‘At times it was as if I was in some B movie, with young women with a bad but expensive taste in clothing and somewhat unsavory young men with wispy mustaches,’ a former reception employee of Amsterdam Trust Office TMF says. ‘I was once randomly interrogated at my desk by an agent of the Russian secret service FSB. He wanted to know what we were doing for Yukos. I just played dumb.’

It’s no wonder the FSB went snooping around in Amsterdam. The city has always been a popular base for Russian oligarchs. In 2015 – the last available figures – De Nederlandsche Bank identified 305 Russian PEPs as Dutch trust office clients. Today, DNB no longer wants to say how many there are.

The reception employee: 'I also remember the heads of Gazprom coming by once. They were so god damn arrogant. They were welcomed with all possible respect, as if the queen was dropping by.'

Russian President Vladimir Putin has been attempting to tackle tax havens such as the Netherlands for years. With fewer assets held abroad, the country is more resistant to sanctions. Six months ago, Putin canceled the tax treaty with the Netherlands as of January 1st, 2022. This makes our country much less attractive as a conduit for Russian money.

This was not an illogical thing for Putin to do. In 2014, Russia proved to be very vulnerable to sanctions, especially those imposed by the US due to the annexation of Crimea. While the US also imposed sanctions against business interests, the EU at the time limited itself to politicians and top military personnel. In addition, a huge amount of money leaked out of Russia through tax havens. This wasn’t a huge disaster, because so many oil and gas dollars pour into Russia. However, it did loosen Putin’s grip on the oligarchs holding their assets in tax havens.

The fact that the Netherlands has become less popular with Russians is apparent from, among other things, the figures on the 'exposure' of banks to Russia. In 2013, that was still 18 billion dollars. The last known figures, from the third quarter of 2021, showed 6.6 billion dollars.

At Follow the Money’s request, De Nederlandsche Bank (DNB) found out that in 2021 488 letterbox firms (officially called ‘special purpose vehicles’, or SPVs) were Russia-focused.

Putin’s wealthy friends

The US’s old and new sanctions, and the new sanctions imposed by the European Union and the UK, should hit some of Putin’s wealthy friends. It is suspected that these rich people function as asset managers for the Russian president. Putin’s wealthy friends, who appear on the EU and UK sanctions lists and who use Dutch letterbox companies, hold about 5.3 billion euros worth of assets on the balance sheet here.

Update March 1: The European Union announced new sanctions on the 28th of February. These affect, amongst others, Mikhail Fridman and Pyotr (Petr) Aven, best known in the Netherlands for their ownership of the Holland & Barrett chain of pharmacies, which they bought in 2020 for 1.8 billion pounds through Luxembourg-based investor LetterOne.

Fridman and Aven also own (together with German Khan, who isn’t on the list of sanctions [he was added to the sanctions list on March 15 – eds.]) Alfa Bank, the biggest consumer bank in Russia.

Supermarket chain X5 Retail and telecom company Veon (previously known as Vimpelcom) are also owned by Fridman and associates. Their combined assets registered in the Netherlands are worth up to 30 billion euro, according to recent annual reports.

A new name that stands out on the list of sanctions is Alexy Mordachov, who owns 25 percent of the shares given out by travel provider TUI. So far TUI has not been affected by the sanctions: transactions with a company are only prohibited when a person who is sanctioned controls more than 50 percent of the assets. In a statement, TUI says Mordachov’s stake is about 30 percent. Because Mordachov is on the advisory board, but not part of the board of directors, TUI doesn’t anticipate any hindrance from the sanctions.

Update March 10: New sanctions against Vladimir Kiriyenko and Andrey Melnichenko were announced by the European Union on the 9th of March. Kiriyenko is known for internet company VK (previously Mail.ru) which is part of Gazprom, and partly owned by Gennady Timchenko’s daughter, whose name was already on the list of sanctions. Melnichenko owns fertilizer giant EuroChem.

Update March 15: Roman Abramovich was added to the sanctions list. Together with Oleg Deripaska, he is a major shareholder of Nickel; Abramovich is linked to the Arnhem soccer team Vitesse. Also new is Tigran Khudaverdyan, the director of Yandex nv. This Russische internet giant has its headquarters – at least on paper – near Schiphol, and has 6.1 billion euro on the balance. Furthermore, Marina Sechina, Igor Sechin’s wife, has also been added to the sanctions list, just like two men who have ties to Mikhail Fridman.

Those of Putin’s prosperous pals using Dutch shell companies and are sanctioned by the UK and the EU, have more than 44 billion in assets on Dutch balance sheets,

Many of these assets cannot be fully frozen by the sanctions, such as assets in Russia or Russian fossil fuel investments in countries like Venezuela and Kazachstan. Not exactly countries where Dutch bailiffs have the power to shut down whole companies. The sanctions order financial institutions to freeze the liquid assets owned by those on the list. [end updates]

The assets on the balance sheet cannot be entirely frozen through sanctions. They include assets in Russia, or Russian investments in the oil and gas industry in countries such as Venezuela and Kazakhstan. These aren’t countries where a Dutch bailiff can go and lock a company’s doors. The sanctions oblige financial institutions to freeze the bank assets of parties on the list.

Since tensions between the West and Russia have been rising for years, and because of the end of the tax treaty between Russia and the Netherlands, Leo Neve, tax specialist and lecturer at Rotterdam’s Erasmus University, thinks that many Russian interests have long since been moved. ‘The treaty, which was terminated in January, was an important factor for Russians in reducing the withholding tax on dividends and interest. Russians with any foresight have long since placed their interests in the United Arab Emirates.’

If Europe wants to hit rich Russians, the better option would be to tackle the trade in golden passports

Neve claims that this is quite an easy thing to do. ‘Most trust offices, at least the larger ones, have a global reach and are also located in Hong Kong and the United Arab Emirates. Russians can continue to do business there, unless those governments put a stop to it.' But this does not yet seem to be happening.

According to Neve, if Europe wants to hit rich Russians in their wallet, the better option would be to tackle the trade in golden passports. These are passports issued by countries in exchange for money or direct investment. ‘Portugal, Cyprus and Malta in particular have issued such passports,’ says Neve. ‘I don’t know how that affects the sanctions rules. But the EU should suspend the validity of all those passports.’

In practice, a non-Russian passport does appear to work when trying to circumvent travel restrictions. As if granting Neve’s request, the European Parliament has recently voted to curb the trade in passports by EU member states.

Another way to potentially escape sanctions is to use foreign front men. Gennady Timchenko did this in 2014, at the time of the American sanctions against him. Until 2011, Gunvor still had a ‘head office’ in Amsterdam. At the time, it had a balance sheet total of 5.4 billion euros.

Timchenko is a good friend of Putin’s (although Timchenko denies that) and is the founder of the Gunvor oil company. This was, until 2013, a billion-dollar company that was Dutch on paper, and is now Cypriot. Gunvor, like industry peers Glencore and Trafigura, is very profitable. American diplomats say it’s Putin's ‘secret piggy bank’, according to the diplomatic cables disclosed by Wikileaks.

After the US sanctions, Timchenko sold his stake in Gunvor to business partner and co-founder Torbjörn Törnqvist, on paper, at least, ‘Of course that’s a complication. If oligarchs use front men and are able to create a nebulous situation, it quickly puts a stop to any asset freezing,' say Jurjan Geertsma and Thom Dieben, lawyers at JahaeRaymakers.

An initial Dutch ‘victim’ of the new sanctions against Putin’s wealthy friends seems to be Victor Muller’s car manufacturer Spyker, which has workshops in Zeewolde and England. Since 2020, Boris Rotenberg, who practiced judo with Putin in his younger years, has been a major investor. Rotenberg had been on the sanctions list in the US since 2014, but not yet in England and Europe, although the United Kingdom placed Rotenberg on the sanctions list on Tuesday, February 22nd. Muller told RTL Nieuws he wasn’t sure what this means for Spyker’s future. ‘But I don’t do business with Rotenberg only.’

State-owned enterprises

Of the large Russian state-owned enterprises, only Rosneft has been on the European sanctions lists for years. With the sanctions that the US announced in 2014, two Dutch entities of Gazprombank came into focus. If necessary, the Netherlands could hit some large Russian state-owned companies hard. The large Russian state-owned companies have 36.5 billion euros in assets on the balance sheets of their Dutch companies.

Freeze, prevent, control

The financial sector and companies must implement the sanctions against Russia themselves. These banks, pension funds, trust offices, investment funds and companies must compare the sanction lists with their customer base. In the event of a match, they must ‘freeze’ the funds and/or economic resources, ‘and prevent the funds and/or economic resources from being made directly or indirectly available’.

‘Anything that represents economic value should be frozen,’ explains Jasper Helder, attorney at Akin Gump Strauss Hauer & Feld. ‘The 50 percent rule applies to large structures; if a company is owned for at least 50 percent by a sanctioned party, that party is in principle also subject to the sanction. Violating sanctions is punishable under the Economic Offenses Act (in Dutch, the Wet economische delicten, or WED). There are hefty fines and, for individuals, even prison terms. If it concerns an institution under supervision, violation of sanctions legislation can also lead to licenses being revoked.’

According to lawyers Jurjan Geertsma and Thom Dieben, these days institutions’ compliance with sanction rules is closely monitored. ‘In recent years, not only the Dutch Financial Market Authority (in Dutch, AFM) and DNB, but also the National Office for Serious Fraud, Environmental Crime and Asset Confiscation have clearly paid more attention to institutions that fail to comply with sanctions legislation.’

‘The EU must be able to explain the link between a party and the occupation of parts of Ukraine; the factual substantiation of this is important’

To Helder, the sanctions that have now been announced by the EU differ from those imposed in 2014. Just like the US before, the EU is now also targeting business interests. ‘Under current EU rules, business interests can only be subject to sanctions if there is a direct involvement in violating territorial integrity in Ukraine,’ Helder explains. ‘The EU must be able to explain the link between a party and the occupation of parts of Ukraine; the factual substantiation of this is important. Otherwise, the EU will look like a fool before the Court of Justice.’ 

This may explain why Roman Abramovich, who is known to be a close friend of Putin, is not (yet) on any sanctions lists. The owner of London football club Chelsea has a connection with the Netherlands; the FinCen Files, a collection of 2100 leaked documents from US anti-money laundering institution Financial Crimes Enforcement Network, revealed that the checking accounts of his letterbox companies in the British Virgin Islands were held with ING Bank. Abramovich does fear sanctions, judging by the haste with which he sailed one of his yachts out of the port of Barcelona.

With the collaboration of Jesse Pinster, Mira Sys, Mark Koster and Dimitri Tokmetzis