When the United States places sanctions on a rogue businessman or corrupt corporation, the expectation is that significant financial consequences will result. Some targets of those sanctions, however, are devising tactics to skirt the measures and continue with their dirty business as usual.
Today, these evasion schemes are both putting global banks at risk for money laundering and sanctions busting, and endangering the United States’ most important foreign policy tool: targeted sanctions.
A textbook example is Israeli tycoon Dan Gertler, sanctioned by the United States for his involvement in grand corruption. An aggressive yet charming businessman who is said to be the inspiration for the movie "Blood Diamond," Gertler has claimed that he should get the Nobel Prize for his supposed investment in Congo. His record says otherwise.
At age 23, Gertler went to the Democratic Republic of Congo and reportedly gave then-President Laurent Kabila $20 million in cash – money that was then used to buy weapons – in exchange for a monopoly on Congo’s diamond exports. He then, according to U.S. Treasury Department reports, leveraged a tight-knit relationship with Kabila’s son and Congo’s subsequent president, Joseph Kabila, to make “hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the Democratic Republic of the Congo.”
Many of these deals involved asset flipping, with Gertler opaquely obtaining natural resource concessions for undervalued prices and then selling them for enormous profits with minimal or no investment. In one instance, he reportedly bought a mine for $60 million and then flipped it for $680 million; in another, he was said to have made a 29,900 percent profit on an insider oil deal.
In 2013, after 15 years of diamond, cobalt, and oil deals in Congo, Gertler made Forbes’ list of the world’s top 25 youngest billionaires. He has boasted that, "At the end of the day, yes, I’m looking to create a lot of wealth." Meanwhile, the source of that wealth, a nation with vast natural resources, has been shattered by systematic looting. Seventy-seven percent of Congo’s population still lives under the poverty line, and nearly half its children under age 5 are malnourished.
When the U.S. Treasury Department first issued the executive order implementing the Global Magnitsky sanctions program two years ago, Gertler was one of the first people targeted, along with 19 of his companies and one of his trusted associates. This powerful law allows the United States to sanction individuals and companies anywhere in the world that are involved in corruption or human rights violations.
- Alan Dershowitz, former FBI director lobbying for sanctioned Israeli billionaire
- Israeli diamond tycoon with ties to Democratic Republic of Congo slapped with U.S. sanctions
- The Paradise Papers: Haaretz reveals some of the Israeli businessmen and firms registered in offshore tax havens
- Congo probing Israeli billionaire’s loan to state firm
With Global Magnitsky and modernized sanctions targeting entire corrupt business networks, the United States is deploying proven techniques once reserved for countering terrorism and nuclear proliferation to support human rights and good governance, an historic step forward for international justice.
Gertler, however, is now actively attempting to dodge those sanctions in a series of power plays that allow him to continue to loot Congo of its natural treasures. He has set up new companies after being sanctioned, according to Congolese corporate records reviewed by The Sentry. These allow him to continue to be paid tens of millions of dollars in royalties by mining giant Glencore, this time in euros as a tactic to evade the legal jurisdiction of U.S. dollar transactions.
Gertler has also cut post-sanctions deals to have his companies’ oil permits extended by the Congolese government despite allegedly not following DRC investment rules. If the government sells the oil blocks, this would net Gertler another post-sanctions $150 million, according to two people familiar with the negotiations.
In 2018, the U.S. followed its original action with sanctions against 14 additional Gertler-affiliated companies and a Justice Department subpoena to Glencore that, according to sources familiar with the matter, requested information about Gertler’s activities.
Gertler recently upped the ante by hiring former FBI Director Louis Freeh and President Trump's legal advisor, attorney Alan Dershowitz to lobby on his behalf. Their high profiles suggest that the sanctions are having some effect even as Gertler attempts to poke holes in the net of accountability. But unless the U.S. closes those gaps by sanctioning Gertler’s new companies and enforcing the existing penalties, he and his cronies will seriously undermine U.S. anti-corruption efforts.
When Iran attempted to develop methods for evading sanctions in the late 2000s and early 2010s, the U.S. responded with a mix of strong diplomacy and secondary sanctions that essentially presented foreign governments and banks with a clear choice: Either do business with the sanctions target, or with the United States. The U.S. government should do the same with Gertler and others sanctioned for major corruption and human rights abuses.
How Gertler’s efforts play out will have significant implications for U.S. foreign policy and, more broadly, for international justice. At risk is the efficacy of targeted network sanctions and global anti-money laundering approaches, two of the most important policy tools the United States has in creating leverage for change.