Russian billionaire Usmanov: German justice's legal dilemma

For more than 10 years, the Russian billionaire Alisher Usmanov was able to enjoy the picturesque Bavarian Alps on the shore of Lake Tegernsee. Companies linked to Usmanov had purchased three properties there, including one that was apparently only for security people and other staff.

Everything changed with Russia's full-scale military invasion of Ukraine in February 2022, after which Usmanov, a "pro-Kremlin oligarch with particularly close ties to Russian President Vladimir Putin," was added to the EU's sanctions list. There are currently several law enforcement agencies and departments investigating him, and various cases have been opened into companies and individuals with whom he is connected. He is suspected of money laundering, tax evasion and violating sanctions law. 

Hardly a month goes by without a report in the German media about searches or raids in connection with the oligarch. The yacht Dilbar, which was allegedly used by him until 2022, has been searched, as have the German premises of a Swiss bank where, according to reports in German media, he controlled accounts, and even the Munich office of his lawyers. This caused outrage at the German Federal Bar and was eventually contested successfully in the courts. The villa on Lake Tegernsee and other properties thought to be connected to the billionaire have been searched twice.

Powerful team of lawyers

A dozen experienced lawyers work for Usmanov in Germany. They have challenged each step made by the investigators, including the searches, which they have described as a "witch hunt" that serves only "to clearly demonstrate political determination to the public."

In confidential conversations, the billionaire's team of lawyers has made no secret of its satisfaction with the first spectacular successes in court. In one case, Usmanov's defense team was able to deliver a slap to prosecutors in a court of appeal in October when a Frankfurt on Main judge confirmed a May decision that the search of the villa in which Usmanov had supposedly previously lived was illegal.

All of Germany's leading media outlets reported on the major search operation in the fall of 2022, which involved about 250 police officers. The search was prompted mainly by the suspicion of money laundering on the part of Usmanov.

Judges not convinced by Navalny's video

Even in 1 1/2 years, prosecutors in Frankfurt haven't been able to collect enough evidence to convince the judges that the suspicion of money laundering is justified. Prosecutors answered DW's request for information by saying that the investigation was ongoing, also pointing to its confidentiality. 

DW was able to learn what evidence had been gathered in connection with Usmanov and money laundering after it received the texts of the court rulings regarding the legality of the searches of the properties on Lake Tegernsee. The first court decision of May 12, 2023, is based on 88 money transfers between 2017 and 2022 to German accounts controlled by Usmanov. To substantiate their suspicions that the money might be of criminal origin, investigators put before the court a printout of the English translation of a video made by the Russian opposition leader Alexei Navalny detailing how Usmanov allegedly evades the tax authorities in Russia by setting up shell companies for exports.

However, the judges did not discern any evidence that Russian laws had been violated or see a direct connection between tax evasion and concrete money transfers to Germany. Usmanov's German lawyers have not made a secret of their satisfaction, and in an informal conversation with DW, they said this case was "practically a done deal."

Frank Buckenhofer from the German Trade Union of the Police doesn't think the case could stand up in court. "One would have to make a credible case that the money resulted from criminal activity," he said. "If it all took place in Russia, then Putin would probably personally attest that he is the most honest person in the world."

For 25 years, Buckenhofer has been one of the leading analysts in the fight against financial crime. He said that without close cooperation with law enforcement agencies in the country where the money originated, it was almost impossible to prove that laundering has taken place, adding that there was no such cooperation with Russia. 

'Political theater'

While prosecutors seem to be plagued with a series of failures regarding the money laundering case, the investigation into assets attributed to Usmanov continues unabated. In October, on the initiative of the Central Office for the Enforcement of Sanctions (ZfS), some 30 officers from different law enforcement agencies conducted searches at properties on Lake Tegernsee.

Representatives of the "Matryoshka" commission that was specifically established to investigate Usmanov mainly confiscated expensive cars that the oligarch allegedly used until 2022. The reason for the confiscation was apparently information about the intention of the owner or his associates to sell the vehicles, which are subject to EU sanctions.   

Buckenhofer described the sensational pictures and videos of the raids as a "show for the oligarchs" and "political theater." He suggested the German authorities just wanted to show citizens that they are doing something against oligarchs, after decades of ignoring them and showing no interest in the origins of their money.

He also expressed doubt about the legal capabilities of the ZfS, which he said has not been granted the powers of a law enforcement agency.

"If the idea really had been to make life difficult for the oligarchs, then a more powerful financial police such as Italy's Guarda di Finanza would have been established. If that concept had been implemented, the message to all people who have illegal, hidden or sanctioned assets would have been: You cannot sleep soundly."

Offshore companies and trusts

German prosecutors haven't even been able to prove that the yacht Dilbar and the properties on Lake Tegernsee really belong to Usmanov, because they are registered as trusts via a chain of offshore companies. According to lawyers, part of the oligarch's German assets belongs to a trust in Bermuda via companies in different jurisdictions.

Usmanov's defense has claimed that he withdrew as a beneficiary of the trust in February 2022, just days before Russia's invasion of Ukraine, which led to his being put on sanctions lists by the European Union, the United Kingdom and the United States.

At first, the trust was registered anew in the name of Usmanov's sister, Gulbakhor Ismailova. When sanctions were imposed on her, too, in April 2022, she was also removed from the list of beneficiaries. It's not certain who currently owns the yacht and the properties that Usmanov used until 2022. His lawyers have refused to name the current beneficiary, even in confidence.

Buckenhofer said this situation showed how powerless the German law enforcement agencies were and that they would have to draw certain conclusions. "It would be an important precondition that it should not be permissible to invest money into assets such as property if there is no chance for the German authorities to robustly ascertain the person with the financial responsibility, and if money is invested via companies in some kinds of banana republics or tax havens," he said.

Two further cases revolving around tax evasion and the violation of EU sanctions will depend on who the owner of the villa on Lake Tegernsee really is. Usmanov's lawyers claim their client isn't the owner, and never has been. They say he rented it from a trust he had set up but later left. If German prosecutors can prove in court that the villa does belong to Usmanov, that could turn him into a resident of Germany, possibly making him liable for hundreds of millions in taxes. 

If he isn't recognized as the owner, then the prosecutors will have to prove that he spent over 182 days per year in Germany. "Germany was never his main domicile. He is a citizen of the world," one his lawyers told DW. According to reports in the media, real estate in Uzbekistan, Russia, Germany, France, Italy and the UK is thought to have been under Usmanov's control at different times.

Violations of sanctions legislation?

If it can't be proven in court that Usmanov controls the real estate in Bavaria, the case regarding alleged violations of sanctions legislation could collapse.

"The accused is alleged to have continued using a security company to guard the properties in Upper Bavaria that can be ascribed to him after he was put on the EU's sanctions list. By paying this company, he would have violated the ban on accessing frozen funds," is how Munich II public prosecutors described the main thrust of their allegations to DW.

First, however, it would have to be proven that the money in the accounts of the companies in question is indeed Usmanov's money, sources from law enforcement agencies have admitted.

Citing their own sources, German media outlets have reported that investigators are looking into the circumstances surrounding the multiple transfer of assets from trusts, first to Usmanov's sister, then to unknown third parties. It could be that questions regarding the payment of gift tax might arise in this context.

Whatever the outcome of this case regarding assets in Germany attributed to Alisher Usmanov, Buckenhofer said the activities of the law enforcement agencies will not have been in vain.

"It should be a clear goal of financial policing to make life so difficult for these people that they at least find Germany unattractive as a location," he said.

DW did not receive an official response to its written inquiries to Alisher Usmanov's lawyers.

This article was originally written in German.

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