Wine, Watches and Warnings

What usually happens when someone becomes financially wealthy?

Their portfolio likely becomes diversified - across traditional asset classes and increasingly into alternative assets: paintings, sculptures, fine jewellery (including watches and handbags), rare wines, and more.

Often perceived as mere symbols of wealth, these items can also act as vehicles for value preservation, sometimes secrecy, and now, regulatory scrutiny.

The UK recently released a new report examining how high-value goods fit into sanctions compliance landscape.

Few matters come to attention:

1. It is “highly likely” that many high-value assets held in the UK by sanctioned individuals have not yet been reported.

2. It is “likely” that enablers (dealers, intermediaries, advisors) have facilitated transactions through:

   • Concealed ownership structures

   • Rushed or undervalued sales

   • Intermediary deals involving family members or complex payments

The document also provides a list of red flags, outlining common tactics used by sanctioned persons, be it the use of family members arranging the sales, complex payment arrangements, or through the use of golden passports.

Notably, the UK now requires art dealers and high-value asset traders to report any suspicious activity via a Suspicious Activity Report (SAR).

Failure to do so may result in criminal penalties, including up to 6 months imprisonment, or fines up to GBP 1 million (or 50% of the asset’s value), whichever is higher.

On a more colorful note, the report includes a fictional case study where a wine trader is approached with an offer to purchase a rare case of wine, ultimately linked to a sanctioned Russian individual. It’s meant to illustrate multiple red flags in action.

I couldn’t help but smile.

This fictional story reminded me of Evgeny Chichvarkin, a skillful businessman and a smooth operator, whose Hedonism Wines has been referred to as the “best wine shop in the world”.

Goes without saying, the shop’s Mayfair location is a mere coincidence.

Either way, interesting times ahead for everyone in the business.

Sources: Report and Hedonism Wines

Thanks for reading!

If you’d like to discuss any of this further, or need help navigating this space, feel free to reach out.

Alexey