July 29 (UPI) -- Russian oligarchs have dodged U.S. government sanctions by secretly dealing in artwork, using shell companies to hide their true identities in high-value art purchases from the United States, according to a new congressional report released Wednesday.
Wealthy energy moguls Arkady and Boris Rotenberg used three shell companies to get around sanctions after the Obama administration froze their U.S. assets in 2014 because of their connection with President Vladimir Putin and the annexation of Crimea.
The bipartisan Senate report led by Robert Portman, the Ohio chair of the Permanent Subcommittee on Investigations, and ranking Democratic member Tom Carpers of Delaware, followed more than $18 million of artwork purchases back to the shell companies.
The report was part of a two-year investigation detailing how the secrecy of art sales was being used to circumvent such penalties against wealthy foreigners.
"It is shocking that U.S. banking regulations don't currently apply to multi-million-dollar art transactions, and we cannot let that continue," Portman said in a statement. "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."
Some of the key findings in the report found that private art dealers are not subject to anti-money laundering requirements and information about potential buyers is not often exchanged. It also found auction houses consider agents or dealers as the principal purchasers even though they may know the person is representing someone else.
"It is alarming and completely unacceptable that common-sense regulations designed to prevent money laundering and the financing of terrorism do not apply if someone is purchasing a multi-million dollar piece of art," Carper said.
"As a result, criminals, terrorists and wealthy Russian oligarchs like the Rotenbergs are able to use an unregulated art industry, as well as real estate and other investments, to hide assets, launder funds, and evade sanctions."