Economic sanctions against Russian oligarchs have been in place in Europe since Russia attacked Ukraine. But many of them still own real estate assets in Germany. Because it is easy to disguise ownership in this country, they can continue to do business unmolested.
Police officers and tax investigators search a villa in Rottach-Egern am Tegernsee, south of Munich, in September. Seizure paintings, a wine collection, jewelry and computers. At the same time there are raids on several other properties. The action is said to be directed against the Russian-Uzbek oligarch Alisher Usmanov. He is one of the richest Russians and a confidant of Russian President Vladimir Putin. At the time of the raid, the villa was empty. Usmanov is said to have fled to his homeland of Uzbekistan long ago.
The accusation: breach of sanctions, tax evasion and money laundering. Usmanov has been on the EU sanctions list since the end of February 2022. His assets have been frozen. He is accused of failing to declare valuables worth millions. “Specifically, although he is on the EU sanctions list, he is said to have used frozen funds to pay a security company to monitor real estate,” Andrea Grape, spokeswoman for the Munich public prosecutor’s office, was quoted as saying in the fall.
Russian oligarchs feel comfortable in Germany. Not only at Tegernsee. Because it’s pretty easy to own real estate in this country without your name appearing.
Over 700 companies registered in tax havens
The German land registers are well and properly kept. “We know exactly who owns every square centimeter in Germany,” says Stephen Sebastian in the ntv podcast “Learned something again”. He is a professor at the International Real Estate Business School at the Institute for Real Estate Economics at the University of Regensburg.
Steffen Sebastian holds the Chair in Real Estate Financing and is Deputy Managing Director of the IREBS Institute for Real Estate Economics at the University of Regensburg.
(Photo: Christian Buck)
But it is often difficult to find out who is actually behind the entries: “If the land register contains a company that has its registered office abroad, then it is usually not possible for the German authorities to determine with certainty who is actually the owner of the property,” explains Sebastian. There is cooperation with the tax havens, but it is sluggish.
There are many ways to disguise who actually owns a piece of land or property in a prime location. One option is to register your company in a tax haven. 774 real estate companies throughout Germany belong to companies based in Cyprus, the Virgin Islands, Cayman Islands and Marshall Islands. have that Data from Creditreform result, which the ARD has evaluated. Four out of five of these companies, 618, can be found in Berlin.
“If you want to hide millions, it’s worth every effort”
“One possibility is that you look for a trustee somewhere in a tax haven, and then this trustee founds a company, which in turn buys a property in Germany,” explains Sebastian. The Network Tax Justice has even identified many more companies in tax havens, because the companies often operate through a complex and widely ramified network of companies: According to his study, around 15,000 to 20,000 anonymous letterbox companies own German real estate.
Actually, a transparency register in Germany should help against money laundering. But still too few companies have entered the data of their actual owners there. At the beginning of December, the details of about half of the companies were still missing.
Expert Sebastian emphasizes that the law is already effective in many cases, but “if you want to hide a few 100 million, then almost any effort is worth it.” In such cases it is “very difficult to actually enforce the law”. There is a transitional period until June, after which the Federal Office of Administration can impose fines.
Properties belong to fictitious managers
In addition, with many owner constructions, only the German managing director is entered as a fictitious authorized person. This makes it even more difficult to find out the actual owners of real estate. “In the real estate market, it’s maybe every 20th or every 30th property that belongs to a shadow financial center player,” says Christoph Trautvetter from the Tax Justice Network at ntv. Germany must join forces with other large countries such as the USA in order to combat the shadow financial centers.
The Russian oligarchs also conceal their ownership in Germany via networks of letterbox companies. Alischer Usmanow, for example, is said to have bought the villa on Lake Tegernsee through straw people on the Isle of Man tax haven between Great Britain and Ireland. His luxury yacht “Dilbar”, which was confiscated in Hamburg and is currently in Bremen, is said to belong to a company on the Cayman Islands, according to media reports. Usmanow has registered family members as owners for some companies.
The Russian oligarch Roman Abramovich did a similar thing: Shortly before the Ukraine war, he is said to have transferred assets worth several billion US dollars to his children.
No central real estate register in Germany
Experts assume that there are an estimated 20 to 50 billion euros in Russian assets in Germany. So far, however, only around 5 billion euros have been confiscated.
The Sanctions Enforcement Act II makes it a bit easier to identify the real estate and company holdings of the oligarchs, says real estate expert Steffen Sebastian. “But that is always an individual request from the respective banks and the respective land registers.” It is not easy to say which assets, accounts and properties belong to the people under sanctions.
In Germany there is no central land registry, but many small ones, each located at the local district court. This makes it complicated to find out who owns which property. “If a company is registered and its actual ownership is obscured, then you’re at the end of the rope very quickly,” says Schneider. With the help of laws, it must be possible to create more transparency, explains real estate expert Sebastian. It’s easier in other countries. In England or Italy you can query land register data online.
Italy’s financial police as a role model
The laws are there, but tracking down the assets of the oligarchs in Germany remains difficult. What is missing is a financial police – like in Italy, demands the union of the police. They could find and confiscate suspicious assets such as luxury yachts much more quickly. The customs investigation service could be converted into such an authority.
Finance Minister Christian Lindner is planning a Federal Financial Criminal Police Office as a new authority against money laundering. However, experts say it may take years before this is ready for use. For Steffen Sebastian it is clear that detective work is necessary to uncover veiled identities: “If you are dealing with criminal energy in concealing property in order to prevent sanctions, then you have to counter it with criminal energy.” That is a task for the police, maybe even for the secret services. “This means that the classic authority is overwhelmed in any case.”
Until then, finding out the actual owners of real estate remains a tedious Sisyphean task. And only then can applicable sanctions take effect.
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