£5m Surrey Mansion at the centre of row over Russian bank sanctions loophole

The £5.3m sale of a 12-bedroom mansion in Surrey involved in a case of alleged banking fraud is heading for the high court in a bid by lawyers to send some of the proceeds to one of Russia’s state-controlled banks.

Lawyers believe some of the money can be transferred to one of Vladimir Putin’s state-controlled banks, the National Bank Trust, without any breach of sanctions. They are seeking a court order to allow the transfer.

Ministers now face questions over why the bank has escaped sanctions to date, with a former boss at the bank claiming the money could be used to help fund the war in Ukraine.

The bank, which was once promoted by the actor Bruce Willis, is 99% owned by the Central Bank of the Russian Federation, which helps fund the country’s federal budget and has been targeted by UK sanctions.

Christine Jardine, a Liberal Democrat MP who has raised questions in parliament over why the bank has not been put under sanction, said: “It’s been a year since questions arose about whether National Bank Trust has been allowed to funnel money to Russia, yet we’re still in the dark.

“We urgently need clear answers from the government on this matter. If there are any loopholes in the government’s sanctions regime they must be closed immediately.”

National Bank Trust alleged in a high court case that its former majority owners – Nikolay Fetisov, its former president, Ilya Yurov, ex-chair of the supervisory board, and Sergey Belyaev – orchestrated a fraud to extract millions of dollars in salaries and bonuses.

The high court in London ruled in January 2020 that the bank was owed $900m compensation from three former bosses allegedly involved in the scheme. Fetisov and Yurov denied wrongdoing in the case and Belyaev said he had no knowledge of the alleged scheme.

Fetisov and Yurov, who both settled in the UK, were bankrupted by the case. Bankruptcy specialists at Mazars, the audit, tax and advisory firm, are working as joint trustees in their bankruptcies, seeking to recover assets for the benefit of National Bank Trust and other creditors.

Fetisov’s family assets included the mansion in Oxshott in Surrey bought for £4.25m in October 2012. It has an indoor swimming pool, gym and private cinema. The property was sold last month for £5.3m and Mazars is understood to be seeking a court order permitting payments to be sent to Russia.

A transfer by a UK bank is no longer available because of the war in Ukraine, but it is proposed to send the money via a legal firm acting for the bank in Russia.

There are also efforts to track down Fetisov’s assets in Cyprus, Switzerland and the US. A court was previously told his family portfolio included a flat in Chelsea in London and a residence near Moscow.

A campaign spearheaded by Willis in 2010 was credited with raising the profile of National Bank Trust in Russia. It included cardboard cut-outs of the actor in bank branches across Russia, a poster campaign and television advertisements.

The bank collapsed in December 2014 after the alleged fraud, requiring a state-backed bailout. Its majority owner, Russia’s central bank, was targeted by UK sanctions in February 2022, with restrictions prohibiting UK persons from undertaking financial transactions with the bank.

Lawyers consider the restrictions do not affect its subsidiary, National Bank Trust. Under article 26 of federal law on Russia’s central bank, it is legally required to transfer 75% of its profits to the federal budget of Russia. A UK judge ruled earlier this year that Putin does not control the National Bank Trust for the purposes of the sanctions regulations.

The trustees in bankruptcy are also seeking to realise Yurov’s assets. The high court heard in 2018 that Yurov’s family properties included Oxney Court, a £4m gothic manor house with a swimming pool and tennis court on the Kent coast, two properties in Cyprus and three flats in Chelsea with a combined value of more than £6m.

Yurov has said he accepts that assets need to be sold and money recovered, but that National Bank Trust should be put on the sanctions list. He has warned the money could be used to fund the war in Ukraine.

Vladyslav Vlasiuk, a sanctions expert working in Ukraine’s presidential office, said he would like to see the UK also impose sanctions on the National Bank Trust in Russia. He said: “There are sometimes gaps in the sanctions and they need to be closed.”

The Foreign Office declined to comment on the National Bank Trust. Mazars said it would not comment on a case in progress.

Article Credit: https://www.theguardian.com/business/2023/jun/25/5m-surrey-mansion-at-centre-of-row-over-russian-bank-sanctions-loophole