Yachts and Airplanes: What Procedures and Legal Theories Are Being Used to Forfeit Russian Assets in the United States?

• Date: 06 February 2023
• Year: 2023
• Author: Stefan D. Cassella
• Pages: 55
• DOI: https://doi.org/10.30709/eucrim-2022-022

I. What is the Approach behind the Seizure/Confiscation of Assets?

Law enforcement officials and policymakers in different countries have suggested a number of approaches to underpin the seizure and confiscation of the assets of sanctioned individuals and entities. Some have argued that law enforcement should make use of so-called “unexplained wealth orders;” but this approach is problematic for two reasons: Firstly, most countries (including the United States) do not have legislation authorizing the seizure – never mind the ultimate forfeiture – of an asset based solely on a property owner’s inability (or unwillingness) to explain the source of his or her wealth. Secondly and more fundamentally, the wealth of Russian oligarchs is rarely “unexplained.” A property owner can easily point to the revenue stream from his or her control of, for example, the oil and gas industry in his or her part of the world as an explanation for being able to purchase and derive pleasure from luxury yachts or airplanes.

Other countries have taken a more direct approach, authorizing not only the seizure but the permanent forfeiture of assets solely on the grounds that they are owned by a sanctioned individual. In Canada, for example, new legislation has been enacted to allow the government “to directly issue an Order seeking permanent asset forfeiture based on individuals who risk a ‘grave breach of international security.’”¹

Yet other commentators have suggested that the only way to confiscate assets permanently in a way that complies with the rule of law, and that recognizes that the source of the assets is likely to be serious criminal conduct -- including embezzlement, public corruption, or other types of kleptocracy – is to return to first principles: i.e., to bring criminal or non-conviction-based asset forfeiture actions based on the nexus between the property and the underlying crime, rather than the sanctioned status of the property owner. It also involves expanding the reach of the statutes that authorize such action, where required, to make them effective.²

The United States has taken what amounts to a hybrid approach. It does not use unexplained wealth orders; and while it may freeze assets based solely on the status of the property owner as a sanctioned individual or entity, it may not permanently take title to them for that reason alone. To the contrary, under federal law in the United States, property may only be permanently forfeited if the government – on a balance of the probabilities – can prove that the property was derived from or otherwise involved in a criminal offence.³

The crime that gives rise to forfeiture under federal law, however, does not have to be the “original sin” that occurred when a kleptocrat stole or extorted the funds used to purchase his or her fleet of yachts or airplanes. Indeed, those crimes – or in the case of money laundering, the predicate crime – almost always will have occurred in a foreign country, which means that any cases decided on a balance of the probabilities would require the government’s being granted full access to foreign evidence, not to mention the cooperation of the foreign state where the crime took place. It is hard to imagine Russia, for example, being particularly forthcoming with the evidence needed to prove that a given oligarch’s assets were derived from crimes committed in Russia.

In the cases brought in the United States to date, the alleged crime invoked as the basis for the forfeiture of a sanctioned oligarch’s assets was not a crime that occurred in some foreign country where the oligarch obtained his or her wealth. Instead, the cases centred on crimes that occurred in the United States when sanctions imposed under US law were violated. That is, it is the violation of the sanctions in the United States that is the crime giving rise to the forfeiture, not the crime that generated the oligarch’s wealth in the first place.

Sidestepping the issues inherent in basing a forfeiture action on conduct that occurred in violation of foreign law, this approach allows cases to proceed on evidence of criminal conduct that is readily available to law enforcement, such as access to bank records, and other indicia of conduct that occurred much closer to home.

II. What is the Procedure?

Before discussing the legal theories that the United States has been employing to establish the nexus between oligarchs’ yachts and airplanes and a sanctions-related crime, I will explain the procedure that law enforcement in the United States is required to follow.

Under federal law, the government of the United States is able to forfeit – or permanently take title to – criminally-tainted property in two ways: as part of the defendant’s sentence in a criminal case (“criminal forfeiture”), or in a separate civil action against the property (“civil or non-conviction-based forfeiture”). The former requires a conviction in a criminal case, which is hard to obtain when dealing with a foreign person not likely to consent to extradition or being extradited to the United States. Accordingly, most forfeiture actions against oligarchs’ assets need to be brought as civil forfeiture actions.⁴

While civil forfeitures do not require the criminal conviction of any person or entity, they do require the government to prove – on a balance of the probabilities – that a crime was committed and that the property in question was derived from or otherwise involved in that crime.

Most civil forfeiture cases begin with the seizure of the property, generally with a warrant issued by a judicial officer. The seizure of the property, however, is not the end of the process; it is only the beginning. It gives the government the ability to take custody of, or immobilize, the property temporarily while a formal forfeiture action is commenced and litigated in a federal court. As discussed in more detail below, the government has thus far obtained seizure warrants for a number of yachts and airplanes in contemplation of commencing formal forfeiture action, the successful outcome of which would be to permanently divest the owner of the property or title to it.

If the property in question is located within the jurisdiction of the United States, taking possession of an asset pursuant to a seizure warrant is a relatively simple matter. If the property is located elsewhere, however, the government must seek the assistance of a foreign court. As we will see later on, the United States invoked this procedure when it sought the assistance of the courts in Fiji to seize the Amadea, a yacht that was found in Fijian waters.

Once the property has been seized, the government must file a formal complaint setting forth the facts and legal theories giving rise to the forfeiture, and must send notice of the seizure and its intent to forfeit the property to all persons who appear to have a legal interest in it. Such persons then have a period of time in which to answer the complaint, to file motions challenging the forfeiture action, and to request (and respond to requests) for evidence relating to the forfeiture action. All of this is laid out in detail in the Civil Forfeiture Reform Act (CAFRA) and the case law that has applied it over the last quarter-century.⁵

Ultimately, if the facts of the case are undisputed, the parties may file competing motions for summary judgement, asking for judgement in their favour as a matter of law. Otherwise, where material facts are disputed, the person contesting the forfeiture – known as the “claimant” – has the right to have the case tried to a jury. Finally, even if the jury finds in the government’s favor, the claimant is entitled to ask the court to set aside or mitigate the forfeiture on the grounds that it would be “grossly disproportional” to the gravity of the underlying offence.

Obviously, this is a lengthy process. Indeed, virtually every article written on the seizure of Russian yachts and airplanes over the past year has noted that given all of the due process protections in CAFRA and elsewhere in federal law, the litigation in these cases – once they have been commenced – may take ten years or more.⁶ This was certainly the case with respect to other celebrated cases involving the forfeiture of foreign assets in the past.⁷ So, commencing a civil forfeiture action against the assets of sanctioned Russian oligarchs is no short term undertaking likely to result in the early disposition of assets that may be used to reimburse Ukraine for military and humanitarian losses caused by the Russian invasion, at least not if an action is contested. Rather, those who commence such actions are aware that they are in for the long haul, which may explain the caution being exercised before initiating formal action, even in cases where seizures have been effected.

Nevertheless, commencing a civil forfeiture action against a seized asset serves to justify the continued, if temporary, deprivation of an owner’s property. What is more, it demonstrates that any violation of US-imposed sanctions has consequences, even if the perpetrator eludes the jurisdiction of the criminal courts of the United States.

III. What are the Government’s Legal Theories? 1. The Tango motor yacht case

Several pending cases illustrate the range of legal theories the United States Department of Justice has employed so far in seeking the seizure – and presumably, the eventual forfeiture – of Russian assets involved in the violation of sanctions. One of the first cases entailed the seizure of a motor yacht called Tango.⁸

In 2018, the Office of...