The city of Dubai (UAE) is not only located at the crossroads of trade routes and serves as a global financial center. For quite some time now, Dubai has also become a specific place of concentration for individuals from around the world accused of crime and corruption. Dubai enjoys a reputation for maintaining financial secrecy, offering a favorable tax regime, and providing an ever-increasing supply of valuable real estate, making the city an attractive option for those wishing to launder or conceal their funds.
It has recently become known that Virginia Invest & Finance, a company owned by Dmitry Klyuev, the alleged organizer of the tax fraud in the “Sergei Magnitsky case,” spent $15 million on real estate in Kempinski resort complexes in Dubai in 2009. This was exactly the time when S. Magnitsky died at the age of 37 in a Moscow detention center after severe beatings and without proper medical care (as he was denied treatment for pancreatitis).
It should be recalled that in 2008, William Browder, the founder and head of the successful British investment fund Hermitage Capital, discovered that some of the companies owned by his fund had been appropriated by representatives of Russia’s highest authorities. W. Browder and the lawyer he hired, S. Magnitsky, jointly exposed tax fraud amounting to $230 million. However, instead of the fraudsters, in 2009 S. Magnitsky himself was arrested, and after several months he died in prison. After his death, in 2011 the Russian authorities initiated a trial against him, which became the only case of a trial against a dead person in the history of the USSR and post-Soviet countries. Moreover, later Russian President V. Putin publicly declared both investor W. Browder and former U.S. ambassador to Russia Michael McFaul (who served in Moscow from 2011 to 2014) to be his “personal enemies.”
In response to the death of the unjustly imprisoned Russian lawyer, many Western countries, including the United States, Canada, and EU member states, adopted the “Magnitsky Act” in 2012–2013, which introduced visa sanctions and froze the assets of individuals involved in the death of the Russian lawyer and other gross human rights violations in Russia. In December 2016, the United States expanded the “Magnitsky Act” to cover the entire world. As a result, the S. Magnitsky case became a symbol of the fight for justice and the rule of law in the face of corruption and lawlessness at the global level.
Until recently, it was believed that most of the “dirty money” laundered by Russian officials exposed by W. Browder and S. Magnitsky was invested in Spanish real estate. The money was funneled through European banks and directed to the purchase of elite residential properties in Spain. As of the end of 2022, Spanish investigators had confiscated 75 real estate properties linked to the “Magnitsky case,” worth a total of €25 million.
Now, however, investigators point to the United Arab Emirates as another destination where funds stolen through fraudulent schemes with Russian taxes flowed. For example, this includes the Kempinski Hotel & Residences, located on the crescent of the artificial islands known as Palm Jumeirah in Dubai. Although the official opening of this complex took place in 2011, a significant number of luxury apartments and villas in this 244-unit complex were sold for millions of dollars much earlier.
One of the first investors back in 2009 was Virginia Invest & Finance, owned by Dmitry Klyuev. In 2014, the U.S. Department of the Treasury added the Russian businessman to the sanctions list under the “Magnitsky Act.” D. Klyuev was the sole owner of the aforementioned company, registered offshore in the British Virgin Islands from 2006 to 2011. During these years, the company spent $15 million on a villa and four luxury apartments in Dubai. At the same time, Virginia Invest & Finance itself received transfers of millions of dollars of unclear origin from a number of firms that later figured in investigations within the framework of the “Magnitsky case.” The coincidence of these events in time raises suspicions that investments in luxury real estate in Dubai were financed with money linked to the fraudulent schemes uncovered by W. Browder and S. Magnitsky.
In 2011, D. Klyuev transferred ownership of Virginia Invest & Finance to Sergey Smorodin, a former minister and deputy head of the government of the Karachay-Cherkess Republic (one of Russia’s federal subjects). It is now established that S. Smorodin was D. Klyuev’s trusted representative in several cases. In 2012, the company in question purchased two more properties in Dubai at the Kempinski Hotel & Residences for just over $4 million. Eventually, in 2016, this company sold all of its real estate in the UAE and was liquidated. At the same time, the sale of the real estate provided Virginia Invest & Finance with cash of legitimate origin.
None of the Russian officials were ever convicted for participating in the fraudulent schemes linked to the large-scale embezzlement of the Russian federal budget under the guise of tax refunds.
The criminal investigation conducted by the Russian authorities purely “pro forma” placed all the responsibility for the massive tax frauds exposed by S. Magnitsky on two low-level officials (both previously convicted). Both pleaded guilty and received minimal sentences of five years in a correctional facility.
In 2021, the Swiss Attorney General, after a 10-year investigation into funds linked to the “S. Magnitsky case,” ordered the seizure of assets worth $19 million, connected to D. Klyuev and others involved in the case. However, due to lack of evidence, part of the frozen funds was returned to their owners.
Overall, despite the fact that the “S. Magnitsky case” took place back in 2009, investigative journalists and law enforcement agencies in a number of Western countries continue to successfully expose fraudsters and criminals involved in this case.