From Russia With Love

March 23, 2022

Vladimir Putin’s invasion of Ukraine has made it an uncharacteristically rough time to be a Russian oligarch. Everyone from western central banks to amateur yacht-tracking sleuths has joined the effort to track down their riches. But a former Wall Street Journal columnist caught our attention in one especially entertaining report: “Western governments have quietly contracted multiple teams of ‘combat bookkeepers’ to secure the estimated hundreds of billions of dollars worth of sanctioned assets the Russian president and his oligarch cronies have spent the past 27 years legitimately laundering through international capital markets.”

There’s a lot to unpack in that single sentence. “Hundreds of billions”? “Legitimately laundered”? But the reference to “combat bookkeepers” probably made you laugh. Did you know the Venn diagram illustrating “combat” and “bookkeepers” had any overlap at all? Did you suspect the American Institute of Certified Public Accountants has a paramilitary wing? Can you close your eyes and picture their Special Forces rappelling out of helicopters with Brooks Brothers suits, briefcases in their hands, and Ka-bar knives in their teeth?

Seriously, though, it shouldn’t surprise you to learn how big a role the IRS is going to play in chasing Putin’s cronies. The IRS Criminal Investigations (CI) unit, with 3,000 employees, has launched more than 20 cases related to oligarch money laundering since 2017. Those efforts will kick into overdrive as sanctions tighten. Special Agents – who are the only IRS employees authorized to pack heat on the job – will scour the world like truffle pigs for dirty money, sniffing out signs of new shell companies, suspicious crypto transactions, and efforts to park money in real estate, jewelry, and art.

The Treasury has also launched a Kleptocracy Asset Recovery Reward program paying bounties up to $5 million for information leading to stolen assets linked to Russia. The IRS has a successful history of dangling cash rewards to snitches, including a $104 million payment to Bradley Birkenfeld, the whistleblower who ended illegal Swiss banking for most Americans. (Of course, Birkenfeld didn’t face potential retaliation from the sort of goons the oligarchs might enlist as bodyguards.)

This won’t be the Service’s first rodeo when it comes to helping enforce sanctions. In 2004, CI agents flew to Baghdad to track down Saddam Hussein’s hidden riches and uncovered $2 billion the dictator had looted from his country. Six of those agents even earned a medal, the Joint Civilian Service Achievement Award, the second-highest award that military commanders can present. (Speaking of rodeos, did you know you would only get one rodeo to figure life out? That seems like an awfully low number of rodeos.)

The Service’s biggest roadblock moving into this role is going to be staffing and resources. For example, there are only five agents in the entire CI unit right now who can use a specific software tool that lets them track oligarchs through international local government databases. And budget-cutters in Congress aren’t helping. Last week’s omnibus federal spending bill included $12.9 billion for IRS operations but specifically blocked administration requests for more money for criminal investigations. Florida Senator Rick Scott’s “Rescue America” plan would go even further by cutting IRS funding by 50%. (Naturally, IRS Commissioner Charles Rettig sees this as folly. “If the IRS budget was cut by 50%, you might be better off and save more money by just shutting it down completely,” he said last week.)

Several of Putin’s oligarchs have already called for an end to his war. It’s too soon to say if sanctions (and seizing a dozen of their yachts!) have helped push them to that conclusion. But taxpayers who are used to grumbling about the IRS may be delighted to see the Service play a part in ending the conflict.

Don’t hestitate to contact us.

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