Page:2020-07-29 PSI Staff Report - The Art Industry and U.S. Policies that Undermine Sanctions.pdf/4



I. EXECUTIVE SUMMARY

The United States government imposes economic sanctions on foreign adversaries in attempt to change their behavior. In theory, sanctions are simple. U.S. persons and companies are prohibited from doing business with sanctioned persons and entities. This prohibition should bar access to the world's largest economy. The United States imposes sanctions for a wide range of reasons. For example, the United States has imposed sanctions on Russia for election interference, human rights abuses, providing support to Venezuela and Syria, but mainly in response to Russia's invasion of Ukraine.

This report focuses, in particular, on a case study documenting how certain Russian oligarchs appear to have used transactions involving high-value art to evade sanctions imposed on them by the United States on March 20, 2014 in response to Russia's invasion of Ukraine and annexation of Crimea.

Specifically, the Subcommittee traced purchases of high-value art back to anonymous shell companies linked to sanctioned individuals Arkady and Boris Rotenberg, two Russian oligarchs, and Arkady's son, Igor. It appears the Rotenbergs continued actively participating in the U.S. art market by purchasing over $18 million in art in the months following the imposition of sanctions on March 20, 2014. Shell companies linked to the Rotenbergs also transferred over $120 million to Russia during a four-day window between President Obama's March 16, 2014 executive order stating that the U.S. would be sanctioning certain Russian individuals and the Treasury Department specifically naming the Rotenbergs as sanctioned on March 20, 2014. In addition, certain Rotenberg-linked shell companies continued transacting in the U.S. financial system long after Arkady and Boris Rotenberg were sanctioned. The Subcommittee determined these Rotenberg-linked shell companies engaged in over $91 million in transactions post-sanctions.

While Russia-related sanctions, including those against the Rotenbergs, were set to expire in March 2020, President Trump extended them for another year. The effectiveness of these sanctions, however, is in question. To date, Russia has not withdrawn from Crimea and has even expanded its military operations in