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The AC Digs Into: Ancient Artifacts, International Intrigue, and Financial Crimes

July 20, 2020

The arts and antiquities industry is massive, secretive, and unregulated—all factors that have primed it for criminal activities. Couple those characteristics with the chaos wrought by the COVID-19 pandemic, and you get a market that is more vulnerable to crime than ever before. Every shareholder in the art market has a part to play in curbing art crime. So long as we recognize that, efforts to protect the art market will continue to develop and evolve.

Liz Fraccaro, project manager for the Antiquities Coalition’s Financial Crimes Task Force, delivered a presentation on these matters via Zoom on July 20. The virtual lecture, titled “Ancient Artifacts, International Intrigue, and Financial Crimes,” was organized by the San Diego – Baja California Chapter of the Association of Certified Anti-Money Laundering Specialists.

Key takeaways included:

  • The Arts and Antiquities Industry Is Massive, Secretive, and Unregulated:  The United States boasts the world’s largest art market, valued at $26.6 billion in 2018. Thus far, U.S. arts and antiquities dealers have not been required by law to report suspicious cultural property transactions or to disclose the ultimate beneficial owner of a transaction, and are only required to disclose cash transactions (not wire transfers) of over $10,000 to the Financial Crimes Enforcement Network, a bureau of the United States Department of the Treasury.
  • The Nature of the Art Market Has Primed It for Criminal Activities:  Criminals exploit the lack of regulations on the U.S. art market to engage in fraud, forgery, tax evasion, money laundering, and sanctions violations. This industry even provides a breeding ground for terrorist financing, with mafia syndicates, armed insurgents, and terrorist groups using the sale of “blood antiquities”—artifacts looted from countries in crisis—to fund violent crime and conflict all over the world.
  • COVID-19 Has Made the Art Market More Vulnerable to Crime Than Ever Before:  Quarantine and stay-at-home orders kept museums shut down for months. Many have yet to reopen, and others never will. Some museums are even considering selling off portions of their collections to cover operating costs. This, however, risks putting more of our shared public heritage into private hands. While much of the art market flounders, art lending—the practice of loaning money against art or antiquities as collateral—has taken the industry by storm. In such an unregulated market, a rise in art lending translates to a rise in art crime.
  • Every Shareholder in the Art Market Has a Part to Play in Curbing Art Crime:  When coming into possession of an art piece or antiquity, one is ethically obligated to practice “due diligence” by thoroughly investigating the provenance (i.e., ownership history) of the item in question. Due diligence also requires that one keep an eye out for “red flags,” so as to ensure both that the item in question is not a looted antiquity (see the Antiquities Coalition’s list of red flags for looted antiquities here) and that the transaction at hand is lawful (see the Responsible Art Market Initiative’s list of red flags for financial art crimes here).
  • Efforts to Protect the Art Market Are Continuing to Develop and Evolve:  Last year, legislation was proposed that would add “dealers in art or antiquities” to the list of regulated financial institutions falling under the Bank Secrecy Act, a United States law that requires financial institutions to report to the government with the information of the beneficial owner in any transaction over $10,000, as well as any suspicious activity that signifies money laundering. Meanwhile, the Antiquities Coalition’s Financial Crimes Task Force is in the process of developing concrete typologies for how the financial industry can counter the use of art and antiquities in facilitating criminal activity.

To learn more, download the presentation slides here.