Close outstanding gaps in the US anti-money laundering and counter financing of terrorism (AML/CFT) regime, including those related to beneficial ownership and real estate, before focusing on the art trade the US treasury is told in a study examining money laundering (ML) and terrorist financing (TF) through the art trade.
The high-value art market is susceptible to abuse by illicit financial actors according to The Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art which suggests the treasury considers tougher non-regulatory and regulatory obligations for some art market participants.
But it also points out that sometimes it is not the work of art itself that enables illicit transactions but the shell companies used to facilitate high value sales in several sectors.
Art sector vulnerabilities
The study says the relatively high value of art compared to other retail goods and commodities, the opaque nature of the high-value art market, subjective valuations and the lack of stable and predictable pricing make the art sector vulnerable to ML and TF risks.
Other vulnerabilities include the transportability of certain types of artworks, including across international borders and the difficulty faced by law enforcement to monitor such movements and assess the value of artwork.
Recommendations
The report concludes that the treasury should consider several non-regulatory and regulatory options.
Non-regulatory options include encouraging the creation and enhancement of private sector information-sharing programmes to foster transparency among art market participants and updating guidance and training for law enforcement, customs enforcement, and asset recovery agencies.
Mandatory AML/CFT programmes
Regulatory options include using the treasury’s Financial Crimes Enforcement Network (FinCEN) recordkeeping authorities to support information collection and enhanced due diligence.
Certain art market participants could be brought into the AML/CFT legal framework and obliged to create and maintain AML/CFT programmes.
Anonymous owners
The study says the sector is vulnerable because of the accepted use of third-party intermediaries to purchase, sell, and hold artwork while their clients remain anonymous, including art dealers, advisors, interior designers and shell companies.
But when a shell company is employed it is not the work of art itself that enables illicit transactions but the anonymous company that may be used to facilitate high value sales the study says.
Prioritise anonymity and real estate
“The initial vehicle for moving the illicit funds into the system was the shell company, not the work of art itself…this mechanism is not something unique to the high-value art market,” the report says. “It could involve many other high-value goods, such as real estate, private jets, or yachts,” it adds.
“It is recommended that treasury complete its ongoing work to close outstanding gaps in the US AML/CFT regime related to beneficial ownership, real estate, and potentially investment advisers and non-financial gatekeepers before potentially turning its attention to the high-value art market,” the report concludes.
The US treasury’s Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art can be found here.
Categories: Trade Based Financial crimes News
Related Articles
-
Italian and Spanish police arrest 33 suspects in globally active TBML network
-
TBML increasingly prevalent across Europe and beyond says head of Ireland’s fraud squad
-
TD Bank’s takeover of First Horizon reportedly scuppered by AML concerns
-
US banks used to launder funds in illicit gold scheme, Russian national indicted