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Compliance Alert: Expensive watches raise red flags

One luxury item is showing up more often in alleged graft-related asset seizures: wrist watches, especially the high-end variety with eye-watering price tags.

In November 2018, Venezuela’s former national treasurer Alejandro Andrade was sentenced in the United States to ten years in prison for his role in a plot to launder $1 billion in bribes. He also forfeited $1 billion in personal assets, including bank accounts, aircraft, real estate, vehicles, horses, and watches. Andrade used watches to pay some of the bribes.

In September 2018, police in Brazil reportedly confiscated a bag of 20 luxury timepieces worth around $15 million from Teodoro Nguema Obiang Mangue (Teddy) and his entourage after their private plane landed at an airport near Sao Paulo. Some quick math shows the average price of each watch was $750,000.

In July 2018, police in Malaysia arrested former prime minister Najib Razak after seizing $273 million of loot from his houses and condos. They also took 423 watches worth $19 million from Najib’s homes. That’s an average price of about $45,000 per watch.

Why watches?

They’re often expensive, easy to transport, and commoditized. Even staggeringly expensive watches can be bought and sold easily. Ownership is not tracked and private collectors keep the market hot.

Some watches look expensive and attract attention, like the $750,000 Richard Mille RM 12-01 Tourbillon Red pictured above. That watch is for sale online here on the second-hand private market.

Other expensive watches, however, may not get a second look from the average customs official or immigration agent. Like the more traditional looking Lange & Söhne Grand Complication below, which will cost a buyer $2.6 million.

Lange & Söhne Grand Complication (Image courtesy of Hodinkee)

Many people travel with more than one watch. Some take four or more watches with them everywhere they go.

Political situations change. Out-of-favor politicians and others marooned someplace unfamiliar, with their bank accounts frozen, can rely on a small duffel of expensive watches to soften the landing.

A former government official or current business executive showing up at customs with a satchel of diamonds worth $3 million would trigger serious alarms. But a small case with two Richard Milles and a Patek Philippe would likely attract significantly less scrutiny, if any, yet could match the value of the diamonds.

As with Alejandro Andrade, a watch can also work well as a bribe. It’s small enough to fit in a pocket, and valuable enough to make sure the recipient and perhaps his or her family are well taken care of.

The SEC said in a 2015 FCPA enforcement action against FLIR Systems, Inc. that watches worth $7,000 each were used to bribe Saudi officials.

“Expensive watches” also played a role in the FCPA prosecution of Hewlett-Packard Company and a Russian subsidiary in 2014.

The vast majority of watches are bought and sold entirely legally. Owning an expensive watch is obviously no indication of criminality.

Watches do, however, conveniently combine extreme value with compact size and commoditized marketability. Perfect for border crossings and bribery.

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3 Comments

  1. Do you get a fee for announcing on your site watches?

    It seems wrong because you are suggesting the purchase of the watch and given the context of the article it seems like an invitation to get a bribery object.

    • Will you be promoting bribery if you comment on an anti-bribery post?

  2. I disagree that this post is an invitation to get a bribery object. People who would travel with a pouch of wildly expensive watches, have done so because they believe it is secret and safe. If these people were to read this FCPA Blog post, they would more likely understand that what they thought was their little “bribe-watch” transactions secret is no longer secret nor safe.


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