Further, and as noted, other traditional vehicles for laundering money have become less attractive, thereby driving those who need a mechanism to launder large sums into the arms of the art world.  As we repeatedly have blogged, one of the most time-honored and relatively convenient vehicles for laundering — real estate — is under intense scrutiny and now is subject in the U.S. to the Financial Crimes Enforcement Network (“FinCEN”)’s ongoing Geographic Targeting Orders (these require U.S. title insurance companies in many parts of the U.S. to identify the natural persons behind legal entities used in purchases of residential real estate involving $300,000 or more and performed without a bank loan or similar form of external financing).

The potential role of high-end art and antiquities in money laundering schemes has attracted increasing attention over the last several years, particularly as the prices for such objects steadily rise and a tightening global enforcement and regulatory net has rendered other possible avenues for money laundering increasingly less attractive. The effort to subject U.S. dealers in art and antiquities to Anti-Money-Laundering (“AML”) obligations recently has gained new life.  As we blogged, the House Financial Services Committee just released three proposed bills to codify many of the reform ideas that have been swirling around the Bank Secretary Act (“BSA”) and AML and Combating the Financing of Terrorism (“CFT”) laws.  One of the bills — entitled as the “To make reforms to the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” —  catalogues various detailed provisions seeking to reform the BSA and AML laws.  Nestled admist all of the other, generally higher-profile proposals (such as the creation of a BSA whistleblower program), one short section of this bill simply expands the list of defined “financial institutions” covered by the BSA to include “dealers in art or antiquities,” and then states that the Secretary of the Treasury shall issue implementing regulations within 180 days of the bill’s enactment.
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If the BSA is extended to apply to dealers in art and antinquities, FinCEN can expect a robust notice and comment period for the implementing regulations.  Further, when proposing such regulations, FinCEN might draw upon some existing AML guidelines for the art trade, including those from two not-for-profit groups — one independent, the other supported by industry.  We explore those guidelines in the rest of this post.

Of course, beyond AML-related process concerns, any art dealer — just like any business person — always must remember that just about any financial transaction that involves proceeds known to have originated from illegal activity represents a criminal money laundering offense.  Stated otherwise, even if the BSA is not expanded to include dealers in art and antiquities, those in the U.S. art industry still need to bear in mind, in extreme examples, the omnipresent federal criminal code.  Sometimes, the provenance of the funds can be more critical than the provenance of the art.
Further, and as noted, other traditional vehicles for laundering money have become less attractive, thereby driving those who need a mechanism to launder large sums into the arms of the art world.  As we repeatedly have blogged, one of the most time-honored and relatively convenient vehicles for laundering — real estate — is under intense scrutiny and now is subject in the U.S. to the Financial Crimes Enforcement Network (“FinCEN”)’s ongoing Geographic Targeting Orders (these require U.S. title insurance companies in many parts of the U.S. to identify the natural persons behind legal entities used in purchases of residential real estate involving $300,000 or more and performed without a bank loan or similar form of external financing).
Say you’re an oligarch in a country that loathes them but is powerless to do anything about their existence because the highest levels of government profit off their businesses, legal and not. While you might think you have it made, your position is actually quite precarious. Pull on your leash too much and start commenting on politics, and you might just find yourself in jail for tax evasion and embezzlement, or sent into exile according to the template that shut down a critical news channel first, and stealthily re-nationalized an oil empire soon after that.
Art Businesses should also consider the form of the transaction, such as whether the transaction is taking place through intermediaries, face to face, entirely via the Internet, over the phone, or by any other similar non face to face means. In some circumstances, depending on the nature, value and/or geographic location of the transaction, enhanced due diligence may be appropriate.
When you sell your home the paperwork details the sale, including your name, and the title search lists the names of the people who owned the property before you. But when someone sells an artwork at auction — even something worth $100 million, much more than your house — the identity is typically concealed.  […] In finance, Treasury officials last year began asking banks to identify customers who set up accounts in names of shell companies. In real estate, they introduced a pilot program that requires the full identification of people who buy expensive properties in New York and Miami using cash and shell companies.
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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.

At the same time, Trump partnered with a real estate developer called Bayrock, founded by Soviet-born Tevfik Ariv who set up office in Trump Tower. In 1999, Russian-born former gangster implicated in a Wall Street pump-and-dump scheme and money laundering, Felix Sater, joined Bayrock and would become a top Trump adviser. Sater claimed they would talk often, with him pitching ideas on a regular basis. By 2005, the duo is trying yet again to build a hotel in Moscow to no avail.
Borisovich says London’s Russian oligarchs should not be mistaken for conventional, self-made businessmen. “Their riches come from transactions with the Russian government. They either sold something for a fortune to the state of Russia or they bought something for pennies in some sort of privatisation from the state of Russia. Some of them managed to do both, to buy for pennies and sell for fortunes. Some of them never did any of that and they just worked all their life as government officials and somehow in the process became immensely rich,” he says.
The potential role of high-end art and antiquities in money laundering schemes has attracted increasing attention over the last several years, particularly as the prices for such objects steadily rise and a tightening global enforcement and regulatory net has rendered other possible avenues for money laundering increasingly less attractive. The effort to subject U.S. dealers in art and antiquities to Anti-Money-Laundering (“AML”) obligations recently has gained new life.  As we blogged, the House Financial Services Committee just released three proposed bills to codify many of the reform ideas that have been swirling around the Bank Secretary Act (“BSA”) and AML and Combating the Financing of Terrorism (“CFT”) laws.  One of the bills — entitled as the “To make reforms to the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” —  catalogues various detailed provisions seeking to reform the BSA and AML laws.  Nestled admist all of the other, generally higher-profile proposals (such as the creation of a BSA whistleblower program), one short section of this bill simply expands the list of defined “financial institutions” covered by the BSA to include “dealers in art or antiquities,” and then states that the Secretary of the Treasury shall issue implementing regulations within 180 days of the bill’s enactment.
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