HB 406-MORATORIUM ON TRUSTS/PROPERTY ACQUISITION  9:55:20 AM CO-CHAIR SPOHNHOLZ announced that the next order of business would be HOUSE BILL NO. 406, "An Act relating to the validity of trusts involving persons sanctioned by the United States Department of the Treasury; and relating to the recording of documents conveying land to persons sanctioned by the United States Department of the Treasury." 9:55:35 AM EVAN ANDERSON, Staff, Representative Zack Fields, Alaska State Legislature, provided a PowerPoint presentation titled "House Bill 406" on behalf of the House Labor and Commerce Standing Committee, sponsor. He spoke from the fourteenth slide, "HB 406: Moratorium on Trusts / Property Acquisition." He explained that HB 406 would: update Alaska law to ensure trusts held or managed by enemies of the United States can no longer operate in the state of Alaska; prohibit these individuals from acquiring real estate, which is the biggest difference between HB 406 and HB 405; and protect Alaskans' access to services provided by trusts, such as estate planning, while ensuring foreign adversaries cannot hide their wealth in Alaska. MR. ANDERSON moved to the fifteenth slide, "Office of Foreign Asset Control," and stated that the U.S. Department of the Treasury has used economic power to freeze assets of enemies of the U.S. since 1940 when Nazi Germany invaded Norway. He said OFAC's authorities were expanded with the 2016 Global Magnitsky Act and stressed that sanctions from OFAC target individuals, not countries, deemed enemies of the U.S. He specified that financial transactions with individuals on the sanctions list are prohibited for U.S. citizens, which makes it even more concerning that Alaska's trust laws could potentially conceal some of these transactions. He stated that [in October 2021] the Pandora Papers revealed that U.S. states like Alaska have trust laws so strong that they may effectively conceal assets of international criminals. MR. ANDERSON displayed a photograph on the sixteenth slide depicting Monaco's Monte Carlo Star, a luxury apartment complex located between the casino [and the sea] and which has in front of it a marina full of yachts. He said the complex was worth $3.1 million when it was cited in the Pandora Papers. He related that according to a recent report by the International Consortium of Investigative Journalists (ICIJ), one of the multi-million-dollar flats inside this building was purchased through a Caribbean-based shell company in 2003 for Alina Kabaeva, whom some reports have identified as the rumored mother to a child of Russian President Putin. MR. ANDERSON presented the seventeenth slide, "Why do criminals like trusts?" He paraphrased a quote from ["The Puppet Masters" report by the World Bank, October 2011], which states: "Trusts prove such a hurdle to investigation, prosecution (or civil judgment), and asset recovery that they are seldom prioritized in corruption investigations. Investigators and prosecutors tend not to bring charges against trusts, because of the difficulty in proving their role in the crime". MR. ANDERSON showed the nineteenth slide and said the photograph includes Alisher Usmanov, a notorious Russian oligarch who until recently was majority owner of Arsenal football club in the United Kingdom (UK) and who is a major financier of Putin's efforts in Russia. Mr. Anderson moved to the twentieth slide and related that Mr. Usmanov made news a few weeks ago when his spokesperson said that Mr. Usmanov's assets, including a yacht and a London apartment, were out of reach of sanctions in the UK, even though located in the UK, [because they had been transferred into irrevocable trusts]. Mr. Anderson stated that things can be done about these legal loopholes in Alaska by taking steps to integrate the state's trusts into the existing federal enforcement mechanisms. 10:00:14 AM MR. ANDERSON reviewed the sectional analysis of HB 406. He spoke from the document provided in the committee packet titled "Sectional Analysis House Bill 406 Version B," which read as follows [original punctuation provided]: * Section 1. AS 13.36 is amended by adding a new section that strips a trust of its legal status in the State of Alaska if any individual associated with it is named on the sanctions list by U.S. Department of Treasury. Trusts are a legal recognition of relationships definitions for these relationships already exist in statute: - a settlor places their assets into trust - a trustee or trustor holds the assets in their name, but the assets do not belong to them, and they can not [sic] financially benefit from them - a beneficiary will receive distributions from the assets held in trust * Sec. 2. AS 40.17.070 is amended by adding a new subsection to make it impossible for individuals on the U.S. Department of Treasury sanctions list to acquire, sell, or gift real property in the State of Alaska. The Recorders Office in Department of Natural Resources is responsible for keeping records on real estate transactions. The Recorders Office can utilize the Office of Foreign Assets Control sanctions list to avoid any future sale of Alaskan properties to individuals on the sanctions list. * Sec. 3. This section provides for an effective date. This bill will not impact trusts established or real estate transactions completed prior to its effective date. 10:01:41 AM CO-CHAIR SPOHNHOLZ opened invited testimony on HB 406. 10:01:56 AM RYAN GURULE, Policy Director, Financial Accountability and Corporate Transparency (FACT) Coalition, provided invited testimony on HB 406. He urged that in promulgating HB 406 the committee consider typical real estate anti-money laundering typologies and creative corporate structuring that is available to sanctioned individuals, such as the ability to purchase real estate through trusts or other anonymous legal entities or arrangements, or via nominees. He said HB 406 needs to contemplate and look past legal blinders to identify problematic buyers. In other words, he continued, HB 405 will help to ensure that HB 406 is effectively implemented in Alaska as would similar measures with respect to other typologies. This would ensure that sanctions against oligarchs cannot be avoided through secrecy and that Alaska is encouraging the type of investment that will ensure the long-term growth of the Alaskan economy to the benefit of the Alaskan citizenry. 10:03:55 AM The committee took an at-ease from 10:03 a.m. to 10:04 a.m. 10:04:31 AM CO-CHAIR FIELDS opined that international criminals who use trusts to shield their assets are like vermin and it must be ensured that they cannot come into Alaska. He said Alaska cannot control what South Dakota or Nevada do, but Alaska can protect itself as well as set a good example with its state laws. These goals are important, he continued, because it is a reality that Putin and other rogue regimes operate through informal networks of hiding and generating wealth, including through criminal organizations. Alaska must do its part to stop someone like Putin from deriving funding for a criminal and aggressive regime, he added. 10:05:36 AM CO-CHAIR SPOHNHOLZ offered her belief that the committee process will make the bill better. She stressed that the intent is not to undermine individual Alaskans or good acting Americans who want to establish trusts. She said the trust industry in Alaska is an important part of the state's commercial spectrum and most trusts are family trusts that are designed to make it easy to convey assets. [The intent], she continued, is to ensure that Alaska is not part of propping up bad actors that might take advantage of Alaska's trust system. [HB 406 was held over.]