Luxury designer goods despite sanctions
Ivan has never known anything other than a life of luxury. Designer clothes, expensive dinners, exquisite watches: as the youngest child of a high-ranking government official, he has everything he desires. That is, until his country is hit by wide-ranging EU sanctions. The luxury goods he enjoys so much are also included on the sanctions list. In this case study, we demonstrate how Ivan tries to maintain his lavish lifestyle despite the sanctions.
Foreign payment card
Due to the sanctions and the export ban on luxury goods, Ivan can no longer simply shop at his favourite fashion house in France. He is not the only one in his social circle facing this issue. Through word of mouth, he picks up a few [I1] useful tips. For instance, a close acquaintance provides him with a foreign payment card from a country that has not imposed sanctions. The idea is that this makes Ivan harder to identify as the buyer, preventing suspicion on the part of the fashion house and the payment service provider.
VPN connection
Ivan fills his online shopping basket and attempts to pay using his foreign payment card. However, when he tries to check out, the payment is suddenly declined. He then realises that he forgot to activate the VPN connection on his laptop. This prevents his laptop’s IP address from being traced and allows him to disguise his location. Ivan turns on the VPN connection and makes a second attempt: success.
Delivery address: anonymous PO box in a circumvention country
To further obscure the fact that the clothing is destined for his country, Ivan has his purchases sent to a PO box in a so-called circumvention country. This is a country that has not imposed sanctions on Ivan’s home country. The PO box is anonymous, which is a major advantage for Ivan, as it makes him untraceable as the recipient.
Intermediary
A member of Ivan’s family knows someone in the circumvention country who, for a fee, is willing to collect the clothing from the PO box. This intermediary then forwards the items to Ivan. By combining these different methods, Ivan conceals the fact that he is purchasing luxury goods and manages to maintain his luxury lifestyle despite the sanctions.
Together we see more
FIU-the Netherlands regularly receives reports of unusual transactions concerning luxury goods due to suspected circumvention of sanctions. As in this case involving Ivan, where we received a report from a payment service provider based in the Netherlands. Maria, an analyst at FIU-the Nederland, explains: “The payment service provider identified several indicators of sanctions circumvention in the transaction, including the use of a VPN connection, the use of a foreign payment card, and the fact that the products were shipped to a circumvention country.”
Because the payment service provider has its head office in the Netherlands, it is required to report unusual transactions in the Netherlands. Maria adds: “The challenge with this type of sanctions evasion is that the financial flows pass through the Netherlands or are reported here, while the individuals involved (buyers and intermediaries) are often located elsewhere. This makes it difficult for Dutch law enforcement to take action. However, once we designate reports as suspicious, we can share the information with an FIU in the country where the buyer, intermediary or seller is based. As there are many cases where the buyer or seller is located in an EU Member State, such as Germany, France or Spain. These FIUs may then be able to take the matter forward. Reporting is therefore always extremely important.”
Sanctions circumvention through the purchase of luxury goods can be identified by one or more of the following indicators:
• A mismatch between the name and identity of the cardholder and the buyer.
• Use of a payment card issued in a country other than the one where the buyer is located or where the purchased goods are being shipped (often a circumvention country).
• The IP address indicates that the buyer is located in a circumvention country or in a country subject to sanctions.
• Multiple payments are made in quick succession from different countries: the first from a country subject to sanctions, followed by a second from another country, with the buyer now using a VPN connection (to encrypt data and mask the IP address).
• The payment account does not match the delivery address.
• The buyer uses an email address with a domain extension corresponding to a country subject to sanctions.
• The payment is made from a country other than the billing address. For example, the payment is made from Greece using a Greek account number, while the invoice shows an address in Belarus.