Treasury urges closer monitoring of fine art money laundering


FILIE – This photo from June 6, 2019 shows the US Treasury Department building at dusk in Washington. Fine art isn’t just fun to look at. It also attracts criminals who attempt to launder money, finance terrorism, and trade in illegal drugs and weapons. The agency released a report on February 4, 2022, recommending that financial firms and art dealers set up an information-sharing database to track how art sales are linked to bad actors who make anonymous purchases. (AP Photo/Patrick Semansky, File)


Fine art is not only pleasing to the eye, it also attracts criminals who attempt to launder money, fund terrorism, and trade in illegal drugs and weapons. And the Treasury Department wants art dealers and financiers to do something about it.

The agency released a 40-page report on Friday recommending that financial firms and art dealers set up an information-sharing database to track how art sales are linked to bad actors. who make anonymous purchases.

The need to monitor art sales has become more complicated and necessary with the recent increase in sales of digital assets called NFTs, or non-fungible tokens.

Michael Greenwald, a former treasury official and deputy senior fellow at the Center for a New American Security, called the report “a crucial first step in ensuring there is a regulatory framework around the broader art market,” which he called one of the last unregulated. markets.

“This puts illicit actors and people in the art market on notice that this is a serious problem and will also lead to regulation of the NFT digital art market space,” he said. he declares.

In releasing the report, the Treasury Department declined to take stronger action to create new regulations on art sales, after finding limited evidence of terrorist financing risk.

However, the department found evidence of money laundering in the high value art market. A common theme is that criminals use shell companies to purchase art and hide behind a corporate veil.

The report cites the seizure by Brazilian authorities of the multimillion-dollar art collection of former bank owner Edemar Cid Ferreira, after it was discovered that he had illegally taken bank funds to buy art. A painting by Jean-Michel Basquiat entitled “Hannibal”, as well as a Roman statue of Togatus had been smuggled into the United States in violation of customs laws.

Another example included Mark Bloom, an investment fund manager who pleaded guilty to investment fraud charges after embezzling at least $20 million from a $30 million partnership, which he used for the purchase of high-value works of art, among other things.

Maureen Bray, executive director of the New York-based Art Dealers Association of America, welcomed a study on the subject rather than immediate regulation, which she said could hurt small dealers.

On the recommendation encouraging information sharing between companies, Bray said: “It’s an interesting idea in principle, but serious thought would be given to how it would work in practice.”

The Treasury study was mandated by Congress as part of the Anti-Money Laundering Act of 2020.

It indicates that financial companies are the most vulnerable to money laundering in the art market through art collections used as loan collateral. This type of loan can be used to disguise the original source of the money, the Treasury said.

Scott Rembrandt, who directs strategic policy for the Treasury’s Office of Terrorist Financing and Financial Crimes, said the need to tackle corporate transparency and “gaps that allow criminals to abuse the financial system” is not limited only to the world of art, but also to real estate. transactions.

In September 2021, the Treasury’s Financial Crimes Enforcement Unit issued a Notice of Proposed Rulemaking advising financial institutions of the new money laundering law and antiquities reporting requirements, which the agency sets out separately. valuable works of art.

“Certain features of the antiquities trade may be exploited by money launderers and terrorist financiers to evade detection by law enforcement,” the document states.

The issue has become so pervasive that the meeting of the Group of 20 culture ministers last summer included a session on the protection of cultural heritage.