AML CHALLENGES
U nder the Wave off Kanagawa ( Kanagawa oki nami ura ), also known as The Great Wave , from the series Thirty-Six Views of Mount Fuji ( Fugaku sanjūrokkei ) is one the most recognizable works of Japanese art in the world . This wood block print by the Japanese artist Hokusai , published between 1829 and 1833 , embodies the beauty , movement and force of tidal waves on the lakes around Mount Fuji .
It seems a fitting illustration of the concepts of movement and change , which we are witnessing in 2017 when it comes to tackling financial crime .
The AML / CTF regulation tide
Concerned by the significant and evolving challenges of money laundering and terrorist financing , recent months have witnessed a series of recommendations and measures at international , European and national levels . It seems the tide of regulation is no longer confined to the financial sector with legislators extending their focus to new sectors of financial activity , including the art market .
For example , on June 26 , 2017 , the European Commission published a supranational risk assessment ( SNRA ) of money laundering and terrorist financing affecting the internal market . 1 The report identifies dealers in high-value goods and the art market as being sectors at risk due to what the report describes as their “ inherent risk exposure and weak level of controls .” It recommends member states extend their lists of obliged entities to include auction houses , art and antiques dealers and specific traders in high-value goods . On the same day , the U . K .’ s new anti-money laundering ( AML ) regulations came into force . 2 Art businesses accepting cash payments above 10,000 euros in a single or series of linked operations are regulated as high-value dealers and in a change to the previous legislation are now required to register to carry out their activities .
When it comes to countering terrorism , the G20 published a new action plan on July 7 , 2017 . Amongst other measures , it calls on heads of state , governments and the private sector to dismantle connections between terrorism and transnational organized crime , including the looting and smuggling of antiquities . Within a week , the European Commission responded by publishing a proposal for a new regulation on the import of cultural goods . 3 The proposal is designed to close loopholes and to curb illicit trafficking suspected to be linked to terrorist financing activities .
This article looks at these issues and asks if further regulation is really the answer or if there are alternative and complementary methods of tackling financial crime .
Financial crime in the art market : A reality ?
In November 2015 , at a conference in Geneva organized by the University of Geneva ’ s Art-Law Centre and the Geneva-based Art Law Foundation , representatives from the art market , Geneva Freeport , law enforcement and customs , as well as lawyers and academics came together to debate whether financial crime in the art market was a reality .
The absence of any reliable figures makes it practically impossible to gauge the extent to which money laundering may exist in the art market . With that said , the few high profile cases — which have come to light in recent years — demonstrate that the art market , like other financial markets , is at risk of abuse . In the layering stage of money laundering , criminals seek to separate the proceeds of their criminal activity from its illegal origin . Purchasing valuable assets such as artworks , artifacts or antiquities , helps to convert such “ dirty ” cash or funds into an asset that gains value and can be sold later .
Certain features of the art market ( like other luxury goods such as real estate , yachts and cars ), make it attractive to criminals seeking to launder the proceeds of crime or to finance illegal activities . These include :
• High-value goods
• International markets and networks
• Common use of intermediaries or proxies for transactions
• Common use of foreign / offshore structures and accounts
• Culture of discretion ( the buyer and seller are often unknown to each other )
However , the art market also has features that can serve as a deterrent , including :
• Auction sales are public and highly publicized making them less attractive to criminals seeking to keep a low profile .
• Unlike cash or financial instruments , artworks tend to be unique , making them more easily identifiable and traceable .
1
“ Report from the Commission to the European Parliament and the Council on the Assessment of Risks of Money Laundering and Terrorist Financing Affecting the Internal Market and Relating to Cross-Border Activities ,” European Commission ,
2
The Money Laundering , Terrorist Financing and Transfer of Funds ( Information on the Payer ) Regulations 2017 , http :// www . legislation . gov . uk / uksi / 2017 / 692 / made
3
” Security Union : Cracking Down on the Illegal Import of Cultural Goods Used to Finance Terrorism ,” European Commission , July 13 , 2017 , http :// europa . eu / rapid / press-release _ IP-17-1932 _ en . htm
ACAMS TODAY | SEPTEMBER – NOVEMBER 2017 | ACAMS . ORG | ACAMSTODAY . ORG 25