High-value art is being used by sanctioned individuals to launder money, according to a recent report by the U.S. Senate Permanent Subcommittee on Investigations. The art industry does not have the same anti-money laundering (AML) requirements as banks and other financial firms, creating a perfect loophole for criminals.
Many auction houses do have voluntary AML programs in place, and like all U.S. entities, they are forbidden to do business with sanctioned individuals. But the subcommittee found that these programs were often lax and Know Your Customer (KYC) checks were only performed on the immediate purchasers, not the beneficial owners, even when the purchaser was clearly a middleman.
“The art industry is one of those little pockets of dark market activity,” commented Beam’s founding CEO Ben Duranske. “The goods are extremely valuable, fairly easy to transport over international borders, and appealing to private collectors who do not publicize sales. Money laundering via high-value art presents a real opportunity for sophisticated criminals with sophisticated tastes.”
The report also describes the pervasive culture of secrecy in the art industry. “In a typical transaction,” it states, “a purchaser may not ask who owns the piece of art they are purchasing; the seller may not ask for whom it is being purchased or the origin of the money. And in general an art advisor would be reluctant to reveal the identity of their client for fear of being cut out of the deal and losing the business.”
The subcommittee recommended that the art industry should be required to comply with the Bank Secrecy Act. This reflects a similar decision made by the European Union, which recently required AML compliance for art transactions of 10,000 euros or more.
The Senate’s report strikes a very similar tone to the FBI’s report about how private equity firms and hedge funds should be subject to AML compliance requirements. It appears that the U.S. government is working to expand the reach of the Bank Secrecy Act to close all the loopholes used by money launderers. Art dealers would be wise to implement an AML compliance solution now, before they are compelled to do so by law.
To find out more about how Jumio can help you meet your AML requirements, schedule a demo today.