FINDINGS OF FACT AND RECOMMENDATIONS
Findings of Fact
(1) The art market is the largest legal, unregulated market in the United States. The art industry is not subject to the BSA and is not required under U.S. law to maintain AML and anti-terrorism financing controls for transactions. However, all U.S. persons and entities are prohibited from transacting with sanctioned individuals or entities as determined by the U.S. Treasury Department Office of Foreign Asset Control ("OFAC").
(2) Sotheby's, Christie's, Phillips, and Bonhams all have voluntary AML controls in place. Despite no legal requirement to do so, the four auction houses reviewed by the Subcommittee had established voluntary AML policies.
(3) Private art dealers are not subject to AML requirements. One private dealer told the Subcommittee she had no written AML or sanctions policies and instead relied on her gut and worked with people she knew. She also explained that questioning the identity of the buyer and the source of funds in an art transaction was not done in the art industry, nor would the dealer for the purchaser want to provide that information. During an interview with the Subcommittee, she explained that her practices have changed over the years and that she relies on the advice of lawyers with expertise in AML and related areas and looks for potential red flags in transactions.
(4) The auction houses treated an art agent or dealer as the principal purchaser of art, even if they had reason to believe they were working with an undisclosed client. This practice enables the auction house to perform due diligence on the art agent or dealer instead of identifying and evaluating the undisclosed client, creating a significant AML vulnerability.
(5) The United States sanctioned members of the Rotenberg family in March 2014. On March 16, 2014, President Obama signed Executive Order 13661 imposing sanctions on Russia due to its annexation of Crimea. Arkady and Boris Rotenberg were among the Russian citizens specifically sanctioned on March 20, 2014 due to their close ties to Russian President Vladimir Putin, which included awards of large government contracts to companies they owned. The U.S. Treasury Department later sanctioned specific Rotenberg-owned companies (on April 28, 2014), Boris Rotenberg's son Roman (on June 30, 2016), and Arkady Rotenberg's son Igor (on April 6, 2018). Both Roman and Igor Rotenberg were sanctioned due to their financial ties to their sanctioned fathers.
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