Art is part of the picture when it comes to money laundering


After 40 years in the art business, James O’Halloran has seen just about it all. But one thing he hasn’t come across in recent times is a customer trying to buy a piece of art with a wad of banknotes, a sign that the money may be the proceeds of crime.

“It’s been a long, long time since I’ve seen anyone bring in any big money,” says O’Halloran, managing director of Adam’s auctioneers in Dublin.

Fine art dealers are always on guard against theft of paintings, sculptures and antiques. Today, however, hundreds of art dealers, galleries and middlemen have been warned to take action against gangsters who buy expensive works of art to launder money from drugs, conspiracies or terrorism.

This is the local part of an international campaign to close the roads allowing criminals to use the private world of the art trade to harbor illicit funds.

Irish art sales are estimated at around 50 million euros per year, which is large but modest compared to global markets dominated by the US, UK and China. A report from Art Basel, which organizes sales, and UBS bank estimates that the global market was worth some $ 50.1 billion (44.1 billion euros) in 2020.

These transactions are increasingly scrutinized as the anti-money laundering rules developed for the banking system are extended to cover fine crafts that have had little public scrutiny for generations and have flourished. thanks to anonymity.

Pursuant to an EU directive, new laws came into effect here last April to fine-tune the regulation of the high-value art market. As the regime eases, the justice ministry plans to step up inspections of traders and intermediaries.

Officials of the department’s anti-money laundering unit have identified some 234 companies trading in art. After authorized agents visited 10 dealerships in the last quarter of last year, they are planning twice as many inspections this year.

“In 2022, the unit will conduct a review of all inspection results of art dealers and art intermediaries in order to better understand and assess the risks in this sector,” the department said. “As these risks become more apparent, ongoing compliance inspections will be carried out using a risk-based approach, with inspections focused on entities at higher risk of money laundering and terrorist financing.”

Public oversight

For some in the polished world of the art trade, intrusive public surveillance is already a reality. Auction houses, for example, cannot operate without a license from the Property Services Regulatory Authority, a public body whose anti-money laundering powers include the right to conduct regular investigations and audits. But the new regime – stemming from the 2021 Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act – covers art dealers and galleries that are not subject to PSRA oversight.

“It’s attracting more people to the net,” says O’Halloran, whose company is already overseen by PSRA.

“The demands are getting more and more onerous.

Art has long been used in international crime to bring illicit money into the legitimate economy through a process known as layering, which involves removing illegal funds from their source. Such goals can be achieved by adding layers of transactions involving a work of art to sever ties to the original crime and thwart the audit trail.

Two factors help criminals secure money with art and move wealth. First, high valuations mean that individual works can run into millions of dollars. Second, the fact that the art market often operates in secrecy offers opportunities.

American criminals have dealt with the works of Pierre-Auguste Renoir, Pablo Picasso and Salvador Dalí – and Russian oligarchs targeted by sanctions linked to the annexation of Crimea have been accused of using large-scale art deals. value to evade sanctions.

The art market has been touted as the “largest unregulated legal industry” by politicians in Washington.

“Secrecy, anonymity and the absence of regulation create an environment conducive to money laundering and the evasion of sanctions,” said a 2020 report from the U.S. Senate Standing Subcommittee on Investigations. “It is difficult to trace the ownership of anonymous front companies, including those involved in high value artistic transactions. “

Irish criminals are as violent and unscrupulous as bloodthirsty gangsters elsewhere – and four art thefts in decades at Russborough House, Co Wicklow, show that valuable paintings can be vulnerable to theft. Gardaí says, however, that art is less likely to be used in Ireland for money laundering than cars, houses and jewelry.

“I am not aware that we have ever seized this kind of asset. But listen, you can be sure they do. But it didn’t come on our radar, ”said a senior source from Garda.

Obligations

Yet Irish art dealers have been warned that tough new laws now apply and that they must take action to ensure their business is not used by criminals with tainted money.

Justice officials contacted companies covered by the scheme in November, inviting them to a webinar in December in which they were briefed on mandatory obligations to report suspicious transactions to Garda’s financial intelligence unit and to the tax administration. These include “exceptionally large” transactions or “unusual patterns of transactions which appear to have no apparent or obvious economic or lawful purpose”.

Clodagh White, detective sergeant with the Financial Intelligence Unit, told the webinar that drug cartels and organized crime groups are using art and antiques to fund themselves.

“We are talking about high-value goods, high-value works of art that are very tangible, that can be easily sold and transported across borders,” she said during the webinar.

“It’s all part of the stratification process and the laundering process where they convert the proceeds of crime – which in some cases can be money – into an asset that can then be sold, and it’s about infiltrating legal economy and giving the impression that these works of art were purchased with legitimate funds. ”

O’Halloran has said the demands of the new regime are serious.

“Even if you were naive and found yourself on the wrong side of a report about something that happened in relation to [the Criminal Assets Bureau] discovering things isn’t the kind of thing that gives an outfit a lot of confidence in the outside world, ”he says.

“At the end of the day, the legitimate business doesn’t want anything to do with people who are even seen as suspicious. You just don’t want to know, “I’m not making time for you.” “

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