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Executive Director Tess Davis Discusses Money Laundering and the Art Market at American Bar Association’s Tele-Coffee

October 22, 2020

In July 2020, a U.S. Senate report exposed how the art market’s continuing exemption from standard laws and regulations had gifted Russian oligarchs with an easy backdoor into the world’s biggest economy, evading U.S. sanctions on Vladimir Putin’s inner circle.

AC Executive Director Tess Dsvis discussed this report at the ABA Arts & Cultural Heritage Law Committee Tele-Coffee series on October 22. The committee is made up of attorneys who work in a variety of settings and considers topics related to the international trade in antiquities, underwater cultural heritage, artworks stolen during the Holocaust, and more.  

Key takeaways include:

The American Art Market’s Continuing Exemption from Standard Laws and Regulations Gives Bad Actors a Backdoor into the U.S. Economy: The report, and many others, refer to the $28.3 billion American art market as the largest unregulated industry in the United States and arguably the world. It is not yet subject to the Bank Secrecy Act (BSA), the United States’ primary anti-money laundering (AML) law. The BSA requires high-risk individuals and institutions to assist the U.S. government in detecting and preventing financial crimes. In addition to businesses one would expect, such as banks, the statute also applies to groups such as sellers of precious metals, stones, and jewels; sellers of automobiles, planes, and boats; casinos; real estate professionals; travel agencies; and pawn shops. However, despite having a similar business model to pawn shops, billion dollar companies like the major auction houses do not have to comply. This case shows that this current art market exemption is not working for our national security and economic integrity, and it is not working for the art market.

Criminals Can Take Advantage of the Art Market’s Tradition of Trust and Secrecy: The Rotenbergs were able to launder at least $18 million through leading New York auction houses and private dealers, taking advantage of art market discretion and using shell companies and art intermediaries. This practice makes it difficult to know who owns the art and who owns the companies dealing the art. 

The U.S. Must Take Action: The EU, UK, and Switzerland have all already taken action and applied their AML regimes to the art market. U.S. dealers operating in Europe—which, given the art market’s global nature, is likely a large number—need to be thinking about these rules already. Unfortunately, if the U.S. doesn’t act, it may continue to be a safe haven for criminals like the Rotenbergs. Adding the AML infrastructure to the art market does more than just help identify and prevent money laundering—it would help with the full scope of financial crimes, such as sanction evasion. That said, this is just a first step—there is much more that the US government can be doing to work with the private sector to safeguard our national security, economic integrity, and the vast majority of responsible collectors, dealers, auction houses, and museums. 

To view AC’s most recent story map on the Senate report, click here.

To read the Financial Crimes Task Force Report—which calls for new policies, practices, and priorities for the United States to implement on its own and in conjunction with the private sector and international community—click here.