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Senate investigation finds Russians shelter millions in assets through art purchases

Art’s value is in the eye of the beholder — and, according to a Senate investigation, Russian oligarchs find it very valuable as a way to shelter millions in defiance of U.S. economic sanctions.

The Senate’s Permanent Subcommittee on Investigations studied two Russian oligarchs in particular, Arkady and Boris Rotenberg, who are close friends of Russian President Vladimir Putin.

They bought at least $ 18 million in art on the U.S. market through shell companies in the months after they were sanctioned in 2014, following Russia’s invasion and annexation of Ukraine’s Crimea region, the bipartisan probe found.

“If the art market in the United States is seen as a place where it’s easy to launder dirty money then it’s going to attract criminals,” said one committee investigator.

Added another: “This is in the same vein as guys like this buying property in the United States and other significant investments to move their money around the world, hide their assets.”

The investigators said the Rotenbergs are likely the tip of the iceberg when it comes to money being moved and hidden through art sales.

Art is the largest unregulated legal market in the U.S., accounting for billions of dollars in sales without being subject to anti-money laundering and terrorism finance controls.

“It is shocking that U.S. banking regulations don’t currently apply to multi-million dollar art transactions, and we cannot let that continue,” said Sen. Rob Portman, Ohio Republican and chairman of the subcommittee. “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.”

Sen. Tom Carper, the ranking Democrat on the subcommittee, said allowing art purchases in defiance of sanctions makes a mockery of the sanctions themselves.

Major art houses such as Christie’s and Sotheby’s have voluntary policies to police purchases, but the individual agents handling transactions often seem to ignore those policies, the investigation suggested.

Usually they won’t prod a buyer or seller beyond asking some brief questions, and they treat the agent as the purchaser even if they suspect it’s a straw purchase intended for someone else.

In the case of the Rotenbergs, Senate investigators identified Gregory Baltser, an American citizen, as the go between.

He refused to talk to the investigation — his lawyer told them that he now lives in Russia and has no plans to return, the subcommittee said — but they traced art he purchased back to several shell companies that, thanks to the so-called Panama Papers, they were able to connect to the Rotenbergs.

Investigators said when they asked the auction houses about their dealings with Mr. Baltser, they were told the representatives were aware he was buying on behalf of someone else, but never asked who.

“This is all sort of done under this cloak of secrecy where it’s just not done, you don’t ask somebody who his client is,” one investigator said.

Mr. Portman and Mr. Carper promised legislation to add the business of buying and selling art to the list of industries regulated by the Bank Secrecy Act’s money laundering provisions.

The senators also said that when the administration imposes sanctions, it should consider including all immediate family members, to prevent transfer of assets. And they said when sanctions are announced, they should be effective immediately.

When President Obama announced the sanctions stemming from the Crimea annexation in 2014, the Treasury Department waited four days to officially impose them.

Millions of dollars were transferred from the U.S. back to Russia during that time, the Senate investigators said.

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Source: www.washingtontimes.com stories: Politics

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