Tensions ran high in the Principality of Liechtenstein when Rheingold Edelmetall and three members of its owner family Diegelmann were placed on the «Specially Designated Nationals and Blocked Persons» (SDN) list by the Office of Foreign Assets Control (OFAC) on February 23 in connection with Russia sanctions, finews.com reported at the time.

Company founder Axel Paul Diegelmann, originally from Germany, was only naturalised in Triesen, Principality of Liechtenstein, at the end of October 2023, albeit by a narrow margin: the «No» vote in the referendum was 48.31 per cent.

Immediately after the sanctioning, he was optimistic in an interview with Liechtenstein's «Vaterland»: «We will get off the OFAC list. I am absolutely certain of that.» At the time, he was hoping to resolve the matter «by June».

High-Ranking Officials Sued

To underscore this intention, he, along with his companies Rheingold Edelmetall and Liemeta and his son Fritz Diegelmann, filed a lawsuit against US Treasury Secretary Janet Yellen, OFAC Director Bradley Smith, the US Treasury Department, and OFAC. This is according to court documents reviewed by finews.com.

Specifically, the lawsuit filed in the United States District Court for the District of Columbia on April 16, is an action is a complaint for declaratory and injunctive relief: The plaintiffs are asking the court to declare «unlawful and set aside defendants’ imposition of sanctions on Plaintiffs and direct the lifting of all sanctions and direct the lifting of all sanctions by a writ of mandamus compelling the same.»

«Guilt by Association»

Notably, the second sanctioned son, Bernd Günter Diegelmann, did not join the lawsuit. OFAC accuses him of evading Russia sanctions by dealing in gemstones as an employee of Rheingold Edelmetall in the United Arab Emirates.

The plaintiffs have distanced themselves from this: «Plaintiffs’ designation based on any of Bernd Diegelmann’s activities, even if true, amounts to guilt by association based on familial relation rather than any legitimate or legal basis.»

Allegations of Money Laundering

In its brief communication on sanctioning the alleged «Diegelmann Illicit Finance Network,» OFAC mainly justified the measure by claiming the gold dealers had «disguised the Russian origin of the precious metals it traded and allowed Russians to buy and sell them for cash, laundering funds.»

The gold dealers counter this accusation, arguing they cannot fake the origin of precious metals as they do not possess processing or refinery facilities. Such facilities are essential to obscure the origin of precious metals due to the typical stamps of gold bars.

Not Illegal

Rheingold Edelmetall and its owners emphasize that trading in gold of Russian origin is not prohibited by OFAC's standing practice unless dealing with companies also on the SDN list. Rheingold Edelmetall last purchased gold from Russian suppliers in 2021, before the Ukraine war and the sanctions regime took effect.

Furthermore, there were discussions between Rheingold Edelmetall or its founders and a company named Highland Gold. Highland Gold appeared on OFAC's SDN list in December 2023. «The interaction with Highland Gold was limited to preliminary discussions regarding constructing a vault in Oman, a venture that never proceeded past the discussion phase, and did not result in any executed contracts or completed transactions.»

Learned of Sanctions from the Media

Rheingold Edelmetall denies that sanctioned individuals accessed the company's services. In Liechtenstein and Germany, where the sister company of the same name which is also on the SDN list is located, the precious metals business adheres to anti-money laundering laws, including Know-Your-Customer and anti-money laundering measures.

The plaintiffs claim they learned of their SDN list sanctioning from the media. Consequently, on March 13, they demanded the administrative record from OFAC to obtain a detailed justification for the measure. However, they were unsuccessful. On April 16, the day the lawsuit was filed, they also submitted petitions for removal from the SDN List through the administrative reconsideration with OFAC.

Insurance for «Fort Knox»

The legal document also details the private and business consequences of OFAC's sanctioning. Travel radius is restricted, the family members «are unable to use most of their domestic banking channels in Liechtenstein,» and they are forced to «only use cash» for basic needs like rent and related utilities, such as electricity. «They are at serious risk of being evicted from their home and unable to secure new housing.»