Trusts holding billions of dollars of assets for Roman Abramovich were amended to transfer beneficial ownership to his children shortly before sanctions were imposed on the Russian oligarch.
Leaked files seen by the Guardian suggest 10 secretive offshore trusts established to benefit Abramovich were rapidly reorganised in early February 2022, three weeks before the start of Vladimir Putin’s war in Ukraine.
The sweeping reorganisation of Abramovich’s financial affairs commenced just days after governments threatened to impose sanctions against Russian oligarchs in the event of an invasion.
The leaked documents raise questions about whether the changes to trusts were made in an attempt to shield the oligarch’s vast fortune from the threat of asset freezes.
Analysis suggests the amendments made Abramovich’s seven children, the youngest of whom is nine years old, beneficiaries of trusts holding assets worth at least $4bn, though the total value could be much higher.
The changes appear to have made the children the ultimate beneficial owners of trophy assets long-linked to their father, including luxury properties and a fleet of superyachts, helicopters and private jets.
Sanctions experts said the sweeping reorganisation of the trusts could complicate efforts to enforce sanctions against the oligarch and potentially frustrate attempts to freeze assets previously believed to belong to the metals tycoon.
The revelations are likely to raise questions about whether Abramovich’s children should also be subject to asset freezes. Unlike family members of some of Putin’s closest advisers, many families of oligarchs subject to sanctions have avoided restrictions.
UK and EU governments have cast Abramovich as a pro-Kremlin oligarch and in March 2022 imposed sanctions on him for allegedly benefiting from close relations with Putin. Abramovich has denied financial ties to the Kremlin and filed legal action to overturn the EU’s measures.
Abramovich, who holds Russian, Israeli and Portuguese citizenship, has not been added to the US sanctions list. Ukraine reportedly asked the White House not to impose sanctions against him after the businessman emerged as an unofficial mediator in peace negotiations.
The files appear to have been obtained through a hack of a Cyprus-based offshore service provider that administers the Abramovich trusts. The large cache of documents was shared anonymously with the Guardian.
The files illustrate how Abramovich has for decades used opaque trust structures to shelter his wealth in secretive offshore havens, and point to the challenges western authorities face in piercing these complex structures to enforce sanctions.
Abramovich’s financial holdings have come under intense scrutiny since the invasion. Authorities in Jersey have tried to freeze $7bn in assets in the Channel Islands, while the US has seized two of his private jets for violating export controls.
The FBI said in court filings at the time that it believed Abramovich had reorganised two trusts, one of which held the seized jets, by making his children beneficiaries.
The leaked files, however, suggest the reorganisation was more far-reaching.
In a burst of activity in February 2022, shortly before the invasion, Abramovich was removed as a beneficiary of the two trusts identified by the FBI. Meanwhile, his children were appointed as beneficiaries of eight additional trusts established to benefit their father.
Sanctions experts said the changes may have been a deliberate but not unlawful attempt to distance the oligarch from his wealth before sanctions were imposed.
The reorganisation, they said, could present challenges for authorities now pursuing assets long-believed to be owned by Abramovich as they determine who in reality owns and controls the multibillion-dollar fortune: the oligarch or his children. Abramovich and his children did not respond to detailed requests for comment.
Reorganisation of luxury assets
In February 2022, a day after Russian tanks rolled across Ukraine’s borders, Abramovich’s 25-year-old daughter, Sofia, reportedly shared a post on Instagram with a stridently anti-war message.
Featuring an image of the Russian president blocked out with a red line, it read: “The biggest and most successful lie of Kremlin’s propaganda is that most Russians stand with Putin.”
But for Sofia and her six other siblings, the beginning of Russia’s war against Ukraine marked another significant milestone: it was the day they in effect became billionaires.
On 24 February, as Russian fighter jets began bombing Kyiv, the finishing touches were made to an extensive reorganisation of their father’s offshore affairs set in motion three weeks earlier.
Until that month, Abramovich was the sole beneficiary of at least 10 Cyprus and Jersey trusts, documents suggest. But on 4 February – almost in one fell swoop – the trusts began to be amended to appoint Abramovich’s seven children as beneficiaries.
Files suggest the changes granted the children – five of whom are now adults – a collective 51%, or in some cases 100%, beneficial interest in the trusts’ assets. These range from shares in large Russian companies to more eye-catching physical assets such as the Eclipse, a superyacht with nine decks and two helipads.
The 163-metre vessel, long-believed to be owned by Abramovich, is ultimately held by the Europa Trust. Documents show Abramovich was removed as the trust’s beneficiary and replaced with his children. At the end of 2021, companies it controlled held assets worth $2.6bn, according to the files.
Details of the reorganisation of the trusts are laid bare in the Oligarch files, a cache of apparently hacked files from the offshore provider MeritServus, which has managed Abramovich’s financial interests for more than 20 years.
Demetris Ioannides, the chair and managing partner of MeritServus, did not respond to detailed requests for comment, saying the firm is prevented from disclosure of information to third parties, citing European data protection rules and UK case law, on which Cypriot trust laws are based. However, he added: “The paramount responsibility of a trustee is to protect the assets of a trust.”
The documents offer a snapshot of the oligarch’s fortune on the eve of the invasion and illustrate how his trusts have held a myriad network of companies in secretive jurisdictions and funded an extravagant lifestyle.
For decades, the trusts’ web of companies have enabled Abramovich and his family to live the high life: from purchasing aircraft – a Boeing 787 Dreamliner and multiple Airbus helicopters – to paying the pop star Prince for a private concert in the Caribbean.
But the timing of the sudden reorganisation of the trusts last February raises questions about whether the changes were designed to ensure his family could continue to benefit from his fortune and circumvent sanctions.
Under US law, if a person subject to sanctions directly or indirectly owns 50% or more of an entity its assets can be frozen. UK and EU rules are similar but allow assets to be frozen when a person owns less than 50% of the entity if they exercise direct or indirect control over it.
But establishing who really controls assets, particularly when they are held by opaque offshore trusts, is rarely a straightforward task, experts say.
With Abramovich’s trusts, measures appear to have been taken that would enable him to state that he does not legally control the trusts’ assets. Files suggest he has been permanently prevented from exercising any control over the trusts as a trustee or protector.
A former senior US sanctions enforcement official said the reorganisation of the trusts could be used as an effective way of distancing someone from assets vulnerable to being frozen as a result of sanctions.
“It is often challenging to figure out ownership due to the byzantine ways assets are held through shell companies and trusts,” they said. “And then when you add further levels of abstraction with respect to who controls the assets, enforcement can become a very challenging exercise.”
Challenges facing authorities
It remains unclear what impact, in practice, the reorganisation of the Abramovich trusts has had on sanctions enforcement, but there are indications authorities are facing challenges when tracing assets linked to the oligarch.
In London, a £90m mansion on Kensington Palace Gardens that reportedly belongs to the former Chelsea football club owner has so far avoided a restriction notice that would prevent it from being sold without explicit permission from the UK’s sanctions enforcement agency.
The Land Registry told the Guardian last year that some properties, even if publicly linked to a person subject to sanctions, may not be marked as restricted because of insufficient evidence of ownership, particularly where they are owned by anonymous trusts.
On paper, the west London mansion, which has 15 bedrooms and an underground swimming pool, is owned by A Corp Trustee. Documents suggest the Cyprus-based company owns the property on behalf of the KPG Trust – whose sole beneficiary, until February 2022, was Abramovich.
After the reorganisation, the oligarch’s entitlement to distributions from the trust’s assets was reduced to 49%, while his children were appointed as beneficiaries and granted a 51% entitlement.
Documents suggest the same change was applied to at least seven of the 10 trusts, including: the Grano Trust, Zeus Trust, Zephros Trust, Proteus Trust and Perseus Trust. The children were also appointed as beneficiaries of the Sara Trust but the proportion of their entitlement to its assets is unclear. Abramovich’s beneficial interest in the Ermis Trust was reduced to 49%.
As a result of the reorganisation, other assets in the sights of authorities may prove more challenging to tie back to Abramovich.
Last month, the Canadian government said it planned to seize $26m in assets in the country held by Granite Capital Holdings, a British Virgin Islands company, which it said was owned by Abramovich. If successfully seized, officials said, the proceeds would be used for the reconstruction of Ukraine.
But documents indicate Granite Capital Holdings is no longer owned by Abramovich. The files suggest he was removed in February 2022 as a beneficiary of the HF Trust that ultimately holds the BVI company.
He was then replaced by his children, though in March 2022, shortly before the UK and EU imposed sanctions on Abramovich, the trustees of the HF Trust told a Cayman Islands-based hedge fund administrator that the children held no fixed interest in the trust’s assets and any distribution of its funds were made at the trustee’s discretion.
Financial statements in the leaked cache suggest that at the end of 2019 the trust held assets worth $3.3bn.
David Rundle, a sanctions and financial crime lawyer at WilmerHale, said the reorganisation of a trust, in anticipation of a connected person being subject to financial sanctions, could protect against the property being frozen but it was not a “silver bullet”.
He said where the children of a person subject to sanctions became beneficiaries shortly before sanctions were imposed, financial institutions were likely to be extremely cautious about how they treat the assets, unless they were satisfied the individual subject to sanctions no longer had effective control over them. “Subject to evidence of estrangement, that is not an easy standard to meet,” he said.
Additional reporting and engineering support from Sam Cutler and Mario Savarese
