The Rotenbergs, who made a fortune through contracts related to the Sochi Olympics, were sanctioned and their US assets were frozen in March 2014 as part of the Obama administration’s decision to punish Russian President Vladimir Putin and his close associates for the Russian annexation of Crimea. Arkady Rotenberg was later chosen by Putin to direct the construction of a bridge connecting Russia to mainland Crimea.
The pair has found a way to avoid sanctions, the subcommittee claims, by moving money through shell companies and investing it in high-value artwork. The report cites more than a million documents reviewed, interviews with nearly two dozen people and requests for information from the country’s four largest auction houses.
And while the Rotenbergs are the only sanctioned people the panel says could confidently determine that they are benefiting from lax laws governing the US art industry, they are likely “just the tip of the iceberg.” A subcommittee staff member said in a call with journalists Tuesday. .
Experts have described the art market as “an ideal playing field for money laundering” given its opaque culture (buyers and sellers often insist on anonymity) and the constant value of art. The global art market is currently valued at around $ 64 billion, with the US accounting for 44 percent of the global market share, according to Art Basel and the UBS 2020 Global Art Market Report .
Congressional investigators say they discovered that the Rotenbergs used three shell companies – Highland Business Group Limited, Highland Ventures Group Limited and Advantage Alliance – to buy the art after they were sanctioned, and that they “attempted to hide their share of the art market from the United States by hiding behind a Moscow-based consultant and art dealer, Gregory Baltser. ”
Baltser, a U.S. citizen, used a shell company called Steamort Limited to shop for the Rotenbergs, the subcommittee alleged. Investigators tracked the purchase of at least 16 paintings, including René Magritte’s “La poitrine”, purchased for $ 7.5 million in May 2014, from the shell companies linked to Rotenberg.
Reached for comment, Baltser’s attorneys categorically denied the allegations, and wrote in a statement that neither Baltser nor his agency, BALTZER, “has in any way represented or negotiated in any way with Boris or Arkady Rotenberg.” Baltzer flatly denies any suggestion to the contrary.
“Baltzer Limited’s compliance program has depended, and will continue to rely, on the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC), its own List of Nationals and Blocked Persons (SDN). According to the OFAC list, Baltzer has acted appropriately and responsibly, ”the statement continued, referring to the fact that Highland has not been sanctioned by OFAC.
“The Subcommittee Report is based on unverified and unverifiable rumors in disagreement with OFAC. Baltzer cannot be criticized for trusting in good faith in the executive agency that makes sanctions decisions. The conflict within the government should have been resolved without making Baltzer a scapegoat simply for complying with applicable regulations. “They added that they are” deeply disappointed “that the subcommittee has chosen” to make unfair allegations based on information from unconfirmed sources. “
Auction houses told investigators they did not consider Balter’s purchases to be unusual: Sotheby’s chief compliance attorney said in an interview that the company saw Baltser as the main buyer of the art because he bought it in his own name. and used funds from his own bank account, noting that Sotheby’s had no legal authority to demand the source of those funds. Christie’s attorney general told the panel in a separate briefing that his purchases “fit” with the house’s “understanding of his profile and operations”.
But the subcommittee “mapped funds used to buy artwork across multiple jurisdictions, accounts, and financial institutions,” the report reads, and found that Rotenbergs’ funds generally followed the same path before and after the sanctions: from his company. Ghost Highland Ventures, to Steamort Limited, to Baltzer’s bank account with Barclay’s in London, and finally to a private auction house in New York.
Baltzer’s agency, BALTZER, would then take the title of the technique, “so any due diligence was done only on Mr. Baltser,” the report reads, easily satisfying the fairly flexible and voluntary protocols against money laundering.
In a July 13 letter to the committee that Baltser’s attorneys provided to POLITICO, BALTZER’s general counsel said that Baltser “was never involved in or aware of any transaction involving Steamort Ltd. dealing” with any of the Rotenbergs.
The Rotenbergs could not immediately be reached for comment.
Subcommittee staff said Tuesday that Portman wanted to investigate this issue “because of his strong support for an independent and democratic Ukraine,” which was invaded by Russia in 2014 in violation of international law. Portman hopes to strengthen deterrents to prevent further misbehavior from Putin and his allies, which now includes the pursuit of the art market in the United States, another committee member said.
“Art is a very important piece of the investment portfolios of very wealthy people,” he said. “It is a property that these people can use to hide, store and move money around the world.” He added that “if the art market in the United States is seen as a place where it is easy to launder dirty money, then it will attract criminals.”
For that reason, among the legislative remedies the panel recommends is that Congress amend the Bank Secrecy Act to add businesses that handle transactions involving high-value art: the art industry is not currently subject to anti-money laundering laws. money under the law.
The staff member noted that the EU recently imposed new anti-money laundering rules that require companies handling art transactions of more than € 10,000 to verify the identity of the buyer, seller, and beneficial owner, and noted the fact that The US has not made a similar change “an obvious loophole globally in the effort to combat this type of crime.”
Another gap that employees identified is the gap between the announcement of sanctions and their actual implementation: in the four days between President Barack Obama’s announcement of new sanctions in 2014 and the actual imposition by the Treasury Department of those sanctions on individuals and businesses. The Rotenbergs repatriated $ 122 million to Russia, the panel found.
“The Treasury Department should take the necessary steps to announce and implement sanctions to avoid creating a window of opportunity for people to evade sanctions,” the report recommends. They also recommended that the department consider sanctioning the immediate family of a designated individual: The subcommittee found that Arkady Rotenberg transferred some of his business interests to his son Igor four months after he was sanctioned.
The Rotenbergs and Baltser did not make themselves available to the subcommittee for interviews, the employees said. But they may have noted the investigation: In August 2019, while the investigation was ongoing, a storage unit in Germany that had Rotenberg’s art purchases closed, the employees said, citing a conversation with the owners of the storage facilities. The art was shipped to Moscow.
