As sanctioned Russian oligarchs’ assets are detained or frozen around the world, many free ports—vast warehouses used by the super-rich to store art and valuables, tax-free—have stayed largely below the radar, at least for now.
Might that change if the sanctions ring continues to tighten? “I assume [questions] will come eventually,” says Fritz Dietl, president and founder of Delaware Freeport LLC, who says he has yet to be contacted by law enforcement agencies of any kind regarding assets potentially owned by sanctioned Russians. “But when it comes, and if it comes through the proper channels, then we’ll answer the authorities.”
Free ports are not new. Ports Francs et Entrepôts de Genève, known both as Geneva Freeport and Free Port, is the world’s biggest; it capitalized on Switzerland’s neutrality to distribute Red Cross parcels to prisoners of war across Europe during World War II.
Such warehouses, often adjacent to rail lines or airports where goods are treated as not yet having been imported into the host country, really came into their own with the emergence of a globe-trotting elite in the jet age. Their numbers began to proliferate in the past decade as the art market boomed and wealthy collectors sought to cut the tax bills they pay to move their masterpieces around the globe.
But for years, mentioning free ports in a conversation conjured up images of havens where shady transactions might occur away from the prying eyes of customs police. In reality, free ports are entirely legal ways to offer wealthy collectors a legitimate way to avoid paying duplicate import duties. “Most of our clients use free ports,” says Philip Hoffman, chief executive officer of Fine Art Group, an art advisory and investment company. “After they purchase something, they’ll send it to the free port in whichever jurisdiction suits them.”
A classic example might be a globe-trotting American art collector who bought a $20 million Picasso at Art Basel in Switzerland. The canvas might then be shipped to Geneva’s cavernous free port to save hundreds of thousands of dollars in import duties; once the collector has set up an appropriately attractive tax environment (that pied-à-terre in Rome might be a cheaper place to hang the painting than the apartment in New York), transport will be arranged to its final destination.
“Many of my clients have five houses,” Hoffman says, “so they’re thinking, ‘Where do I put this?’ There can be huge tax advantages of moving it out of New York or London, and you have to take it somewhere.”
Tarnished Reputation
A series of scandals involving stolen art—and even looted antiquities from the war in Syria—that turned up in Geneva’s free port has dented these warehouses’ reputations. The Swiss government, under pressure to strengthen governing rules, has tightened some, but significant loopholes remain. Swiss citizens can store art or other valuables for no more than 12 months inside, but foreigners face no time limit.
When asked if they’d been contacted by law enforcement, a receptionist at Geneva’s free port relayed the question to its director, who didn’t have an immediate response.
Philippe Dauvergne, chief executive officer at the Luxembourg High Security Hub (until 2020 known as Le Freeport) says that anti-money laundering laws prohibit him from saying whether he’s been contacted by law enforcement. “I am convinced there will be checks,” he says, “and that’s very good.”
In Luxembourg, “all the objects that arrive here have to comply with anti-money laundering rules, regardless of their value,” says Dauvergne. Space is rented to a small number of licensed tenants, all previously checked by Luxembourg customs; they, in turn, rent out their space to private clients.