Louis Vuitton Netherlands Entangled in Money-Laundering Case

Europe|Louis Vuitton Netherlands Entangled in Money-Laundering Case

She paid in cash and shopped often. She never spent beyond a set amount, but over about 18 months, the authorities say, this single customer bought millions of euros’ worth of bags and other luxury goods from Louis Vuitton shops in the Netherlands.

Now, Dutch prosecutors are investigating Louis Vuitton Netherlands, a subsidiary of the French luxury brand, in connection with a case against the customer, a Chinese woman who is accused of laundering millions of euros in an international scheme.

Law enforcement officials in the Netherlands say that the suspicious purchasing patterns should have alerted the Louis Vuitton shops to wrongdoing and are questioning whether the company should have raised alarms. It is being investigated for potentially violating money-laundering regulations.

The case shines a light on the role of luxury goods in financial crime, as well as the reputational risk for brands whose high-end clientele may include people trying to disguise the origins of funds. While fancy boutiques don’t have the same obligations to report suspicious financial activity as banks, they do have some legal responsibilities to alert the authorities to some types of transactions.

Prosecutors accuse the woman at the center of the case — who has been identified publicly only as Bei W., in accordance with Dutch law — of laundering nearly 3 million euros ($3.5 million) from September 2021 to February 2023. Two other defendants who are said to have helped her are also facing charges.

At a preliminary hearing this month, prosecutors said that Bei W. received large sums of illicit money generated through criminal activity from an individual who has already been convicted in connection with the scheme. She is said to have spent the cash in several Louis Vuitton stores in the Netherlands, using various names and email accounts. The goods were then sent to Hong Kong and China, prosecutors contend.

The shopper always spent just under the €10,000 threshold that would trigger cash transaction reporting obligations, a modus operandi that should have raised eyebrows at Louis Vuitton shops, investigators say. She received help from another suspect in the case who worked at Louis Vuitton, and who alerted her when new items arrived that fell within the price range their scheme relied upon, investigators say.

Representatives for Louis Vuitton and Moët Hennessy Louis Vuitton, which owns the brand, did not respond to requests for comment.

Money launderers commonly tailor cash transactions to evade detection by keeping them under a jurisdiction’s reporting threshold.

In the Netherlands, law enforcement officials consider not just objective indicators of potential illicit activity, like a cash payment above €10,000, but also more subjective factors encompassing “numerous conceivable actions and behaviors” that may suggest a crime is taking place, according to the country’s Financial Intelligence Unit. They expect banks and businesses to report “unusual transactions” even if they are below the financial threshold, and to have robust risk assessment measures in place.

Dutch law is guided by principles laid out by a global watchdog, the Financial Action Task Force, an intergovernmental agency established in 1989 to counter money laundering.

Experts say the scheme Louis Vuitton appears to have been drawn into is typical for several reasons. The participants allegedly made use of a surrogate shopping system known as “daigou,” in which purchasers abroad shop on behalf of someone in China. The foreign goods are often less expensive abroad and, in the case of luxury brands, less likely to raise concerns about authenticity.

But in this case, prosecutors say, the shopping was funded by someone who collected proceeds from criminal enterprises and passed them on to the buyers to be laundered through Louis Vuitton stores. The case was first reported in a Dutch newspaper, Algemeen Dagblad.

Oligarchs, kleptocrats and criminals from around the world have long bought villas, yachts, cars, art and other luxury goods as “both a means to enjoy their criminal proceeds, and to move value out of their home country and to otherwise keep it safe,” said James R. Richards, who previously led global financial risk management at Wells Fargo.

Last year, more than $400 billion was spent globally on personal luxury goods. The use of this market to launder funds is well documented, though just how much has not been quantified. U.S. law enforcement officials have increasingly raised alarms about Chinese money laundering organizations.

At a Senate hearing last year, Ricardo Mayoral of the Department of Homeland Security testified that the groups use “complex money laundering schemes” to “move vast sums of dirty money quickly and quietly” for criminal organizations. They rely on “underground bankers” to collect cash and often actively recruit employees inside businesses for help.

Alex Zerden, who previously worked in the Treasury Department’s Office of Terrorism and Financial Intelligence, said the international community had spent the last five decades working to address money laundering risks, trying to find a balance between “collecting sufficient financial intelligence information, limiting regulatory burden and protecting consumer privacy.”

But the problem persists.

“Criminals continue to seek out the weak links in the financial system to engage in money laundering,” Mr. Zerden said. “The luxury market is not immune from threats.”