Most of these industries have checks. Real estate titles and deeds at least require a name. Mortgage brokers, stockbrokers, casinos, banks and Western Union must report suspicious financial activity to the federal Financial Crimes Enforcement Network. Banks must report all transactions of $10,000 or more. Altogether, the network logs more than 15 million currency transactions each year that can be used to track dirty money, said Steve Hudak, a spokesman for the agency. The art market lacks these safeguards. Roll up a canvas and it is easy to stash or move between countries; prices can be raised or lowered by millions of dollars in a heartbeat; and the names of buyers and sellers tend to be guarded zealously, leaving law enforcement to guess who was involved, where the money came from and whether the price was suspicious.
The room is oval and intimate. He sits in an armchair, back to flung-open French doors, the yacht-filled harbor of La Condamine beyond. Curiously, since Rybolovlev is the owner of one of the world's most valuable art collections, not a single work of art is on view. However, books, mainly on business and soccer, line the shelves. When I point out one by Donald Trump, he laughs. "I've never read it," he says. "It was put there by the Candy brothers." I sit on the sofa close to Bersheda, who is going to translate. Rybolovlev's trust in the glamorous, brainy 31-year-old lawyer is obvious. They met six years ago in Geneva, where she worked for a law firm that he had retained. He asked her to work for him and she refused, but subsequently she set up her own firm, of which he is now a major client. She and I met last summer at Art Basel, where she gauged whether he should talk to me.
The AML Standards for Art Market Operators (“AML Standards”) are set forth by the Basel Institute on Governance, an independent not-for-profit organization. Not surprisingly, the AML Standards adopt a “risk based” approach to establishing measures to mitigate money laundering risks, and further note that “[s]mall businesses may not have the resources to address money-laundering risks in the same way that large auction houses or major dealers and galleries will have, and may have a different risk exposure.” The AML Standards are intended to apply to everone trading in art objects, and intermediaries between buyers and sellers. They also suggest that service industries supprting the trade in art objects that are already subject to AML laws, like financial institutions, should identify their clients and customers in the art trade “as higher risk as long as there are no internationally applicable standards.”
He hasn't given many interviews over the past six years, but I managed to track him down for a chat. After learning I did a bit of unlicensed boxing before becoming a journalist, Michel took a liking to me, as he is a fighter himself. He once had so many contracts on his head that Scotland Yard detectives allegedly placed bets on how long he had left to live before he was murdered by a hitman.
If you think that it would be a major oversight to allow people to create plausible deniability just by setting up enough legal entities with limited liability between themselves and their partners, you would be correct. It’s actually illegal under the FCPA, or the Foreign Corrupt Practices Act, which requires basic due diligence prior to making any deals with foreign citizens or in other nations. Domestically, RICO (Racketeer Influenced and Corrupt Organizations Act) goes after opaque arrangements that hide crimes like tax evasion and money laundering to create plausible deniability.
Oh fuck yes! Look, I'm not a conspiracy theorist, but the art market is a billion-dollar industry. If it [smuggling] is not tolerated on certain levels, the banks would never reach their peaks. I had people on my payroll at customs... it was barely even necessary to smuggle because you could bring it in almost officially so long as you pay a little bit to the right people.
Regardless of whether this provision ultimately is enacted, the underlying issue will persist. This post discusses some of the general concerns that the art and antiquities world can be misused as a conduit for dirty money. We then discuss the AML Standards for Art Market Operators proposed by the Basel Institute on Governance, and similar standards set forth by the Responsible Art Market, both of which attempt to set forth a framework for those in the business of trading art to mitigate their money laundering risks.