BY Ryan Swift on 15 Apr 2022

Authorities tasked with sanctioning oligarch-owned superyachts have struggled to uncover their deliberately opaque layers of corporate ownership. Now, there's renewed political energy behind the push to improve transparency

The worldwide hunt for oligarch-owned superyachts may evolve into a wider push to improve transparency over ownership of high-priced assets.

Such a change could have a significant impact on superyacht owners worldwide.

“The superyacht industry tries to be very private, and the UBOs (Ultimate Beneficial Owners) generally like to be discrete,” says Sam Tucker, head of superyachts for market intelligence firm Vessels Value. “Ownership structures can be complex, with the ‘registered owner’, usually a Special Purpose Vehicle, often in a different jurisdiction than the UBO. There are also lease systems that further distance the UBO from the asset. Therefore, it is very hard to know who the true owners are.”

Tucker estimates that about 10% of the global superyacht fleet is Russian-owned. Superyacht News reports that some 30% of all superyachts of 90 metres and up are owned by Russians.

Phi after being seized by the UK in March. Photo: UK National Crime Agency

The challenge for nations that have imposed sanctions on Russia is sorting out who owns what. On March 24, Reuters reported that the EU had blacklisted nearly 700 top Russian politicians, businesspeople and military staff, with several superyacht-owning oligarchs on that list. Yet, EU nations are reportedly struggling to identify which assets, particularly superyachts, belong to sanctioned individuals.

Chris Taggert is the founder of OpenCorporates, the largest open database of companies in the world. “There is increasing opacity in corporates, and corporates are used routinely by the super-rich to hide assets, and to make their footprint harder to understand,” he says. “The vast majority [of companies] are used for legitimate purposes. None of that requires opacity. [But] there’s always been a tendency by some, to abuse corporate structures to commit fraud. That means they can avoid bearing up to liabilities such as pollution. So when a company gets closed the UBO is not responsible.”

READ: Which superyachts have been sanctioned?

When German authorities tried to seize the 156-metre superyacht Dilbar, reportedly owned by Russian billionaire Alisher Usmanov, they ran into trouble thanks to the layers of ownership.

Forbes reported that Dilbar is registered in the Cayman Islands and owned through Klaret Continental Leasing Limited, a company based in Malta. Klaret Continental Leasing Limited was a branch of a Cyprus-based company, which closed in December 2018. The Cyprus company, also named Klaret Continental Leasing Limited, was dissolved in September 2019. A spokesperson for Usmanov said that the yacht had been transferred into an irrevocable trust and that Usmanov had donated the beneficial rights to members of his family.

Enforcement officers board Phi in Canary Wharf. Photo: UK National Crime Agency

Superyacht Phi was detained in London’s Canary Wharf on March 29 – the first vessel to be detained in the UK since sanctions were introduced. Ownership of the £38m yacht had been deliberately obscured: the company the ship is registered to is based in the islands of St Kitts and Nevis and it carried Maltese flags to hide its origins.

Early media reports linked the vessel to Russian businessman Sergei Georgievich Naumenko, but the Financial Times discovered the ultimate owner is Vitaly Vasilievich Kochetkov, the secretive founder of Motiv Telecom.

While Kochetkov is not officially sanctioned, UK Transport Secretary Grant Shapps said Phi’s owner has “close connections” to Vladimir Putin.

There are many reasons why superyacht owners seek to hide their ownership status through complex layers of companies. But should they be able to?

“If you are an oligarch – it’s a rational thing to do: if the rule of law is not good in your home country, if they know who owns that superyacht, they can seize it if you are subject to sanctions or lose a court case… Ultimately, you can probably follow the paper trail [to find out the owner] but you need a team to work on it. And by the time you figure it out, it’s sailed away to another jurisdiction. Or it’s been sold or put into another holding company. It buys enough time to make the law not effective, essentially.”

“If you ask me, with these tools at hand we need to hit where it hurts them the most – and that is in their wallet” — Caroline Nagtegaal

Advocates for open databases of corporate beneficial ownership are hopeful that the current spate of sanctions will add political pressure to push forward legislation that could complicate traditional superyacht ownership strategies around the world.

Caroline Nagtegaal is a Dutch member of the European Parliament for the Volkspartij voor Vrijheid en Democratie (VVD), part of the Renew Europe group.

“Given the Russian invasion of Ukraine, I believe decisive action from the EU is of utmost importance,” says Nagtegaal. “In this regard, a sanctions list of Russian officials and oligarchs associated with Putin’s regime as part of these actions is inevitable and needed. Close to 10 per cent of the world’s superyachts are in the hands of Russian oligarchs, so this will hurt them without a doubt.

“And announcing the seizure of assets is one thing, but it is furthermore important to think about ways to enforce the different sanctions and to close possible loopholes. We need a certain governance structure that oversees the implementation of the sanctions and identification of shell companies and trusts used to disguise ownership and apply the sanctions to these constructions as well. For this to succeed, effective cooperation and exchange of information is needed between Member States, for example in the form of a digital asset register.

“If you ask me, with these tools at hand we need to hit where it hurts them the most – and that is in their wallet.”

Dilbar is reportedly registered in the Cayman Islands and owned through a company based in Malta

Alex Cobham of the Tax Justice Network, a UK-based NGO, says a turning point in the world’s tolerance for anonymous wealth may have finally been reached. He noted that the new taskforces set up to find and seize oligarch assets, especially superyachts, are running into the same challenges that defeat tax authorities, such as anonymous companies, opaque trust structures and golden visas.

“We’re seeing an acceleration in the establishment of public registers of beneficial ownership, including for companies in Canada and New Zealand,” Cobham says. “Strikingly, we’re also seeing a wave of support for our longstanding call for a global asset register – a mechanism to join up the registers for companies and other legal vehicles, and also for high-value assets, including aircraft and yachts. This would combine public elements and elements only available to law enforcement and tax authorities, and it would be a dramatic end to the era of anonymous wealth.”

Cobham says the current focus on the superyacht industry by the wider media and the political pressure it creates could wind up having a real impact on how the industry moves forward.

“For yachts, in particular, the sanctions effort has made clear the weakness of current registration mechanisms, even for craft worth hundreds of millions of dollars. So it seems inevitable that we’ll see a move to impose minimum standards of identification of the ultimate beneficial owner in this space too.”

National investigators have been using data leaks rather than their own records to identify which assets are owned by sanctioned individuals, says Rebecca Lee, a former forensic investigator with PwC and Deloitte and chief impact officer for OpenCorporates.

The recent public attention on superyacht ownership may help push forward legislation that has previously been held up by a lack of political will. Lee notes that in the UK, the Economic Crime Bill, which was meant to address unknown beneficial ownership of property in the UK, has been pushed forward in the wake of the Ukraine war.

The UK’s new Economic Crime Bill introduces a new register of overseas entities, including information about overseas entities that own UK property and their beneficial owners. UK incorporated companies have been required to provide such information since 2016, according to law firm White & Case.

“Why did it take the UK five years for a property register?” asks Taggart. “I think the reason is, this opacity is also used by people who are not criminals, yet don’t want people to know how much they have. Those people who are incredibly rich and powerful want that secrecy. Of course, the flipside is that secrecy can be used by rally nasty people.”

Taggart adds that one of the reasons open registers of beneficial ownership have been delayed by European politicians is that it might cost member nations ‘significant losses.’

An estimated 10% of the global superyacht fleet is Russian-owned

The new UK property register applies retrospectively to property bought since January 1999 in England and Wales and since December 2014 in Scotland. An overseas entity that owns such property will be required to take reasonable steps to identify its beneficial owners and provide verified information about them to Companies House. Some information on the register – including the identities of overseas entities and beneficial owners – will be open for public inspection. Though the law applies to property, Lee says pressure may rise to make ownership of other pricey assets open to the public.

“The shame is coming – we’ve seen in it in a number of governments forced to fast track measures that have already been in place for several years,” Lee says.

On March 9, 127 organisations signed a letter calling on the EU and European governments to make beneficial ownership of high-priced assets available to the public. In the US, there is also mounting pressure to pass the ENABLERs Act, which was introduced by Republican and Democratic congressmen and is designed to open trust companies and other financial intermediaries to greater scrutiny.

As long as the war in Ukraine stays on the front pages and Russian-owned superyachts are in the spotlight, the political pressure on Western governments to open the books on beneficial ownership of top tier assets like superyachts will continue.