Prosecutors have charged a former senior FBI officer with sanctions-busting for carrying out private investigation work for oligarch Oleg Deripaska in a potential sign of the future direction of US sanctions enforcement.
The US Department of Justice alleges that Charles McGonigal breached sanctions after being paid to investigate one of Deripaska’s rivals in a struggle for control of a large Russian corporation. McGonigal, who started working for Deripaska after quitting the FBI after 22 years, has denied sanctions breaches and money laundering.
The US imposed sanctions in April 2018 against seven oligarchs, including Deripaska, the former head of Rusal, the largest aluminium producer outside of China, in response to Russia’s occupation of Crimea and violence in eastern Ukraine.
The case against McGonigal is just the latest example of sanctions-busting action linked to the metals magnate who was Russia’s richest man until he lost huge sums in the 2008/2009 financial crisis.
Two Russian businessmen were last year arrested in Europe and accused of running a sprawling smuggling operation carrying Venezuelan oil on a dark fleet of tankers to a Deripaska-controlled company.
Charlie Pope, a sanctions expert at law firm Wikborg Rein, said on Tuesday that the case against McGonigal was a potential sign that the US would focus on its own nationals when investigating breaches of the Russian sanctions regime.
He predicted an increase in enforcement activity by the US for Russia-related sanctions over the next 12 months after a period of relative quiet in high-profile prosecutions as the US ponders how to further put the squeeze on Moscow.
The US sanctions enforcement body, the Office of Foreign Assets Control (Ofac), was “waiting to see what kind of enforcement battles they want to pick,” he told a meeting in London to discuss sanctions policies following the invasion of Ukraine.
The arrest of McGonigal “suggested to me that enforcement action may be more domestic – about US people in the US”, he said.
Pope predicted US sanctions policy over the coming year would include adding to the raft of measures already in place – including individual designations and adding products falling under the oil price cap – as well as increased enforcement.
The UK and other European nations have beefed up their sanctions programmes and enforcement teams and shipping lawyers are looking for signs of how they are likely to act against the industry that is grappling with increasingly complex regulations.
But Pope said the early signs were that the US would not look “across the Atlantic” to enforce breaches by EU and other operators involved in trades of potentially sanctioned cargoes.
McGonigal was also charged after working to try to get sanctions against the businessman lifted.
US action against Deripaska has affected shipping, with an English court in October reinstating a $2m arbitration award for a company linked to the oligarch after a shipowner triggered a force majeure clause after sanctions were imposed.
Deripaska has been charged in the US with sanctions breaches by arranging to have his children born in the US.
In the announcement of the charges against McGonigal, the US Department of Justice said: “This office will continue to prosecute those who violate US sanctions enacted in response to Russian belligerence in Ukraine in order to line their own pockets.”
Alongside McGonigal, US prosecutors have also charged a former Russian diplomat Sergey Shestakov, now a US citizen, who is said to have worked with the former FBI man. Both men were bailed after a hearing on Monday.
The two men were said to have helped the daughter of a Deripaska employee and reputed Russian intelligence agent to get an internship in the New York police department involved in counterterrorism and intelligence gathering.
The daughter, a college student, was given VIP treatment by the force. An officer later reported her to authorities after she claimed to have an “unusually close relationship” with an FBI agent and access to confidential files, according to a 21-page indictment.