Russian billionaires Arkady and Boris Rotenberg (Forbes estimates the fortune of the former at $ 2.9 billion and the latter at $ 1.2 billion) used the art market to evade US sanctions against them, according to a report presented Wednesday by members of the permanent subcommittee. on the Investigations of the US Senate Committee on Homeland Security and State Affairs.
The report, summarizing the results of the two-year investigation, says that the US art market is not regulated by the rules of anti-money laundering legislation. As a result, multimillion-dollar deals here may well be carried out in the interests of people previously included in the sanctions list.
The authors of the report believe that such transactions were carried out in the interests of the Rothenberg companies by the Moscow art consultant, US citizen Grigory Baltser. According to senators, from May to November 2014, that is, after the inclusion of Arkady and Boris Rotenberg in the US sanctions list, Balzer allegedly purchased works of art for a total of $ 18 million with money from companies associated with businessmen, including a painting by René Magritte La Poitrine worth $ 7.5 million.
According to the senators' conclusions, companies associated with the Rotenberg after the imposition of sanctions made deals (including with works of art) for more than $ 91 million. In addition, almost $ 122 million was withdrawn to Russia between March 16, 2014, when US President Barack Obama announced the imposition of sanctions, and on March 20, when the Rotenbergs were added to the sanctions list, the report said. The report mentions auctions Christie’s, Sotheby’s as well as London-based Phillips and Bonhams. Their representatives stated that they did not know who the final buyer was, and also declared their readiness to cooperate with the US authorities.
“The art industry now operates under a veil of secrecy, which allows consultants to represent sellers and buyers, hiding both their identities and the source of funds. This creates the conditions for money laundering and sanctions evasion, ”commented the chairman of the subcommittee, Republican Senator Rob Portman.
“It is totally unacceptable that rules designed to prevent money laundering do not apply when someone purchases a multi-million dollar work of art. <...>. Failure to close such obvious loopholes makes US sanctions - an important national security tool - far less effective than they could have been, ”said Democrat Senator Tom Carper, second author of the report.
Both senators consider it necessary:
to tighten legislation on money laundering, extending its norms to the art market;
collect data on the beneficiaries of companies doing business in the United States;
eliminate the appearance of windows between the announcement of sanctions and their introduction;
when imposing sanctions against a person, extend them to his immediate family;
lower or remove the ownership threshold for sanctioning companies co-owned by previously listed individuals.
In addition, the senators believe that the Office of Foreign Assets Control of the US Treasury Department (OFAC) should issue detailed instructions to auction houses and art dealers, explaining exactly what steps they should take in order to make sure they are not dealing. with a sanctioned person.
“I understand that auction houses and dealers do not always want to know who they are selling to, as it helps them earn money, but we are interested in ensuring national security, for sanctions to work,” Portman explained to the Wall Street Journal (WSJ ).
Balzer, through his lawyer, told the WSJ that he had not made purchases in the interests of the Rothenbergs. The lawyer added that the investigation by the congressmen damaged his client's business.
The representative of Arkady Rotenberg told RBC that businessmen have never resorted to money laundering and have not tried to evade sanctions, including through transactions in the art market. "All transactions with works of art, made by members of the Rotenberg family or on their behalf, have always been carried out openly, exclusively for legal and personal purposes and on market conditions," said a representative of the Rotenberg.