Customs officials at JFK airport didn’t have a reason to be suspicious. After all, the package wasn’t anything special—just a regular shipping carton with an unnamed $100 painting inside. Only later did it emerge that the $100 unnamed painting was, in fact, Hannibal, a 1981 painting by Jean-Michel Basquiat valued at $8 million. Authorities across three different continents had spent years trying to track down Hannibal, along with other famous works by Roy Lichtenstein and Serge Poliakoff, that Brazilian banker Edemar Cid Ferreira had used to launder millions of funds he illegally obtained from a Brazilian bank. It wasn’t until 2015, nearly ten years after Edemar’s conviction for money laundering, that US authorities managed to return Hannibal to its rightful owner, the Brazilian government. Meanwhile, thousands of other paintings move across borders with few questions asked about who owns them, who’s buying them, and for what end.
The art world is readymade for corruption. Paintings—unlike real estate—are readily portable. Their true value, as Hannibal illustrates, is readily disguisable. And the law does not require disclosure of the buyer or seller’s true identity. Unlike real estate, where ownership can be traced to a deed, the only available chain of title for most artwork is its “provenance”—which is commonly vague, falsified, or not readily verified. Recognizing that money laundering in the art world is a big (and growing) problem, there’s been a flurry of recent proposals to address that problem. In the United States, Congressman Luke Messer proposed a new law called the Illicit Art and Antiquities Act, which, if enacted, would amend the Bank Secrecy Act (BSA) to require art and antiquities dealers to develop an internal compliance system, report cash payments of more than $10,000, and file the same sorts of “suspicious activity reports” (SARs) with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) that the BSA currently requires of financial institutions and money service businesses. And in Europe, the EU’s Fifth Anti-Money Laundering (AML) Directive dramatically expanded suspicious transaction reporting requirements for art dealers.
These developments show that legislators on both sides of the Atlantic are taking the challenge of art corruption seriously, which is an encouraging development. Unfortunately, expanding SAR requirements, while appropriate in other contexts, is misguided when it comes to the art world, for two reasons: