The objective of provenance research is to produce a complete list of owners (together, where possible, with the supporting documentary proof) from when the painting was commissioned or in the artist's studio through to the present time. In practice, there are likely to be gaps in the list and documents that are missing or lost. The documented provenance should also list when the painting has been part of an exhibition and a bibliography of when it has been discussed (or illustrated) in print.
Of course, beyond AML-related process concerns, any art dealer — just like any business person — always must remember that just about any financial transaction that involves proceeds known to have originated from illegal activity represents a criminal money laundering offense. Stated otherwise, even if the BSA is not expanded to include dealers in art and antiquities, those in the U.S. art industry still need to bear in mind, in extreme examples, the omnipresent federal criminal code. Sometimes, the provenance of the funds can be more critical than the provenance of the art.
The Responsible Art Market, or RAM, is an industry-supported not-for-profit organization which describes itself as ‘”[r]aising awareness of risks faced by the art industry and providing practical guidance on establishing and implementing responsible practices to address those risks.” On its website, RAM provides both an Art Transaction Due Diligence Toolkit, as well as Guidelines on Combatting Money Laundering and Terrorist Financing (“AML Guidelines”). The AML Guidelines are similar to the protocols set forth by the Basel Institute, but provide slightly more concrete detail. They set forth eight basic principles:
— The United Nations Office on Drugs and Crime estimates the amount of illicit money that is laundered each year to be between “2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars.” The difficulty of knowing exact figures accounts for the huge margin within estimates. The UN’s estimates specifically cite “Mega-Byte” as an issue, defining the term as “money in the form of symbols on computer screens the can move anywhere in the world with speed and ease.”
The most obvious forgeries are revealed as clumsy copies of previous art. A forger may try to create a "new" work by combining the elements of more than one work. The forger may omit details typical to the artist they are trying to imitate, or add anachronisms, in an attempt to claim that the forged work is a slightly different copy, or a previous version of a more famous work. To detect the work of a skilled forger, investigators must rely on other methods.
There is no comparable entity in the art market. But were the same type of program instituted in the art market, it would only require that the auction house, dealer or lawyer know the beneficial owner and be able to reveal that information to federal authorities. It would not require the other side of the transaction to learn the seller (or buyer’s) identity.
In the United States federal money laundering statutes apply to nearly every major transaction through which illegal profits are disguised to look legal. Typically, dirty money is laundered through the purchase of, say, a penthouse apartment, or mixed in with the earnings of a legitimate business like a restaurant. When gambling winnings or drug proceeds come out the other end, they appear as a real estate asset or business profit. They look clean.
The potential role of high-end art and antiquities in money laundering schemes has attracted increasing attention over the last several years, particularly as the prices for such objects steadily rise and a tightening global enforcement and regulatory net has rendered other possible avenues for money laundering increasingly less attractive. The effort to subject U.S. dealers in art and antiquities to Anti-Money-Laundering (“AML”) obligations recently has gained new life. As we blogged, the House Financial Services Committee just released three proposed bills to codify many of the reform ideas that have been swirling around the Bank Secretary Act (“BSA”) and AML and Combating the Financing of Terrorism (“CFT”) laws. One of the bills — entitled as the “To make reforms to the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” — catalogues various detailed provisions seeking to reform the BSA and AML laws. Nestled admist all of the other, generally higher-profile proposals (such as the creation of a BSA whistleblower program), one short section of this bill simply expands the list of defined “financial institutions” covered by the BSA to include “dealers in art or antiquities,” and then states that the Secretary of the Treasury shall issue implementing regulations within 180 days of the bill’s enactment.
From Oct. 19 to Oct. 26, 2017, the Toledo Museum of Art (TMA) is deaccessioning 68 objects from its antiquities collection through Christie’s auction house in New York. All information about these objects can be found online at Christie’s website. In response to inquiries concerning this sale, it is important to underscore TMA’s collecting philosophy as well as the Museum’s commitment to ensuring clear provenance of all of the objects in its collection.
* Get full names and contact information for all private parties who the seller claims previously owned the art, or other forms of proof that they indeed owned it. Confirm that these people actually exist (or existed) and, when possible, contact them or their descendants directly to confirm all claims. Or have the seller do it for you. Simply being given a list of names with no other accompanying or verifiable information is not enough.
However, even this careful process can be faked by those knowledgeable enough. In our collector's reading list, we feature a book called Provenance that examines how two people were able to sell forged art at the highest levels. Their documentation for the inauthentic pieces they sold was so expertly faked that more obvious flaws in the pieces themselves were overlooked.
John (American, 1777-1851) and Hugh (American, 1781-1830) Finlay, Card Tables in the Neo-Classical Taste, c. 1825, Mahogany, maple, pine, and poplar, painted and paint-grained rosewood, and gilded, with gilt-brass toe caps and castors and die-stamped rosettes, and red velvet in the wells, 28 7/8 x 35 7/8 x 17 ¾ in. (73.34 x 91.12 x 45.09 cm), Mr. and Mrs. Robert J. Barber Art Fund, 2016.3-.4.
* Provenance must specifically describe the piece of art that's being offered for sale in order to be valid. It should contain important information including dimensions, medium, date of creation (if known), title (if known), and other relevant details. Documents that do not specifically describe the work of art in question do not constitute valid provenance.
For museums and the art trade provenance has increasingly important, not just in the older way where establishing the authorship and authenticity of an object was the main concern, but in establishing the moral and legal validity of its chain of custody, given the increasing amount of looted art. This first became a major concern regarding works that had changed hands in Nazi-controlled areas in Europe before and during World War II. Many museums began compiling pre-active registers of such works and their history. Recently the same concerns have come to prominence for works of African art, often exported illegally, and antiquities from many parts of the world, but currently especially in Iraq, and then Syria.
Rapid and dramatic rises—and collapses—in price are bad things for money laundering whose sole purpose is to find a relatively stable vehicle to mask the source of funds. Money launderers are not looking to make a profit on their purchases let alone a killing. In fact, a money launderer is willing to take a loss on the vehicle that hides the illicit source of the funds because that is the price of washing the money. If a money launderer buys something with dirty money that has the potential to be unsalable for clean money, it doesn’t work. Art, even some of the world’s best art, is often temporarily unsalable for a variety of real and legitimate reasons.
Knoedler’s fantastic tale of fraud begins in the early 1990s on the streets of Manhattan. That’s where a former waiter from Spain, Jose Carlos Bergantiños Diaz, came upon a Chinese artist peddling canvases on the sidewalk. Bergantiños approached the man, Pei-Shen Qian, and said that he had friends who wanted works by esteemed artists but could not afford the real things. Could Pei-Shen duplicate paintings for them? Bergantiños reportedly offered $500 per copy.