A powerful Russian businessman who has been under financial sanctions for nearly a decade has nevertheless used US and European banks to raise money for orphanages in a region central to the Kremlin’s program to deport Ukrainian children to Russia, it appears from the data.
Businessman Konstantin Malofeyev is one of Russia’s most prominent conservative voices and has championed the resettlement efforts, which prosecutors in The Hague have labeled a war crime. He calls for a return of the Russian Empire and has repeatedly denied the existence of a Ukrainian identity.
Mr Malofeev has been cut off from most Western financial systems since 2014, when the Treasury Department and other international regulators accused him of funding Russian proxy forces in Ukraine. He has denied that.
However, Mr. Malofeev has continued to use his charity, the St. Basil the Great Foundation, to raise money for orphanages in the Russian-occupied Donbas and Zaporizhia regions. In an interview, Mr Malofeyev said he did not know if these orphanages were hosting Ukrainian children who had been forcibly relocated, but said the resettlement efforts had been unfairly demonised.
“Little children, deported from their families by Russians?” he said, comparing it to the fairy tale ‘Cinderella’. “This is all fake.”
The New York Times has seen documents confirming a recent transfer of US dollars to the charity’s account in the Moscow branch of OTP Bank, a Hungarian bank.
The exact path these dollars have taken is unclear. OTP said it would not discuss its clients, citing its confidentiality policy, but said it was “an ethical and law-abiding institution that follows the principle of zero tolerance regarding any kind of crime.”
The charity’s website states that international donations go through Bank of America and Deutsche Bank. But spokesmen for both companies said neither is currently doing business with OTP’s Moscow facility.
The St. Basil the Great Foundation itself is not blacklisted by US or European authorities. But under the Treasury Department’s “50 percent rule,” sanctions against Mr Malofeev would automatically extend to any entity in which he is a majority shareholder. The European Union has similar rules for organizations in which people on the blacklist have ‘decisive influence’.
Mr. Malofeyev founded the foundation in 2007 and is chairman of the board. He is listed as CEO in the official Russian legal register.
It is not clear whether the rules of the Ministry of Finance would also apply to Mr Malofeyev’s foundation. Its ability to move money through Western banks is an example of how sanctions – the West’s main punishment against Russia – depend largely on bank enforcement, and can be a matter of interpretation.
Spokesmen for Bank of America and Deutsche Bank said the banks followed all sanctions rules. The Treasury Department declined to comment. European regulators declined to comment, but said it was up to national governments to enforce the sanctions.
Russia illegally annexed parts of Ukraine last year, and Mr Malofeev echoed the Kremlin’s claim that all children from that region “belong” to Russia.
Since the large-scale Russian invasion of Ukraine, children in these areas have become battlegrounds themselves. Some children have described a painful process of coercion, deception and violence as they were taken to Russia, placed in state institutions or foster homes and subjected to re-education. In response to these reports, the International Criminal Court issued an arrest warrant in March for President Vladimir V. Putin and Maria Lvova-Belova, the official who led the relocation efforts.
Mr Putin publicly thanked Mr Malofeev in February for helping “the children of the Donbas”. And Ms. Lvova-Belova mentioned him at the same event when she discussed businessmen who have supported her efforts.
Mr. Malofeyev’s foundation has been helping to transport children from Russian-occupied territories to hospitals in Moscow since 2014. Ukraine blacklisted the charity in 2015 and has renewed that designation five times, most recently in 2021.
In January, the foundation and Ms. Lvova-Belova announced a project called “Happy Childhood” to raise money for “children and families with children” in “new regions of Russia,” according to the official press release. About $265,000 was raised in less than a month. In February, she and Mr. Malofeev toured the occupied territories together, meeting with self-proclaimed regional chiefs.
Mr. Malofeev was outraged by the coverage of the warrants.
“This story is absolutely immoral,” Mr Malofeyev told The Times earlier this year. “For example, if they were accused of the children getting sick, the children suffering, then that could be talked about. But the kids are fine. The children have found their family.”
According to an official press release, about 450 children and young adults are housed in orphanages funded by Mr. Malofeyev’s foundation. He said the charity also supported Russian families in the Donbas region who recently adopted children.
“There are families with several children who have adopted children who are not theirs,” he told The Times.
“The St. Basil the Great Foundation is a back door for Malofeev and Russia to continue their foreign influence operation,” said Jelle Postma, a former Dutch intelligence officer who now heads Justice for Prosperity, a research institution that focuses on foreign interference.
Mr. Postma transferred money in dollars to the foundation to test the donation system and shared the documentation with The Times.
Last year, the Justice Department indicted Mr Malofeev on charges of attempting to evade sanctions. It was the first criminal case brought by the Biden administration’s multi-agency task force, which was set up to crack down on illicit Russian money.
Earlier this year, the Justice Department announced it would use the $5.3 million it seized from Malofeyev to help rebuild Ukraine.
“While this is the first transfer by the United States of forfeited Russian funds for the reconstruction of Ukraine, it will not be the last,” Attorney General Merrick B. Garland said in a statement.