Beverly Hills Cop (1984)
Important Local Businessman uses his Art Gallery as a Front Company for Drug Smuggling
Beverly Hills Cop, the 1980’s action-comedy about Axel Foley (Eddie Murphy), the hot shot detective from the Detroit Police Department, that goes on ‘vacation’ to Beverly Hills to investigate the murder of his childhood friend, Michael Tandino (James Russo). After Tandino breaks into Axel’s apartment in Detroit, he tells Axel he was released early from prison and went to California. Tandino pulls out $10,000 Deutsch Marks in bearer bonds from a brown paper bag, calls them ‘untraceable,’ then when asked by Axel whether he stole them, Tandino responds with a blank stare.
Bearer bonds are unregistered securities with the ultimate benefit that whoever is in possession of the bonds, owns the assets in the same name, inclusive of any funds in the financial accounts. Pre-know your customer (KYC) days, proving ownership was simply providing the bearer bonds, which unlocked the money in the accounts that may have been funded by a previous owner (or two…or three). The bonds were routinely exchanged among different entities in different jurisdictions to obfuscate the true owner and source of the funds, providing attractive secrecy to illicit financiers for their clients engaged in activity such as narcotics trafficking, political corruption, tax evasion, among others.
Shortly thereafter, Tandino tells Axel, in which Axel laughs while shooting a game of billiards, that their childhood friend, Jenny Summers, got him a job as a security guard at the world famous Hollis Benton Art Gallery in Beverly Hills. Subsequently, Tandino is murdered outside Axel’s apartment because of the stolen bearer bonds, which Axel’s boss, Inspector Todd (Gilbert R. Hill), believes Tandino’s murder was a professional hit. In response, Axel volunteers to go on vacation as Todd tells him to stay away from the Tandino murder case. However, in typical Axel fashion, he drives his crappy blue Chevy Nova right through the glitz and glamour of Beverly Hills to meet up with some old friends, gets acquainted with a different way of life, and learns the ways of the ‘by the book’ Beverly Hills Police Department (BHPD).
In Beverly Hills, Axel continues to size up his new environment and visits the art gallery where Summers works, he observes an interesting art piece, and learns from Serge (Bronson Pinchot) that a collector paid $130,000 USD (approximately $400,00 USD today) for the same piece yesterday. Summers shares that gallery owner, Victor Maitland, hired Tandino as a favor and he worked at Maitland’s warehouse. Axel visits Maitland at his office uninvited, gets thrown out of a window, and is arrested by the BHPD. At BHPD headquarters, Sergeant Taggart (John Ashton) doubts Axel’s version of his story of the events and scolds Axel that he would believe the word of an ‘important local businessman,’ Victor Maitland, that Axel broke in to his office, tore up the place, and jumped out the window on his own.
In the US, the art industry is not covered under the Bank Secrecy Act (BSA), however, like any transaction involving a US person, art transactions are subject to the Office of Foreign Assets Control (OFAC) sanctions requirements. Art dealers or advisors are not subject to anti-money laundering (AML) requirements yet may self-regulate their own participation in the art transaction process out of comfort on the buyer or seller or both. Due to the high value of the goods and malleable intrinsic value of art, art transactions are largely considered private transactions. Moreover, KYC, inclusive of beneficial ownership information on private company transactions, is voluntary.
Under the Anti-Money Laundering Act of 2020 (AML Act), Section 6110(c), the US sought to amend the BSA to include persons engaged in the trade of antiquities. However, a 2022 study performed by the US Treasury concluded there were higher priorities to close the gaps on BSA/AML laws such as the real estate sector, rather than regulate the art industry. Globally, new laws and guidance continue to be issued on the art world such as the 5AMLD in the European Union, inclusive of the UK, effective January 10, 2020, that imposes AML requirements on persons engaged in art transactions EUR 10,000 or more, HMRC registration in the UK for art market participants with approved HM Treasury guidance from the British Art Market Federation, and global guidance in 2023 from Financial Action Task Force (FATF), among others.
After Axel puts a banana in the tailpipe of a BHPD undercover car during a late-night supper, Axel and Summers go to Maitland’s warehouse, where Axel observes open shipping crates stamped ‘HOLLIS BENTON’ with coffee grounds spread around. He explains to Summers that coffee grounds are used by smugglers to disguise the drug scent from the sniffer dogs. The crates are opened by two guys that appear to be customs workers, and stacks of bearer bonds are removed from the crates. Thereafter, the crates are resealed and returned to a bonded warehouse near the Los Angeles airport, where Maitland’s foreign shipments are held before they clear customs.
Ever inquisitive, Axel visits Maitland at his posh members-only club, the Harrow Club, and confronts him again about killing Tandino, only to find himself back at BHPD headquarters. He eventually tells Lieutenant Bogomil that Maitland is a smuggler of bonds, drugs, etc. In essence, the art gallery is a front company, and, in a form of corruption, Maitland pays off customs agents, the crates containing drugs and bearer bonds are temporarily diverted from the bonded warehouse, the contraband removed at Maitland’s warehouse, and the crates are returned to the bonded warehouse. A front company is a legal entity that may or may not be engaged in ongoing business activities. In part, the company may be a shell with no real activities or purpose. On the other hand, the company can be engaged in real business activities, however, the illicit activity is commingled behind the scenes, whether physically or digitally. Here, Maitland is using the art gallery as a front for his drug smuggling operation.
Based on Axel’s latest incident, Bogomil instructs Detective Billy Rosewood to take Axel to the city limits. However, Axel convinces Rosewood and Summers that based on shipping documents, another shipment was inbound that day, i.e. the shipping crates containing the contraband would be unloaded at Maitland’s warehouse and to go there to prove it. Axel’s hunch was correct as he sees the open shipping crates and confirms the coffee grounds are being used to mask kilos of cocaine. The action revs up as Maitland confronts Axel, Rosewood starts a gun fight, which continues and ends at Maitland’s mansion at 509 Palm Canyon Road.
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RISK | STRATEGY | CYBER COMPLIANCE MANAGEMENT
