US slaps sanctions on accused fave go-to money launderer of Russia’s rich

A Russian woman the US accuses of being a career money launderer is the latest to be sanctioned by the country for her alleged role in moving hundreds of millions of dollars on behalf of oligarchs and ransomware criminals.

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) added Ekaterina Zhdanova to its Specially Designated Nationals And Blocked Persons List (SDN) on November 3, listing a string of offenses dating back to 2021.

Among these was her alleged involvement in moving funds for criminals involved in the Ryuk ransomware operation, known for attacks on US public sector organizations, with a particular focus on healthcare.

Zhandova is accused of laundering more than $2.3 million in 2021, suspected to be related to victim ransom payments, for a Ryuk affiliate. Seven members of the Wizard Spider group, believed to be behind Ryuk, as well as Conti and Trickbot, were sanctioned earlier this year and another 11 were added to the SDN in September.

The Treasury Dept claims Zhandova is known to use various methods to move funds between borders and launder criminal proceeds. It says these include the use of cryptocurrency exchanges that lack anti-money laundering controls like the Russian Garantex platform, which is also sanctioned by the US, as well as a large network of other international money launderers, cash, and traditional businesses.

In addition to ransomware criminals, she has been commissioned by the wealthiest members of Russia’s elite to move funds internationally, says the department. In one case, it claims, an oligarch tasked Zhandova with moving more than $100 million to the United Arab Emirates (UAE). Separately, she has also run a UAE tax residency service for high-paying clients, and may have helped hide their identities too, OFAC claims.

Another case saw Zhandover help a Russian client hide their source of wealth after moving $2.3 million into Western Europe, it alleges. She did this by illegally opening an investment account in the region and making real estate purchases, claims the treasury.

The purpose of her services in this case, and with the oligarch, was to establish a source of funds for these individuals in regions where they are legally unable to access financial markets due to international sanctions, it alleges.

“Through key facilitators like Zhdanova, Russian elites, ransomware groups, and other illicit actors sought to evade US and international sanctions, particularly through the abuse of virtual currency,” said Brian E Nelson, under secretary of the US treasury for terrorism and financial intelligence. 

“We remain focused on safeguarding the US and international financial system against those who seek to exploit this technology, among other illicit finance risks in the virtual assets ecosystem.”

“Our action today highlights the consequences of supporting corrupt Kremlin proxies, underscores the United States’ efforts to address the abuse of virtual currency to launder illicit funds, and exposes an illicit actor’s money laundering activities,” said US Department of State spokesperson Matthew Miller. 

“This action is also consistent with the G7’s commitment to cracking down on sanctions evasion and closing loopholes that allow the Russian Federation, its elites, proxies, and oligarchs to leverage virtual currency to offset the impact of international sanctions.”

Impact of US sanctions

The US and other allied nations have imposed sweeping sanctions on Russian individuals and entities, especially since the country’s invasion of Ukraine in February 2022, in a bid to damage its economy and ability to finance the war.

OFAC has added more than 2,500 Russia-tied targets to its SDN list in total, including more than 200 targets since the invasion.

It lists extensively the impact of its sanctions on Russia, including cutting off the supply of microchips which is slowing the rate of technological innovation, as well as various issues with manufacturing in a number of different industries.

The US’s position is that the sanctions are working and Russia’s economy is struggling. Often cited is Russia’s last budget which indicated a GDP contraction of 2 percent, but the sanctions haven’t had the desired impact yet.

Russia responded to the early sanctions, which saw the rouble’s value plummet around 30 percent within a few days of the invasion, by raising its key interest rate to 20 percent and imposing controls on withdrawing cash and capital movement.

The markets in Russia then stabilized and have withstood much of the impact of the sanctions thus far, but the US believes ongoing pressures are compounding and will see a more robust weakening of the Russian economy over the next few years.

OFAC’s official fact sheet on Russian sanctions didn’t mention the country’s reported success with importing high-end goods.

Throughout the year, numerous reports have indicated Russia is still able to defeat sanctions and procure the best tech on the market, including Cisco networking gear, Intel CPUs, and Nvidia GPUs.

Much of the help is reportedly coming from China, while organizations from the likes of Hong Kong and even the UK have also illegally shipped tech to Russia. 

As for ransomware, the underground industry has remained resilient to attempts to disrupt it and sanctions have done little to deter victims from paying.

Despite it being illegal to meet ransom demands to sanctioned groups, a significant proportion of ransomware victims still pay up in 2023, according to Astra Security, which states that 41 percent of all victims ignore the advice of Western countries on this matter.

Chainalysis’s half-year report looking at global crypto crime in 2023 found that ransomware criminals are on course to have their second-most lucrative year on record, having already extorted at least $449.1 million from victims by June. By the same point in 2022, the total amount extorted sat at just $175.8 million. ®

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