In regards to the critical issue of the source of the funds, the AML Guidelines “encourage” art businesses “to decline payments from a third party who is not their client and buyer of record. If there are legitimate reasons why it is justified for the Art Business to accept payment from a third party, before doing so the Art Business should conduct enhanced due diligence on both their buyer of record and the third party payer[.]” The AML Guidelines also articulate a “preference” for art businesses only “to accept payments from reputable banks in jurisdictions subject to AML regulation and supervision. Such reputable banks and financial institutions are generally subject to a high degree of AML regulation. That said[,] Art Businesses should remain vigilent and not rely entirely on the fact that banks and financial institutions will have carried out the necessary checks and verification to be satisfied that the source of funds is clean.”
Of all the questions surrounding Trump and Russia, the question of whether the Kremlin could have laundered money through the Trump Organization in order to blackmail Trump has not often held the spotlight, obscured behind more direct connections, like discussions between Russian officials and Trump campaign officials like Donald Trump Jr. or George Papadapoulos, or more lurid ones from the Trump dossier.
But while Simpson saw disturbing patterns, he was unable to nail anything down, because he couldn’t get the relevant records from banks and other financial institutions. Schiff posed an interesting question: Simpson didn’t have subpoena power, but the committee did. Who should it subpoena if it wanted to learn more? Simpson laid out a roadmap for Schiff:
At first Rybolovlev collected slowly, buying a handful of works, including a Monet water lily painting, Gauguin's House of Hymns, three Picassos, and three Modiglianis. After 2009, however, the pace quickened. Rybolovlev was no longer interested in decorating his walls with museum pieces, he says, perhaps because the walls themselves were a subject of dispute.
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.
When addressing the KYC procedures under Guideline 3, the AML Guidelines explain that establishing a client’s risk profile will require an art business to obtain information on the client; understand the purpose and intended nature of the transaction; and understand the client’s source of wealth and how they acquired their art collection. The AML Guidelines also stress the need to identify beneficial ownership, “even if the contracting client raises confidentiality concerns,” and note that the art business “may also choose to include appropriate warranties and representations in their agreements with their clients to emphasise the importance of this point.” Further, art businesses should peform due diligence on intermediaries, such as art advisors or brokers, acting for one of the parties to a transaction.
Creating and maintaining hundreds of LLCs to ostensibly do the same thing, like build hotels, condos, and homes, adds millions in bureaucratic overhead from payroll to tax filings. It wouldn’t be an issue if Trump ran a dozen corporations specializing in each vertical of his business, so having multiple companies under one umbrella is not at all unusual. Having so many doing the same things, however, is typically the same kind of warning sign for money laundering as being constantly told to recruit new salespeople is to pyramid schemes.
I always faced my problems. You have to show some balls. Funnily enough, a lot of these hitmen, if they are cut from the right cloth, will come to you with a certain respect if you don't hide. When the Yugoslavian mafia were going to kidnap my father and brother for trying to set a sting operation against them, I had to come back to Amsterdam to face it. I said, "OK, come along. If you're going to kill me, kill me. If you want my money, go fuck yourself." That's the language they speak. I was standing with my bodyguards on the terrace in Amsterdam and this car flew past and they started shooting at me. A bullet went straight through my leg.
While pretty much all art could be scandalized, some are more susceptible to scheming than others. Digital artist Daniel Temkin points out that digital art, which doesn’t need to be shipped or stored because it has no physical manifestation, is particularly ripe for your risky business. To make it easy for you, Temkin has created an "online auction house, offering net art by internationally renowned artists and their impersonators" called NetVVorth. The art experiment/tongue-in-cheek criminal resource hosts a series of counterfeit works created by legitimate net artists. “The collection is offered to expose net art as a viable investment to serious collectors by establishing a shadow market, proving its ability to hide illicit profits and transfer them easily around the globe. All works are supplied with provenance papers. All sales are in Bitcoin. The true counterfeiter is identified only to the owner of the piece.” The collection includes roughly 35 works. Pick your favorite. (And if you hate digital art, like most collectors, you can always hire an art consultant who can help you pick out some “reeeeeal” art.)
where Rybolovlev was informed that the Kremlin was reopening a potentially bankrupting investigation into the collapse of a mine belonging to Uralkali. Understanding the government's interest in his company and that his days of owning it were numbered, Rybolovlev cashed out, leaving his estimated net worth somewhere between $8 billion and $13 billion. He then focused on trolling the world for other investments. In 2010 he moved to Monaco, his trusts buying La Belle Epoque. His trusts also bought a majority stake in the AS Monaco soccer team in 2011. And in 2012 a broker recommended by Rappo sold his trusts the penthouse at 15 Central Park West. Rybolovlev says that Rappo called him as the deal was closing. "I've been offered a commission of $100,000," she told him. "Would you mind if I accepted?"
These funds, as they’re called in Russia, are operated by LLCs that transfer assets, take out loans, and can make a single large organization doing all sorts of questionable deals and making eyebrow-raising purchases when viewed as a single entity, into a web of seemingly unrelated organizations with very different agendas. With enough records to have to sift through, they can hide their affiliations for years, often in plain sight, just because the web is too tangled to really unravel without a very good reason to spend months parsing paperwork.
Around the same time, a lawsuit against Sater and Bayrock is gaining steam, accusing the two key Trump partners in evading taxes on $250 million through various real estate projects the trio would work on. Officially, Sater is no longer an advisor to Trump and says the two just sporadically kept in touch, although in 2016 he would max out contributions to Trump’s presidential campaign and praise him in American and Russian media.
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.