Seize Kremlin financial assets to rebuild Ukraine

Seizing money from Kremlin cronies to rebuild Ukraine

Shell companies – companies whose beneficial owners are unknown – let the worst people in the world launder their fortunes. They have names like “ABC Ltd” or “XYX Inc”. They are incorporated by smart lawyers in lax and privacy-friendly jurisdictions: offshore, onshore in networks that cover both. The risk of exposure is minimal. The benefits are huge. The effects are pernicious.

Some countries already impose restrictions on front companies. In the United States, for example, they cannot buy prime real estate in certain areas. But the global outrage over Russia’s attack on Ukraine gives us a great chance to go much further.

The principle is simple. If these legal entities want the rights that real people have, such as signing contracts and using the legal system to assert or defend their claims, they must identify their true owners.

Here’s my plan: Anonymous entities should have no legal recourse. Any business (or trust or partnership) that wants to take legal action must identify its true owners. This can be one person or several (or several, for large listed companies). But without this information, he cannot prosecute or be prosecuted.

This simple provision would turn shell companies into outlaws. Few customers and suppliers would want to do business with them because the necessary contracts could not be executed. And it’s hard to rely on trust alone when you don’t know who you’re dealing with. Front companies would of course be free to do business with each other. If they wanted to become respectable, they would just explain who they really belong to. It would not suffice to say that the company belongs to another company, or to another form of legal jigger-poker. The rule is simple: without living, breathing, credible owners, you can have no legal representation and no access to the court system.

It would be an immediate and devastating blow to the plutocrats and kleptocrats who hide their identities behind the shield of corporate secrecy. These people — who include Azeris, Uzbeks, Kazakhs and Ukrainians as well as Kremlin cronies — fear the limelight. Explaining who they really are would expose them to awkward questions such as “how can you afford this asset on your official salary?”

I would go further. The next step would be to say that all shell corporations that own real estate must provide a beneficial owner the next time they file their property taxes. If they do not do so within a year, the property is confiscated: in effect, it belongs to the State.

A law-abiding and respectable landlord will have no difficulty in adhering to this rule. But kleptocrats will find this very difficult. They might try to appoint a lawyer or another pal – but then the question will immediately arise as to how this person managed to afford the property. In Britain, it could lead to the publication of an ‘unexplained wealth order’ – a potent but rarely used weapon in our anti-corruption arsenal.

This approach will have two laudable results: a flood of new information about who owns what, and a large sum of useful money from those who are unable to identify themselves. In theory, affected individuals could file human rights complaints citing confiscation of property. But to bring such an action, the litigants would have to identify themselves, thus solving the problem.

The same principle could be applied to other trophies like yachts and private jets. But real estate is the easiest target because it is real estate.

Funds raised could go into general government spending. But I would prefer a different objective: to endow a fund for the reconstruction of Ukraine.

About Charles D. Goolsby

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