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Is the art world doing enough to reduce the threat of money laundering?

If you are involved in buying or selling art, how can you tell who you are actually dealing with?

Regardless of the huge sums of money involved, many buyers and even the auction houses themselves may never know exactly who is behind the sale of a work of art. Much of the reason for this is secrecy has always been courted in the art world. Not only does it protect the seller, it also adds a bit of intrigue which can make a transaction appear more exciting. The only problem is now that art is seen as just a commodity in some quarters, the likelihood art might be heavily involved in money laundering has shot up.

Thomas Christ, a board member of the Basel Institute on Governance, the Swiss body lobbying hard for more transparency in the art world, has publicly stated he believes “the art market is an ideal playing ground for money laundering”.

The Basel Institute have put forward a number of ways for dealers and auction houses could eradicate anonymity to minimise the threat of money laundering. As a result international auction house Christie’s has now said it has strengthened its policies so that agents looking to sell a work of art will have to tell them the name of the owner they represent or face Christie’s turning the sale away.

With an estimated $63.8 billion in sales taking place in a single year it’s not hard to see why criminals are now investing in art to launder their proceeds and the protagonists don’t always fit the traditional criminal profile. US authorities have recently accused Malaysian officials of using the billions of dollars they have embezzled from public funds to buy real estate as well as pieces by high profile artists including Basquiat, Rothko and Van Gogh.

According to experts the reason artworks are so well suited to international money launderers is that they can be stored so easily until such time as their price rockets because their style finds itself back in fashion with collectors.

However, time may be against the launderers. Regulators have reacted to the increasing number of headlines that link art to money laundering and have started to act. In 2017 US Treasury officials started to ask banks to identify any customers who had set up accounts in names of shell companies and provide details of any shell company that routinely bought high end property in New York and Miami.

At the time of writing any attempt to introduce similar rules in the art world haven’t progressed. A ruling by the New York appeals court telling auction houses to inform buyers of the identity of a seller was even overturned after experts and auctioneers told courts that the level of money laundering was being exaggerated.

We would like to think that some form of regulation is on the horizon, not least because to let dealers continue acting with anonymity could well push the buying and selling of art underground which would make it easier for the less scrupulous individuals involved to inflate prices not to mention provide a structure that would make money laundering even easier.

Contact our Art Dispute Litigation Lawyers, London

Our team has the very specific experience required to resolve disputes involving a work of art. If you have a dispute involving the ownership, authenticity or provenance of an art work or involving art fraud or money laundering, pleasecall us today on 0203 811 7879 or contact us using our online contact form.

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