A powerful Russian businessman who has been under financial sanctions for nearly a decade has nevertheless used American and European banks to raise money for orphanages in a region at the heart of the Kremlin’s deportation program of Ukrainian children in Russia, records show.
Businessman Konstantin Malofeyev, is among Russia’s most prominent conservative voices and a champion of resettlement efforts, which prosecutors in The Hague have labeled a war crime. He called for the return of the Russian Empire, and repeatedly denied the existence of a Ukrainian identity.
Mr. Malofeyev 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 inside Ukraine. He denied that.
However, Mr. Malofeyev continues to use his charity, St. Basil the Great Foundation, to raise money for orphanages in the Russian-occupied Donbas and Zaporizhzhia regions. In an interview, Mr. Malofeyev said he did not know whether those orphanages hosted forcibly displaced Ukrainian children, but said the resettlement effort had been unfairly demonized.
“Little children, driven away from their families by the Russians?” he said, comparing it to the fairy tale “Cinderella.” “It’s all fake.”
The New York Times has seen records confirming the recent transfer of American dollars to the charity’s account at the Moscow branch of OTP Bank, a Hungarian bank.
The exact path those dollars took is unclear. OTP said it would not discuss its customers, citing confidentiality rules, but said it is “an ethical and law-abiding institution that adheres to the principle of zero-tolerance in respect of any kind of crime.”
The charity’s website says international donations are routed to Bank of America and Deutsche Bank. But spokespeople for both companies said there is currently no business at OTP’s Moscow branch.
The St. Basil the Great Foundation itself is not blacklisted by American or European authorities. But under the Department of the Treasury “50 percent rule,” the sanctions against Mr. Malofeyev would automatically extend to any entity in which he is a majority owner. The European Union has similar rules for organizations where blacklisted people have “decisive influence.”
Mr. Malofeyev founded the foundation in 2007, and is the chairman of its board. He is listed as its chief executive officer in Russia’s official legal registry.
It was unclear whether Treasury Department rules would cover Mr. Malofeyev’s foundation. His ability to transfer money using Western banks, is an example of how the sanctions — the Western sanctions against Russia — rely more on the implementation of the banks, and can be a matter of interpretation.
Spokesmen for Bank of America and Deutsche Bank said the banks have complied with all terms of the penalty. The Treasury Department declined to comment. European regulators did not comment, but said it was up to national governments to implement the sanctions.
Russia illegally annexed parts of Ukraine last year, and Mr. Malofeyev repeated the Kremlin’s claim that all children from that region “belong” to Russia.
Since Russia’s full-scale invasion of Ukraine, children in these areas have become a battlefield. Some children described a brutal process of coercion, deception and force as they were transferred to Russia, placed in state institutions or foster homes and subjected to re-education. Following these reports, the International Criminal Court issued an arrest warrant in March for President Vladimir V. Putin and Maria Lvova-Belova, the official leading the relocation effort.
Mr. Putin publicly thanked Mr. Malofeyev in February for helping “the children of the Donbas.” And Ms. mentioned him. Lvova-Belova at the same event when discussing businessmen who supported her efforts.
Mr. Malofeyev’s foundation has, since 2014, helped transport children from Russian-occupied areas to hospitals in Moscow. 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 is a project called “Happy Childhood” to raise money for “children and families with children” in “new regions of Russia,” according to the official news release. In less than a month, it raised about $265,000. In February, he and Mr. Malofeyev toured the occupied territories togethermeeting with designated heads of regions.
Mr. Malofeyev was outraged at the announcement of the warrants.
“This story is completely immoral,” Mr. Malofeyev told The Times earlier this year. “If they are accused, for example, that children get sick, that children suffer, then it can be discussed. But the children are fine. The children have found their families.”
According to an official news release, approximately 450 children and youth are in the care of orphanages funded by Mr. Malofeyev. He said the charity also supports Russian families in the Donbas region who have recently adopted children.
“There are families with many children, who adopt children who are not theirs,” he told The Times.
“The St. Basil the Great Foundation is a back door for Malofeyev and Russia to continue the operation of foreign influence,” said Jelle Postma, a former Dutch intelligence officer who is now in charge. Justice for Development, a research institute dedicated to alien interference.
Mr. Postma wired the dollar to the foundation to test the donation system and shared the documentation with The Times.
Last year, the Justice Department accused Mr. Malofeyev on charges of attempting to evade sanctions. This is the first criminal case brought by the Biden administration’s multiagency task force set up to target Russian illicit money.
Earlier this year, the Justice Department announced that it would use the $5.3 million it seized from Mr. Malofeyev to help rebuild Ukraine.
“While this represents 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.