The Russia connectionRussian investments in the United States: Hardening the target
The United States is the single largest recipient of foreign investment worldwide. This openness reflects the country’s innovative industries, deep capital markets, and ease of doing business – and it also contributes to making them possible. At the same time, a hands-off reporting regime makes it difficult for law enforcement and other government agencies to determine whose money is behind investment flows or where they should focus their investigative resources. While most foreign investment is benign, the current framework presents inviting loopholes through which adversaries can gain non-transparent access to U.S. businesses, technology, and data.
The United States is the single largest recipient of foreign investment worldwide. This openness reflects the country’s innovative industries, deep capital markets, and ease of doing business – and it also contributes to making them possible. At the same time, a hands-off reporting regime makes it difficult for law enforcement and other government agencies to determine whose money is behind investment flows or where they should focus their investigative resources. While most foreign investment is benign, the current framework presents inviting loopholes through which adversaries can gain non-transparent access to U.S. businesses, technology, and data.
The method of choice for the sophisticated actor to make a targeted investment in the United States – as opposed to taking a passive stake in a publicly traded company – is a private investment fund.(1) As investment vehicles, they are ideal for gaining access to the most prestigious, highly sought-after opportunities, and they allow investors to be selective in a way that more plain vanilla strategies like index funds do not. Private funds have only limited obligations to disclose their investors or their investments. And unlike banks, broker-dealers, and mutual funds, they have no legal obligation to detect suspicious activity by their clients. This lack of transparency is troubling in any case, but especially in the context of malign influence operations by Russia and other actors. To protect ourselves, we need more transparency into and enhanced vigilance over this $12.5 trillion pool of capital,(2) in the form of disclosure requirements and anti-money laundering (AML) obligations.
Known unknowns
A number of large-scale Russian holdings in the U.S. via private investment funds have already made the press, and many more likely remain unreported. The sanctioned Russian businessman Viktor Vekselberg invested in the U.S. through Columbus Nova, a private investment firm. Vekselberg’s company, Renova, was Columbus Nova’s largest client. LetterOne, the international investment group co-founded by the billionaire owners of Russia’s Alfa Group, maintains a U.S. office and over $2 billion of investments in the United States.
Altpoint Capital, the private equity firm
