Russian oligarchs evaded U.S. sanctions by trading in high-value art in a scheme that has helped them move tens of millions of dollars out of America and back to Moscow, according to findings published Wednesday by Congress’s Permanent Subcommittee on Investigations.
Shell companies linked to Russian businessmen Arkady and Boris Rotenberg have conducted nearly $100 million in art transactions since the two were sanctioned by the Obama administration in 2014, according to the committee’s findings. These deals were facilitated by a U.S. business associate and conducted via private art sellers, as well as high-profile auction houses such as Christie’s and Sotheby’s. Senate investigators said the Rotenbergs, who have close ties to Russian president Vladimir Putin, used the secretive nature of the American art market to hide their role in the transactions and ultimately move millions back to Russia.
The Senate’s two-year investigation was sparked by concerns that U.S. sanctions on Russian oligarchs had not been effective in containing their empires. Transactions were hidden in a web of shell companies that enabled the Rotenbergs to avoid detection by U.S. authorities. Congress is now determining whether there is enough evidence to prosecute the Russian and American businessmen involved in the scheme. The findings could also spur regulation of the art industry, which is largely exempt from U.S. banking and transparency laws requiring that transactions be fully documented to prevent laundering.
"It is shocking that U.S. banking regulations don't currently apply to multi-million-dollar art transactions, and we cannot let that continue," Sen. Rob Portman (R., Ohio), chair of the Senate’s investigation committee, said in a statement. "The art industry currently operates under a curtain of secrecy with art advisers representing both the seller and the buyer while masking their identities as well as the source of the funds, making art transactions easy to use to evade sanctions. I look forward to working with [subcommittee ranking member Sen. Tom] Carper on legislation to ensure necessary reforms in the art industry as well as working with federal agencies to make sure American sanctions are effective enforcement tools moving forward."
Investigators reviewed thousands of financial documents and conducted interviews with more than 20 art suppliers and banks to determine how the Rotenbergs were able to pull off the art scheme. They found more than $100 million in deals with private sellers and major auction houses, including at least $91 million in sales that came after sanctions were implemented in 2014. But that is likely just the tip of the iceberg, according to one investigator.
A majority of the Rotenberg-linked art deals were allegedly facilitated by an American adviser named Gregory Baltser, according to the Senate report. Baltser runs an art business in Moscow and advertises his services as providing "complete anonymity." Baltser declined to be interviewed by Senate investigators, telling them he was currently in Moscow and had no plans to travel back to America.
Major art houses like Christie’s and Sotheby’s engaged in deals with Baltser, who was able to hide the identity of his clients, according to the report. Due to lax regulations in the art industry, Baltser was able to secure the titles to high-price artworks without disclosing that these transactions were conducted on the Rotenbergs’ behalf.
Investigators also found the Rotenbergs transferred some $120 million in assets back to Russia during a four-day window in 2014 when sanctions had not yet been fully implemented.
Much of the Rotenberg art collection was shipped to Germany for storage, according to the findings. In August 2019, as the committee was investigating the scheme, a Rotenberg-linked shell company named Taide Connoisseur Selection closed its account with the German storage company and shipped all the artwork back to Moscow, generating further concerns about the culpability of other nations in this scheme.