South Florida’s coastal strip of Sunny Isles Beach and exclusive enclave of Fisher Island are among the most monied addresses in the United States.
They are also playgrounds for the Russian elite that have for years drawn the attention of financial crimes enforcers. Residents have included Dmitry Rybolovlev, a billionaire who famously bought a mansion from Donald Trump in 2008 for $60 million more than its asking price just a few years earlier, and Alexander Yuzvik, who has overseen construction of Russian military and intelligence projects.
These are some of the elites that the White House might wish to target to ratchet up pressure on Russian President Vladimir Putin, whose invasion of Ukraine has prompted President Joe Biden to reach for sanctions that no president has deployed before against a major power.
In issuing initial sanctions not just targeting Russian oligarchs and top Kremlin officials, but their family members, the administration is hoping to send a message to Moscow’s elite. The message: that their money cannot be safeguarded through family connections, offshore bank accounts and ritzy real estate.
“We are extending the reach of U.S. sanctions to prevent the elites close to Putin from using their kids to hide assets, evade costs, and squander the resources of the Russian people. This is a new approach,” a National Security Council official told McClatchy and the Miami Herald. “Other Russian elites and their family members are on notice.”
And yet, experts said the sanctions in place thus far will likely have little impact on South Florida.
How Sanctions Work
Economic sanctions are penalties that target a foreign government, its officials, private citizens or other state entities, either as punishment or in an effort to disincentivize particular policies. They can range from travel bans and asset seizures within U.S. jurisdiction to trade embargoes; from barring U.S. companies from conducting business with designees to forbidding foreign-flagged mega-yachts from entering U.S. ports. They can also involve prohibiting transactions in U.S. dollars, which make up over 60% of all financial transactions around the world.
Britain’s parliament is feverishly debating how to crack down on Russian oligarchs who might be using downtown London as a center for illicit financing. But similar debates have yet to heat up in Miami and New York, considered by experts to be two prime locales for Russians — and Russian money laundering.
Financial crimes experts question whether the sanctions against Russia announced on Tuesday — or even those under consideration now that Putin engineered a more aggressive, full-scale invasion of Ukraine overnight Wednesday — are likely to reach Russian assets in U.S. cities.
“I would not be optimistic. I don’t think that this will have any real impact,” said Anders Åslund, a Swedish economist and author of “Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy.” “The people in Miami are not really the top people,” Åslund said. “These are comfortable people rather than the top people.”
The U.S. sanctions put in place Tuesday restrict the Kremlin’s ability to access Western financial institutions, target some of Moscow’s largest banks and blacklist a handful of Russia’s most elite powerbrokers and their families.
“Most Miami Russians occupy a lower rung in the ladder of Russian power, likely exempting them from those sanctions for now,” Åslund said.
Among the well-known individuals with Russian ties who have invested in the Miami area are Lev Parnas and Igor Fruman, two criminally prosecuted associates of Rudy Giuliani who played key roles in efforts to dig up campaign dirt in Ukraine on Joe Biden in 2020. That effort led to President Donald Trump’s first impeachment and acquittal.
Fruman, born in what was then the Soviet Union, has pleaded guilty to an unrelated campaign finance law violation. The Ukrainian-born Parnas, convicted in a trial of campaign finance crimes, has become a critic of Trump and the Russian regime.
Moscow Off Of Miami
Not all Russian-owned real estate in Miami uses dirty money, and not all dirty money in Miami is Russian: Sunny Isles Beach has also experienced an investment boom out of Latin America and has recently attracted European interest as well, according to local Realtors. But those who track illicit financing for a living say Russian money has helped shape Sunny Isles Beach, given the city its nickname: “Little Moscow.”
“We know what’s happening based on patterns of behavior and observations from various sources, just like parts of Manhattan and parts of London. They’re known as places where real estate will reliably retain its value,” said Julia Friedlander, director of the Atlantic Council’s Economic Statecraft Initiative.
Because properties owned through anonymous shell companies are often a sign of money laundering, some European countries have outlawed such structures. Like the United Kingdom, the United States has attempted to crack down as well, but with mixed success.
Five years ago, economists at the National Bureau of Economic Research estimated that Russia’s elite have roughly $800 billion in offshore accounts — a staggering number that experts say has likely surpassed $1 trillion today. A disproportionate segment of that has flowed into Florida.
A 2016 Miami Herald investigation found that dozens of condo units in Sunny Isles Beach — including some with names like Trump Palace, Trump Grande and Trump Towers — had been purchased by Russian nationals. The Trump properties are generally Trump branded rather than Trump built, meaning the mogul received a portion of the initial sale for the use of his name.
A Reuters investigation the following year estimated that Russians had spent at least $98.4 million in seven Trump-branded properties in Hollywood and Sunny Isles Beach alone. Oleg Misevra, a Russian coal magnate who has repeatedly earned Putin’s praise, bought a penthouse in Trump Hollywood in 2010 for nearly $7 million. A Russian politician, Vadim Valeryevich Gataullin, purchased two units in that same building for a little over $5 million combined, later selling them both, Reuters reported.
FinCEN Vs. Launderers
In 2016, the Financial Crimes Enforcement Network, known as FinCEN, confirmed what many already knew: that Miami and Manhattan were two of the most attractive U.S. locales for money launderers who use opaque shells. FinCEN would impose a requirement that U.S. title insurance companies record the names of the actual people behind shells used in all-cash purchases of residential property across several major metropolitan areas, including Miami. The information would be recorded for internal consumption, but not shared with the public.
As a result of the FinCEN initiative, suspicious cash-only exchanges in Miami and Manhattan dropped by 70%, at least according to one analysis in 2018. But a study published this month by the Anti-Corruption Data Collective cast doubt on that, asserting that FinCEN’s geographic targeting orders have actually had little effect, claiming the prior study had flaws.
The National Security Council official said that FinCEN is currently reviewing public comments on new regulations, and that the United States “will continue to work at home and abroad to bring more transparency to real estate transactions.”
“Increasing transparency in the real estate sector will help curb the ability of corrupt officials and other criminals to launder the proceeds of their illicit activity or ill-gotten gains,” the official said. “It will also strengthen U.S. national security and help protect the integrity of the U.S. financial system.”
The Biden administration has further steps it could take. It could cite Section 311 of the Patriot Act and declare that banks or territories hosting offshore accounts — were henceforth viewed as of “primary money laundering concern,” effectively cutting them off from transactions with western banks.
Meanwhile, the Treasury Department is also taking steps toward stronger enforcement of the Corporate Transparency Act and Anti-Money Laundering Act, laws passed in 2020 that are meant to provide the government with more efficient tools to combat illicit financing.
A Slowdown
Real estate brokers in the Miami-Dade area say they have seen less activity from Russian buyers in the past few years. At least in Sunny Isles Beach, that could be because it has been a while since a new luxury tower was constructed. But that is about to change.
The upcoming Bentley Tower on Sunny Isles Beach will mimic the nearby Porsche Tower, which features automobile elevators, so residents can sleep on the same level as they park their cars. The planned St. Regis Sunny Isles will compete with the existing Ritz Carlton residences in offering premium amenities.
Jon Mann, a real estate agent with The Jills Zeder Group at Coldwell Banker Realty, which deals in luxury properties, said the steady stream of Russian buyers in Sunny Isles Beach slowed five years ago because of fluctuations in the ruble and as FinCEN’s targeted orders were put in place.
New construction and a sense of Russian community there may continue to attract new buyers. But fallout from war in Ukraine could also dissuade the cautious.
“I think it’s kind of a wait-and-see approach to see how things play out,” Mann said. “I don’t think there’s going to be a wave of buyers coming here with additional scrutiny from the Biden administration with the sanctions they’ve put in place — I don’t think they’re going to want a microscope on their large cash transactions here.”
And as for those who already have purchased beachfront real estate, even through suspicious means?
“People don’t sell,” Åslund said. “They keep it.”
Source: WLRN
