The art market ’ s vulnerabilities to financial crime have recently become a growing concern in the U . S ., Europe and the U . K . Increasingly , authorities have turned their attention to art market transactions , acknowledging that — like other high-end assets — the art trade is ripe for money laundering . 1 Scrutiny has been expedited and heightened by the ongoing war in Ukraine . Since the annexation of Crimea in 2014 and following the full-scale invasion of Ukraine in 2022 , there has been a groundswell of international criticism of Russia ’ s aggression . Japan , Canada , the U . S . as well as member states across the European Union ( EU ) have implemented over 2,500 sanctions , 2 frozen assets and reduced the flow of luxury assets in and out of the Russian Federation . 3
In February 2023 , Bloomberg reported that major U . S . auction houses had been subpoenaed as part of a federal investigation into Russian oligarchs sanctioned by the U . S . 4 If true , this art market investigation to identify art owned by sanctioned individuals stands as a remarkable example of scrutiny directed toward collectible property holdings . Dealings of or related to Russian oligarchs reach beyond the sanctioned individuals or entities to concern third parties who may willingly or unwillingly facilitate and abet illicit financial dealings . 5
Following the 1991 collapse of the Soviet Union , privatization of national resources and active international trade , including generous incentives to bank overseas and store wealth in offshore jurisdictions , enriched the Russian business elite and made them accustomed to a certain lifestyle , including participating in public auctions and private sales of art and other luxury goods . 6 Individuals who have actively participated in art transactions and were subsequently sanctioned include Viktor Vekselberg , brothers Arkady and Boris Rotenberg , Roman Abramovich , Oleg Deripaska and others . 7 Once names of these individuals appeared on the Office of Foreign Assets Control ’ s ( OFAC ) Specially Designated Nationals ( SDN ) list , members of the art trade were no longer allowed to receive property on consignment and sell property to these sanctioned individuals .
In addition to the general blanket of prohibition to conduct business with sanctioned individuals seeking to buy or sell artifacts , art is also affected by the broader ban on the sale of luxury goods to Russia and Belarus . 8 Scrambling to circumvent sanctions , or in anticipation of being sanctioned , numerous sanctioned individuals transferred their assets to their agents , spouses and children . 9 They have also engaged in oddly timed divorces . 10 The whereabouts of the collections belonging to these sanctioned individuals are being increasingly scrutinized . 11
In June 2023 ( through a bipartisan effort in the U . S . Congress ), a new amendment was introduced to the State Department Basic Authorities Act of 1956 to encourage whistleblowing that would identify agents looking to enable money laundering and evasion of sanctions . 12 The proposed amendment follows a series of indictments , such as the 2022 indictment against the U . K . businessman Graham Bonham-Carter , who was accused of attempting to export a painting owned by Oleg Deripaska from the U . S . by concealing Deripaska ’ s ownership of the artwork . 13
These recent events demonstrate both actions of unscrupulous actors exploiting the vulnerability of the art market and concerted efforts to combat the illicit practices . While the art market is susceptible to money laundering and violating sanctions , art market participants ( i . e ., individuals or companies that act as dealers or intermediaries , operators of free ports , etc ., in the sale , purchase or storage of artworks ) can and should take proactive measures to prevent financial crimes .
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