High-value art is a lucrative avenue for financial criminals because of the nature of transactions and market participants. As such, the US Department of the Treasury has published a study on ML/TF occurring through the high-value art trade. This study examines the art market participants and sectors that pose significant ML/TF risks. It also discusses the measures that government agencies, regulatory authorities, and market participants could adopt to prevent ML through the high-value art market in the US.
The high-value art market involves large-sum transactions and goods transport. Moreover, art market transactions are marked by the privacy of the participants and the use of shell companies and art advisors. The Treasury’s study found that even though there is a considerable risk of ML in the high-value art market, TF poses a low risk in this area. Art market participants most vulnerable to ML are those which offer financial services like art-collateralized loans without mandatory AML/CFT regulatory obligations. This is because criminals can misuse art-collateralized loans to conceal the original source of their funds. Further, market entities with large annual sales turnover and regular transactions in high-value art pose a greater ML risk. Moreover, booming digital art market commodities like non-fungible tokens (NFTs) pose newer ML risks.
The study further notes that both regulatory and non-regulatory options are needed to address risks in the high-value art market. Firstly, it is important to enhance information-sharing programs for the private sector to ensure transparency in the art market. There is also a need to update the guidelines and training for law enforcement, customs enforcement, and asset recovery authorities. It would also help to impose AML/CFT requirements such as KYC and Suspicious Activity Reporting on specific art market participants.
Source: US Department of the Treasury