The Art of Financial Crime
October 23, 2020
Art crime is not limited to the looting of archaeological sites and the pillaging of museums. Because the arts and antiquities market is notoriously unregulated—particularly in the United States—bad actors have been able to use artworks and artifacts to engage in various financial crimes, including corruption, fraud, forgery, tax evasion, money laundering, sanctions violations, and even terrorist financing.
To bring attention to this often-overlooked issue, the Antiquities Coalition has gathered recent instances of financial crimes featuring art and antiquities and compiled them into a series of briefs, featured below:
Antiquities Dealers Arrested for Fraud Scheme
On September 22, 2020, Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation, announced the unsealing of an indictment in Manhattan federal court charging Erdal Dere, the owner and operator of the Manhattan-based antiquities gallery Fortuna Fine Arts Ltd., and his longtime business associate and co-conspirator, Faisal Khan, with engaging in a years-long scheme to defraud buyers and brokers in the antiquities market by using false provenances to offer and sell antiquities. Dere is also charged with aggravated identity theft for his misappropriation of the identities of deceased collectors who were falsely represented to be the prior owners of the antiquities.
Sparking The Art-Backed Lending Renaissance
Compared to the stock market, or even other alternative asset classes, art is a much more nuanced space for ultra-high-net-worth individuals (UHNWI) to invest in—it is both extremely personal and almost entirely disconnected to the financial markets. In volatile market conditions, such as those caused by the COVID-19 pandemic, art can be a safer asset class for investors to pour funds into. Not only does art offer a secure investment choice, but a growing number of UHNWIs are taking the opportunity to unlock liquidity by borrowing against their art (particularly in response to uncertainty as a result of the global pandemic).
Court-ordered auction of works from disgraced Brazilian banker’s collection prompts new controversy
On September 21, the James Lisboa Auction House began an online auction of the collection of works seized from Edemar Cid Ferreira. The art collection of bankrupt Banco Santos owner Edemar Cid Ferreira was seized in 2006 as a result of his conviction for crimes against the Brazilian national financing system and for money laundering. Following this seizure, 1,600 of the items were sent to the Museum of Contemporary Art at the University of São Paulo (MAC-USP) for storage and restoration. According to officials at MAC-USP, expenditures associated with the storage and restoration of the collection over the past 14 years has totalled over R$20 million ($3.6 million USD). MAC-USP has alleged that they are due R$20 million as repayment for the services rendered; however at the end of 2019, the courts ruled that the museum would receive only R$37,000 from the profits of the sale. The judge considered only the expenses that the museum was able to prove by means of invoices.
The FinCEN Files: ICIJ reveals “Mystery company ties accused temple raiders to art world elite”
According to indictments filed in New York last year, a network of art thieves and traffickers extracted thousands of precious relics from archaeological sites across Asia and sold them to museums, elite galleries and wealthy private buyers. Prosecutors say the group includes suppliers, restorers and New York art dealers who fabricated documents describing the origin of the antiquities to camouflage the looting. Amongst the FinCEN files is a confidential document that revealed the shell company Pantheon Worldwide Limited, that exchanged millions of dollars in cash and relics, while obscuring its purpose and registration location from its bank, Standard Chartered Bank, and their compliance officers.
For more information about the Pantheon Worldwide Limited findings, click here.
The FinCEN Files: Nepali banks and companies transact billions of rupees through dubious channels
Between December 2006 and March 2017, nine banks, 10 companies, and various individuals in Nepal were found to have transacted (sent/received) suspicious funds in the name of cross-border trade, linked to the international smuggling of gold, antiquities, bitumen, and telecommunication equipment. Additionally, over a period of 11 years, about a dozen Nepali companies were found to have directly sent or received suspicious funds totalling $292.7 million USD.
In response to an untold number of illegal acts not unlike the above examples, the Antiquities Coalition convened a diverse group of experts to form the Financial Crimes Task Force, which developed guidelines that the U.S. government, the U.S. financial industry, the international community, and the U.S. arts and antiquities sector can use to prevent financial crimes using artworks and artifacts.
For more information about the Financial Crimes Task Force and its recent report, click here.