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Secret trading through offshore accounts and shell companies triggering stricter AML regulations

March 2022 – by Dameni Hoogenhout & Laurens Kasteleijn for Art Law Services



Early 2009, London based financial broker Maurizio Fabris used his offshore trust in New Zealand to purchase over a dozen artworks of the famed British artist Banksy, including several iconic artworks such as “Girl with Balloon''. Fabris then went on to sign a contract with the trust managers making them the legal owners. This made it possible for Fabris to hang the artworks in his own home at no cost, avoiding paying wealth tax.


Documents about the transaction were leaked via the so-called Pandora papers – even bigger than the Panama papers, which included almost 12 million leaked documents containing information from 14 financial service companies. With publishing these, the International Consortium of Investigative Journalists (ICIJ)[1] exposed secret offshore accounts of celebrities, business leaders, billionaires and even world leaders.


With the publication of the Pandora papers on October 3rd last year it was discovered that over 400 artists’ works were secretly traded in tax havens. Although some of the artworks can be viewed in galleries, more often than not the works are hidden from the public in warehouses, so called Freeports.


When three of these Banksy pieces were later sold to a gallery, it raised questions about ownership of the artworks, which led to Fabris and his business associates being under criminal investigation for tax fraud. Fabris’ lawyer stated that the trust was never used for tax purposes and that Fabris paid taxes where he lives, being the United Kingdom.


Money laundering through art is a much bigger problem than most realize. According to the United Nations Office on Drugs and Crime, the underground art market yearly brings in as much as $6 billion[2]. Money laundering and other financial crimes account for about $3 billion.


The art industry is still one of the least regulated industries in the world. Art can be traded in secret, which attracts criminals, money laundering and financial crimes; all the while art dealers are nowadays expected to be familiar with the know-your-customer (“KYC”) rules. This does not imply that Fabris should not have been trusted as a client in the first place, but it does show that there is a need for additional regulation of the art market.


There are multiple organisations worldwide that aim to contribute to this regulation. One of better-known organisations is the Geneva based Responsible Art Market Initiative (RAM)[3]. Their goal is to raise awareness of risks in the art industry by ethically guiding businesses as they are faced with complex laws or regulations. A tool RAM is providing to companies active in the art world is the guideline on combatting money laundering and terrorist financing.[4] Specific country guidelines are provided as well. We are proud to mention that Art Law Services wrote the guide for the Netherlands.


Besides private organisations, the European Union and the United Kingdom are active in combatting money laundering and have recently tightened their Anti Money Laundering (“AML”) rules to try and regulate the industry more.


In the Netherlands for example, every art transaction in cash or via bank transfer valued at € 20,000 or more - whether paid in one transaction or multiple connected transactions - needs to be reported to the Netherlands Financial Intelligence Unit. Incidentally, legislation banning cash payments of € 3,000 or more is currently in preparation, and is expected to be rolled out over the summer.


In practise, AML regulations require art sellers, buyers and handlers or mediators to complete a client research, prior to any transaction involving art, and report certain transactions. However, client screening, identification, verification, and the screening of unusual transactions can take up a lot of time. We found that because of this, art dealers fail to do client research, and consequently accepting the risk of getting caught by the authorities.


But this is one of the fundamental solutions to reach transparency in the art world and one of the biggest reasons why money laundering and criminal activities are still a common practice in the art world. Even if galleries know clients for a long time, it is imperative to adhere to the law and complete the KYC process. Even with the assurance of a bank - similar to Fabris’ account as he was purchasing the Banksy’s - it is essential for an art dealer to do the research.


We at Art Law Services believe that the easiest, quickest, and best way of making dealers and galleries do the obligatory research, is by offering it as a very simple and straightforward service: We do the research & reporting, making sure all the boxes are ticked - so you can remain focused on what you do best!


Do you have any questions or want advice on Anti Money Laundering? Contact us at info@artlawservices.com for pricing and further assistance.


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Notes: [1] As stated in Offshore havens and hidden riches of world leaders and billionaires. (2021, December 6th). ICIJ [2] As stated in The Art of Money Laundering. (2019, September). UNODC [3] www.responsibleartmarket.org [4] http://responsibleartmarket.org/guidelines/guidelines-on-combatting-money-laundering-and-terrorist-financing/

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