WASHINGTON—The Biden administration on Friday imposed sanctions on a Ukrainian banking tycoon and former public official and his family for alleged corruption, marking a renewed effort by the U.S. to help Kyiv address a problem that finance officials say is at the heart of the country’s economic and political woes.
While the action technically only prevents Ihor Kolomoisky, his wife, daughter and son from entering the U.S., the blacklisting is likely to complicate his ability to use Western banks and transfer his Ukrainian assets offshore.
For years, Mr. Kolomoisky wielded enormous clout in Ukraine’s politics, after amassing during the chaos of the post-Soviet collapse a financial empire spanning chemicals, gas, media and finance. He managed his holdings through a nebula of offshore companies and Ukraine’s largest bank, Privatbank, which he controlled.
Russia’s invasion of Ukraine in 2014 only strengthened his power. The embattled government in Kyiv appointed him governor of the Dnipropetrovsk region in eastern Ukraine, where he used his personal fortune to bankroll militias and acquired military equipment to fight off Russian advances. Critics alleged that Mr. Kolomoisky put some of the militias to his personal use after the main threat of Russian invasion had passed.
Secretary of State Antony Blinken accused Mr. Kolomoisky of corruption during his time as governor of the Dnipropetrovsk.
But while the action is based on his time as an official, “I also want to express concern about Kolomoisky’s current and ongoing efforts to undermine Ukraine’s democratic processes and institutions, which pose a serious threat to its future,” Mr. Blinken said in a statement.
Mr. Kolomoisky couldn’t immediately be reached for comment.
In a statement, President Volodymyr Zelensky’s office said that Ukraine is grateful to partner nations for their support in tackling the influence of oligarchs. Mr. Kolomoisky had previously been a backer of Mr. Zelensky, a former actor whose comedy show was broadcast on Mr. Kolomoisky’s TV channels.
“Ukraine must overcome the system dominated by oligarchs,” Mr. Zelensky’s office said. “Every fair decision in this direction will help Ukraine become a strong and truly independent state.”
U.S., European and International Monetary Fund officials have long said official corruption suppresses Ukraine’s economic growth, prevents vital economic and political overhauls, and blocks the former Soviet bloc nation’s integration into the Western economy.
“This designation reaffirms the U.S. commitment to supporting political, economic and justice sector reforms that are key to Ukraine’s Euro-Atlantic path,” Mr. Blinken said.
The U.S. Treasury Department, which manages sanctions policy for the administration, didn’t say whether it planned additional action against Mr. Kolomoisky. Treasury’s sanction tools include the power to block assets and prevent any business or financial dealings, actions that also reverberate globally, especially within Western allied states.
Mr. Kolomoisky, who is under investigation by federal authorities in the U.S., and another businessman each held 45% stakes in Ukraine’s largest financial institution, PrivatBank, until it was nationalized in 2016 by government officials in what they described as a move to avert the meltdown of the country’s financial system. Ukraine’s central bank governor that year said PrivatBank had a $5.6 billion hole in its balance sheet when it was seized, and the bank has since sought to recover those missing funds.
Now under new management, PrivatBank has blamed Mr. Kolomoisky and the other large shareholder, Gennadiy Bogolyubov, for the disappearance of most of the money missing from the bank’s accounts. The bank has accused them in a lawsuit filed in Delaware of laundering hundreds of millions of dollars through real-estate purchases in New York, Florida and Ohio. The two men have denied the allegations.
Western diplomats and officials say Mr. Kolomoisky has been a key hindrance of economic reforms and anticorruption efforts that are vital to strengthening the Ukrainian state so that it can fight off Russia’s encroachment.
Ukraine’s faltering efforts to enact policies meant to eradicate official corruption have stymied international financial aid and investment, making Ukraine a lingering economic basket case three decades after the collapse of the Soviet Union. Efforts by the central bank and government officials, including Mr. Zelensky, to battle corruption have faced opposition, including violence.
Former Ukrainian central bank governor Valeria Gontareva, who led the bank when it seized PrivatBank and has been a vocal advocate for the recovery of the missing funds, was hospitalized in London in 2019 after a driver ran over her foot and fled the scene. Ms. Gontareva’s house in Ukraine was also raided by men in masks and then burned to the ground in September.
“It’s a war against reformers,” Kateryna Rozhkova, the central bank’s first deputy governor, told The Wall Street Journal in an interview at the time.
—Georgi Kantchev in Moscow contributed to this article.
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