30 Jul 2020
Companies linked to two Russian oligarchs exploited the opaqueness of the art world to buy high-value art, bypassing U.S. sanctions, according to a report by the U.S. Senate’s Permanent Subcommittee on Investigations that was published on Wednesday.
American companies are barred from doing business with sanctioned individuals. But the report said the oligarchs, Arkady and Boris Rotenberg, two brothers who are close to President Vladimir P. Putin of Russia, were able to hide behind an intermediary who made the purchases on behalf of companies owned or funded by the Rotenbergs.
The purchases of works at auction houses and through private art dealers in New York totaled $18.4 million in value and were made after the Rotenbergs came under United States sanctions in 2014.
The report said the financial transactions were enabled by the secrecy and anonymity with which the art market operates and it called for tighter rules to force greater transparency. The investigators concluded that the auction houses — including Christie’s and Sotheby’s — and private sellers never knew the true identity of the oligarchs who were buying the art, but they said that was a loophole that needs to be closed for a sanctions policy to be truly effective.
“It is shocking that U.S. banking regulations don’t currently apply to multimillion-dollar art transactions, and we cannot let that continue,” Senator Rob Portman, Republican of Ohio, who is chairman of the subcommittee, said in a statement. “The art industry currently operates under a veil of secrecy allowing art advisers to represent both sellers and buyers masking the identities of both parties, and as we found, the source of the funds. This creates an environment ripe for laundering money and evading sanctions.”
None of the auction houses or dealers were accused of any wrongdoing. The report said they stopped doing business with the intermediary as soon as they learned of the Senate investigators’ concerns.
In a statement, Christie’s said it welcomed “the opportunity to work with U.S. legislators on appropriate and enforceable A.M.L. guidelines for all tiers of the art trade here.” Sotheby’s said in a statement that it “takes Anti-Money Laundering and United States sanctions policies extremely seriously and voluntarily participated in the Senate Subcommittee’s investigation.”
The Rotenberg brothers were the subject of sanctions in March 2014, in an expansion of sanctions to wealthy businessmen with close ties to President Putin that came in response to Russia’s invasion of Ukraine and annexation of Crimea.
The Rotenbergs had amassed fortunes through their ties to the government, the administration said. They were awarded an estimated $7 billion in contracts for the Winter Olympic Games in Sochi. President Putin later entrusted the construction of a bridge to Crimea to Arkady Rotenberg, a longtime friend and judo partner.
Despite the prohibition against U.S. entities doing business with the oligarchs, the Senate investigators traced numerous art transactions in a period of just a few months following the imposition of the sanctions back to anonymous shell companies that they said were linked to the Rotenbergs
The report identifies a Moscow-based art adviser named Gregory Baltser, whom it described as a naturalized U.S. citizen, as an intermediary who bought art for companies it said were linked to the Rotenbergs. Mr. Baltser typically operated through his company, Baltzer, a private art agency and club, that he established in 2013, the report said.
In one case, in May 2014, Baltzer bought multiple works at a Sotheby’s sale in New York for $6.8 million, including works by Henry Moore, Marc Chagall and Georges Braque. A Belize company called Steamort, which the report links to the Rotenbergs, wired funds from an Estonian bank account to Baltzer’s London account and from there to Sotheby’s bank in New York.
In another case, in June 2014, a company called Highland Ventures bought a painting, René Magritte’s “La Poitrine,” for $7.5 million via a private New York art dealer, with funds it traced to a company owned by Arkady Rotenberg.
Just a few months later, in November, Baltzer bought a painting, “Un port sous la lune,” by the artist Tamara De Lempicka, at Christie’s Impressionist and Modern Day Sale in New York, for $665,000 using funds wired by Highland Ventures and Steamort.
By Graham Bowley, The New York Times, 29 July 2020
Read more at The New York Times
RiskScreen: Eliminating Financial Crime with Smart Technology
Count this content towards your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet