorough due diligence to ensure they know their customers, including the beneficial owners of entities with which they do business. Additionally, financial institutions must consider that the termination of a client relationship could cause assets to be transferred beyond DOJ’s reach and should therefore assess whether measures intended to mitigate risk could have the unintended appearance of aiding a client to evade sanctions.

ENDNOTES

[1] White House Briefing Room, “Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest” (June 3, 2021), available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/06/03....

[2] AMLA § 6308.

[3] KARRA § 9703.

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume XII, Number 129
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About this Author

Chase S. Goldstein Government Investigations & White Collar Attorney Squire Patton Boggs Los Angeles, CA
Associate

Chase Goldstein represents international and domestic clients in white collar criminal matters, government enforcement actions and internal investigations.

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