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Anti-money laundering regulation and the art market

  • Saskia Hufnagel (a1) and Colin King (a2)

Abstract

Following concerns that the art market is being used to launder criminal money and fund terrorist activities, measures have recently been introduced to subject the market to the anti-money laundering (AML) regime – such as the EU 5th Money Laundering Directive (2018) and the US Illicit Art and Antiquities Trafficking Prevention Bill (2018). The expansion of the AML regime to include art dealers has been attributed to the failure of regulation and the vulnerabilities inherent in the market to laundering. This paper considers vulnerabilities to money laundering and examines the types of regulation that apply in the art market. The paper then goes on to analyse the application of AML criminal law and preventive measures in the UK context, demonstrating that art dealers can be criminally prosecuted for engaging in normal commercial activities. Even if dealers do comply with AML reporting rules, such compliance can significantly impact upon their business. These are important considerations given the government's emphasis on striking a balance between the burdens on business and deterring money laundering activities. Drawing upon the AGILE analytical framework, we remain sceptical about the continued expansion of the AML regime.

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Corresponding author

*Corresponding author. Email: colin.king@sas.ac.uk

Footnotes

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We would like to thank Peter Alldridge, Janet Ulph and Mark Walters for their helpful comments on a previous draft.

Footnotes

References

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1 In this paper, our use of ‘art’ encompasses antiquities.

2 Fincham, DHow law defines art’ (2015) 14 J Marshall Review of Intellectual Property Law 314.

3 There are similar developments evident with counter terrorism financing (CTF) measures, both at international and national levels. Our focus in this paper is confined to AML laws, though the discussion can also be applied to the CTF regime.

4 See, for example, the allegations concerning the use of Picasso's Personnages 1965 to launder proceeds of crime: US v Kyriacou and Others Indictment No CR 18 0102, 28 February 2018 (Eastern District of New York).

5 [2005] EWHC 258 (QB), para 35.

6 Conklin, JE Art Crime (Praeger, 1994); Charney, NFour art crimes and their effect on the art trade’ in Charney, N (ed) Art Crime: Exploring the Dark Side of the Art World (Praeger/ABC-CLIO, 2009).

7 P Valentin ‘The myth of the unregulated art market’, presented at the Art Business Conference, 3 September 2015.

8 See for example Gerstenblith, PPicture imperfect: attempted regulation of the art market’ (1988) 29 William and Mary Law Review 501.

9 Directive 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU.

10 HR 5886 – 115th Congress (2017–2018), introduced by Rep Luke Messer (Indiana).

11 HM Treasury Transposition of the Fifth Money Laundering Directive: Consultation (April 2019) p 4.

12 Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, SI 2017/692. Article 1(1)(c) of the Fifth AML Directive refers to ‘persons trading or acting as intermediaries in the trade of works of art, including when this is carried out by art galleries and auction houses, where the value of the transaction or a series of linked transactions amounts to EUR 10 000 or more’. The UK government is consulting both on who should be included within the term ‘art intermediaries’ and how to define ‘works of art’ for AML purposes: HM Treasury, above n 11, p 22.

13 HM Treasury, above n 11, p 4.

14 Mackenzie, SThe market as criminal and criminals in the market: reducing opportunities for organised crime in the international antiquities market’ in Manacorda, S and Chappell, D (eds) Crime in the Art and Antiquities World: Illegal Trafficking in Cultural Property (Springer, 2011).

15 Ulph, JThe impact of the criminal law and money laundering measures upon the illicit trade in art and antiquities’ (2011) XVI Art Antiquity and Law 39.

16 See for example Verhage, A The Anti Money Laundering Complex and the Compliance Industry (Routledge, 2011); Unger, B and Ferwerda, J Money Laundering in the Real Estate Sector: Suspicious Properties (Edward Elgar, 2011).

17 Such as van Duyne, PC et al. ‘Money, art, and laundering: coming to grips with the risks’ in Kila, JD and Balcells, M (eds) Cultural Property Crime – An Overview and Analysis of Contemporary Perspectives and Trends (Brill, 2014).

18 Transparency International UK Don't Look, Won't Find: Weaknesses in the Supervision of the UK's Anti-Money Laundering Rules (November 2015) pp 60–62.

19 Chappell, D and Hufnagel, SCase studies on art fraud: European and antipodean perspectives’ in Chappell, D and Hufnagel, S (eds) Contemporary Perspectives on the Detection, Investigation and Prosecution of Art Crime (Ashgate, 2014) p 75.

20 Ulph, J and Smith, I The Illicit Trade in Art and Antiquities: International Recovery and Criminal and Civil Liability (Hart Publishing, 2012) p 267.

21 While discussion might also extend to others involved in the art market (such as restorers and import/export agents), our focus in this paper is the application of the AML regime to dealers.

22 N La Vigne ‘Applying regulatory measures to address crime problems: an AGILE approach to enhancing public safety’ (2018) The Annals of the American Academy of Political and Social Science 202.

23 Alldridge, P What Went Wrong with Money Laundering Law? (Palgrave, 2016) p 15.

24 For a script analysis, see Bichler, G et al. ‘Bad actors and faulty props: unlocking legal and illicit art trade’ (2013) 14(4) Global Crime 359.

25 J Gapper and P Aspden ‘Davos 2015: Nouriel Roubini says art market needs regulation’ (Financial Times, 22 January 2015), quoting the NYU economist Professor Nouriel Roubini.

26 See eg M Lufkin ‘Laundering drug money with art’ (Forbes, 8 April 2003).

27 See J Schectman and A Ananthalakshmi ‘US acts to seize stolen assets, Picasso in probe of Malaysian fund’ (Reuters, 15 June 2017).

28 US Department of Justice, Press Release Acting Manhatten US Attorney Announces Return of 95 Artworks Linked to Brazilian Money Laundering (5 October 2017). The painting was subject to civil forfeiture proceedings in the US, see US v The painting known as ‘Hannibal’ et al 08 Civ 1511 (RJS) (10 May 2013).

29 See eg M Roth ‘Wir betreten den Kunstmarkt’ (Dike Verlag, 2015) pp 20–21; J Burke ‘French trial reveals vast wealth of Equatorial Guinean president's son’ (The Guardian, 2 January 2017); ‘Tunisia sells off Ben Ali's “ill-gotten gains” – in pictures’ (The Guardian, 21 December 2012).

30 According to a Deloitte survey 73% of wealth managers, 69% of collectors and 69% of art professionals see the lack of market transparency as one of the key issues within the market: Deloitte Art and Finance Report 2016 (4th edn) p 143.

31 Rachmaninoff v Sotheby's and Teranyi [2005] EWHC 258 (QB) para 35.

32 Charney, N The Art of Forgery (Phaidon, 2015).

33 In Whistler v Forster (1863) 143 ER 441 at 445 Willes J stated: ‘the general rule of law is undoubted, that no one can transfer a better title than he himself possesses: Nemo dat quod non habet’.

34 Giroud, S and Boudry, CArt lawyers’ due diligence obligations: a difficult equilibrium between law and ethics’ (2015) 22 International Journal of Cultural Property 401 at 403.

35 William J Jenack Estate Appraisers & Auctioneers, Inc v Rabizadeh 2013 NY Slip Op 08373 [22 NY3d 470] (17 December 2013) Court of Appeals, Rivera, J (reversing William J Jenack Estate Appraisers & Auctioneers, Inc v Rabizadeh 2012 NY Slip Op 06211 [99 AD3d 270] (19 September 2012)).

36 G Bowley and WK Rashbaum ‘Has the art market become an unwitting partner in crime?’ (The New York Times, 19 February 2017).

37 Directive 2018/843, Preamble (4).

38 In one case, Sotheby's was sued for not disclosing that an item – Louis-Michel van Loo's ‘Allegorical Portrait of a Lady as Diana Wounded by Cupid’ – had previously been owned by Hermann Göring: see Brooks v Sotheby's, 2013 WL 1156067. The claim was dismissed on the ground that the contract for sale specifically named the UK as having jurisdiction in any dispute.

39 [2008] EWHC 336 (QB) para 140.

41 Davis v Carroll 937 F Supp 2d 390, 429 (2013) (US District Court, SD New York). See also Porter v Wertz 53 NY 2d 696 (1981) (Court of Appeals of the State of New York).

42 This difficulty is particularly pronounced in situations where an item is from a time when few records of provenance were kept. Thus, perfectly legitimate items might not have a perfect ownership history.

43 For discussion of such commoditisation see Horowitz, N Art of the Deal. Contemporary Art in a Global Financial Market (Princeton University Press, 2014) p 10.

44 British Art Market Federation The British Art Market 2017 p 6.

45 2014 was the highest ever total value of sales, namely $68.2 billion. These figures are cited in Deloitte Art and Finance Report 2016 (4th edn) p 26.

46 HM Treasury and Home Office National Risk Assessment of Money Laundering and Terrorist Financing 2017 (October 2017) para 2.4. For a critique see Murray, K“Fake passports” – what is to be done about trade-based money laundering?’ in King, C et al. (eds) The Palgrave Handbook of Criminal and Terrorism Financing Law (Palgrave, 2018) p 210.

47 E Kinsella ‘Bad banker's $8 million Basquiat smuggled with shipping invoice for $100 returns home’ ArtNet News, 19 June 2015, available at https://news.artnet.com/market/smuggled-basquiat-returned-brazil-309813.

48 National Crime Agency National Strategic Assessment of Serious and Organised Crime 2018 p 40.

49 The FATF estimates that there are approximately 3,000 free trade zones (the term that they use) in 135 countries: FATF Money Laundering Vulnerabilities of Free Trade Zones (March 2010).

50 See eg Loi no 444.1 of 20 June 2003, RO 2005 1869, ‘LTBC’, which entered into force on 1 June 2005. Cf KL Steiner ‘Dealing with laundering in the Swiss art market: new legislation and its threats to honest traders’ (2017) 49 Case Western Reserve Journal of International Law 351 at 357.

51 FATF, above note 49, p 15.

52 For consideration in the context of the property market, see Shelley, LMoney laundering into real estate’ in Miklaucic, M and Brewer, J (eds) Convergence: Illicit Networks and National Security in the Age of Globalization (National Defence University Press, 2013). For wider considerations of how criminal money is invested, see Kruisbergen, E et al. ‘Profitability, power, or proximity? Organized crime offenders investing their money in legal economy’ (2015) 21 European Journal on Criminal Policy and Research 237.

53 HM Treasury, above note 11, p 23.

54 HM Treasury, above note 11, pp 23–24. Though it might well be argued that these very points could equally be applied to other markets.

55 See eg Alldridge, above n 23.

56 Gerstenblith, above note 8.

57 For detailed consideration of what ‘regulation’ is see Black, JCritical reflections on regulation’ (2002) 27 Australian Journal of Legal Philosophy 1; Orbach, BWhat is regulation?’ (2012) 30(1) Yale Journal on Regulation Online 1.

58 See Department for Digital, Culture, Media and Sport Press Release UK risks losing £2m modern art sculpture (25 February 2016).

59 Theft Act 1968, s 22 (handling stolen goods).

60 Dealing in Cultural Objects (Offences) Act 2003, s 1; Cultural Property (Armed Conflicts) Act 2017, s 17.

61 See Avrora Fine Arts Investment Ltd v Christie, Manson & Woods Ltd [2012] EWHC 2198 (Ch); Thwaytes v Sotheby's [2016] 1 All ER 423.

62 Christ, T and Selle, C von Basel Art Trade Guidelines: Intermediary Report of a Self-regulation Initiative (Basel Institute on Governance, 2012) p 6.

63 Ibid, p 23.

64 Ibid, p 23.

65 C von Selle Presentation at 3rd AHRC Network Workshop on ‘Art, Crime and Criminals: Painting Fresh Pictures of Art Theft, Fraud and Plunder’, 7–8 September 2017, Federal Ministry of Finance, Berlin.

66 Deloitte Art and Finance Report 2016 (4th edn) p 144. That report also stated: ‘According to our latest survey of wealth managers, art professionals, and art collectors, the majority (two thirds) of opinions are in favour of self-regulation of the art market. However, a significant minority (36 percent) of wealth managers call for more government regulation of this market. The same trend is echoed by both arts professionals and art collectors, who believe that threats to the art market are best addressed from within the art industry itself rather than through government intervention’: ibid, p 144.

67 POCA 2002, Sch 9. The term ‘regulated sector’ is widely defined. For detailed treatment see Williams, M Sutherland et al. Millington and Sutherland Williams on The Proceeds of Crime (Oxford: Oxford University Press, 5th edn, 2018) para 21.08 ff.

68 Baldwin, R et al. Understanding Regulation: Theory, Strategy and Practice (Oxford: Oxford University Press, 2nd edn, 2012) p 8. See also J Black ‘The emergence of risk-based regulation and the new public management in the United Kingdom’ (2005) Public Law 512.

69 For further discussion see Korotana, MThe emergence of regulation: market failure, subversion of justice and inadequacy of private law’ (2017) 28 European Business Law Review 615; McVea, H, ‘Financial services regulation under the Financial Services Authority: a reassertion of the market failure thesis?’ (2005) 64(2) Cambridge Law Journal 413.

70 Baldwin et al, above note 68, p 15.

71 Stessens, G Money Laundering: A New International Law Enforcement Model (Cambridge University Press, 2000) p 108.

72 See Willett, HIll-gotten gains: a response to the Islamic State's profits from the illicit antiquities market’ (2016) 58(3) Arizona Law Review 831.

73 UN Security Council Resolution 2199 (2015) para 16. There has, however, been some scepticism as to the extent to which terrorist groups such as ISIS are raising funds through the sale of antiquities: see G Adam ‘Antiquities: the spoils of war’ (Financial Times, 11 March 2016).

74 UN Security Council Resolution 2347 (2017) para 9.

75 US v Kyriacou and others, Indictment No CR 18 0102, 28 February 2018 (Eastern District of New York) p 16.

76 See generally C Hood ‘Assessing the Dangerous Dogs Act: when does a regulatory law fail?’ (2000) Public Law 282; Grabosky, PNCounterproductive regulation’ (1995) 23 International Journal of the Sociology of Law 347.

77 Of course, as Baldwin et al note, ‘Diagnosing why regulation fails is inherently about perceptions and (often implicit) models of the world, and therefore any reference to a theory of regulatory failure is linked to our beliefs on why and how particular regulatory interventions work’: Baldwin et al, above note 68, p 73.

78 M Carrigan ‘US anti-money-laundering bill could reappear early next year’ (The Art Newspaper, 11 December 2018).

79 Illicit Art and Antiquities Trafficking Prevention Bill, s 2(a)(3).

80 US Congressman Luke Messer, Press Release – Messer Introduces Bill to Curb Terrorism Financing (24 May 2018).

81 CINOA (Confedération Internationale des Négociants en Oeuvres d'Art), Letter to Congressman Jeb Hensarling, Financial Services Committee Chair – H.R.5886 – A Bill to apply the Bank Secrecy Act to dealers in art or antiquities (nd).

82 Z Small ‘Art dealers could be under more financial scrutiny with new US bill’ HyperAllergic Blog (25 June 2018), quoting Iris Tarsis of the Center for Art Law.

83 Directive 2018/843.

84 European Commission Communication from the Commission to the European Parliament and the Council on an Action Plan for Strengthening the Fight against Terrorist Financing. COM (2016) 50 final (February 2, 2016) p 12.

85 European Commission Report from the Commission to the European Parliament and the Council on the assessment of the risks of money laundering and terrorist financing affecting the internal market and relating to cross-border activities. COM (2017) 340 final (26 June 2017) p 7.

86 Ibid, p 7.

87 Ibid, p 13.

88 European Commission Inception Impact Assessment: Import of cultural goods (17 November 2016). See also Deloitte Fighting Illicit Trafficking in Cultural Goods: Analysis of Customs Issues in the EU. Final Report to DG TAXUD (June 2017).

89 Cited in L Chesters ‘New money laundering regulation a “disproportionate burden” on art and antiquities businesses’ (Antiques Trade Gazette, 27 April 2018).

90 Crawford, APlural policing in the UK: policing beyond the police’ in Newburn, T (ed) Handbook of Policing (Willan, 2nd edn, 2008).

91 Garland, D The Culture of Control: Crime and Social Order in Contemporary Society (Oxford: Oxford University Press, 2001) p 124.

92 See eg Helgesson, K Svedberg and Morth, UClient privilege, compliance and the rule of law: Swedish lawyers and money laundering prevention’ (2018) 69(2) Crime, Law and Social Change 227.

93 Verhage, above n 16, pp 79–80.

94 Home Office and HM Treasury Action Plan for Anti-money Laundering and Counter-terrorist Finance (April 2016) p 12.

95 See for example FATF Chairmen's Summary of Outcomes from the Joint G20 ACWG / FATF Experts Meeting on Corruption (17 October 2015) where it was said: ‘As gatekeepers to the financial system, financial institutions play an important role in the fight against both corruption and money laundering’, available at http://www.fatf-gafi.org/publications/corruption/documents/experts-meeting-october-2015.html.

96 Verhage, above n 16, p 80.

97 Though see HM Treasury UK takes top spot in fight against dirty money (7 December 2018) following the UK's 2018 evaluation by the FATF.

98 For consideration of enforcement challenges see R Baldwin and J Black ‘Really responsive regulation’ (2008) MLR 59. Indeed in June 2018 the CEO of HMRC floated the idea that HMRC might not be best suited to fulfilling the AML supervisory role that it currently undertakes: Jon Thompson, giving evidence at the Treasury Committee The UK's economic relationship with the European Union (5 June 2018).

99 HM Treasury, above note 11, p 4.

100 Ibid.

101 Proceeds of Crime Act 2002 (Commencement No 4, Transitional Provisions and Savings) Order 2003, SI 2003/120.

102 POCA 2002, s 340(3). It is immaterial who carried out the conduct; who benefited from it; and whether the conduct occurred before or after the passing of POCA: POCA 2002, s 340(4).

103 Sutherland Williams et al, above note 67, para 21.01.

104 POCA 2002, s 330.

105 POCA 2002, s 331.

106 POCA 2002, s 332.

107 POCA 2002, s 333A.

108 Ulph and Smith, above n 20, p 105.

109 The dealer would have to know or suspect that that money constitutes or represents benefit from criminal conduct: POCA 2002, s 340(3)(b).

110 See the allegations in the Personnages 1965 indictment: US v Kyriacou and others, Indictment No CR 18 0102, 28 February 2018 (Eastern District of New York).

111 POCA 2002, s 340(3)(b) provides that an accused must know or suspect. In relation to ‘suspecting’, see R v Da Silva [2006] EWCA Crim 1654 paras 16–17.

112 POCA 2002, s 338. Note that where an authorised disclosure is made in good faith, no civil liability arises: Serious Crime Act 2015, s 37 inserting a new sub-s (4A) into POCA 2002, s 338.

113 This defence applies to each of the principal money laundering offences. See, respectively, POCA 2002, s 327(2), s 328(2) and s 329(2).

114 POCA 2002, s 333A. See also Jayesh Shah and Shaleetha Mahabeer v HSBC Private Bank (UK) Ltd [2012] EWHC 1283 (QB).

115 ‘Appropriate consent’ is defined in POCA 2002, s 335.

116 See eg NCA v N [2017] EWCA Civ 253; O'Brien v Irwin Mitchell LLP [2018] EWHC 742 (Ch).

117 But see K Ltd v National Westminster Bank plc [2006] EWCA Civ 1039. See also Jayesh Shah and Shaleetha Mahabeer v HSBC Private Bank (UK) Ltd [2012] EWHC 1283 (QB). It must be noted that the Serious Crime Act 2015, s 37 provides for civil immunity where an authorised disclosure is made in good faith.

118 POCA 2002, s 335. The ‘notice period’ is seven working days: POCA 2002, s 335(5).

119 POCA 2002, s 336(8). There is provision for the 31-day moratorium period to be extended: Criminal Finances Act 2017, s 10.

120 Campbell, A and Campbell, ESolicitors and complying with the anti-money laundering framework: Reporting suspicions, applying for consent and tipping-off’ in Ryder, N et al. (eds) Fighting Financial Crime in the Global Economic Crisis (Routledge, 2015) p 124.

121 S Kebbell, ‘“Everybody's looking at nothing” – the legal profession and the disproportionate burden of the Proceeds of Crime Act 2002’ (2017) Criminal LR 741 at 742.

122 These set out, inter alia, the number of hours that a person can drive before taking a break: see HM Government ‘Drivers’ hours’, available at https://www.gov.uk/drivers-hours.

123 Law Commission Anti-Money Laundering: the SARs Regime (HC 2098, June 2019).

124 Ibid, p 29.

125 Ibid, p 30. It was stated that: ‘there is currently no means of ensuring that the burden of reporting is proportionate to the gravity of the offence, the value of the criminal property and the benefit to law enforcement agencies of this intelligence. This is problematic as resources are finite. The burden on those who are obliged to file reports is substantial. The burden on those whose accounts and transactions are frozen pending review is also very significant. It undermines the aim of achieving a truly risk-based approach’ (p 30).

126 Significantly, too, a ‘SARs Reform Programme’ is underway, led by the Home Office: National Crime Agency Suspicious Activity Reports (SARs) Annual Report 2018 p 2 (‘Statement by the Chair of the SARs Regime Committee’).

127 SI 2017/692.

128 HM Treasury and Home Office National Risk Assessment of Money Laundering and Terrorist Financing 2017 (October 2017) para 1.8.

129 Council Directive 91/308/EEC of 10 June 1991.

130 Reg 14(1)(a) defines ‘high value dealer’ as ‘a firm or sole trader who by way of business trades in goods (including an auctioneer dealing in goods), when the trader makes or receives, in respect of any transaction, a payment or payments in cash of at least 10,000 euros in total, whether the transaction is executed in a single operation or in several operations which appear to be linked’ (emphasis added).

131 Transparency International UK, above n 18, pp 60–62.

132 For example, Damien Hirst's piece For the Love of God supposedly sold for £50m in cash. In that type of situation, the dealer would fall within the definition of ‘high value dealer’. See ‘The mystery of the £50m skull: Is Hirst's record sale all it seems?’ (The Independent, 2 September 2007).

133 While some larger firms already have AML programmes in place, this appears to be the exception in the market as a whole. See also Basel Institute on Governance Basel Art Trade Anti-Money Laundering Principles (January 2018).

134 Risk factors include: its customers; countries/ geographic areas that it operates in; its products or services; its transactions; its delivery channels.

135 The obligation extends to any ‘parent undertaking’: reg 20.

136 In effect, those with convictions of a relevant offence can be precluded from acting in such a role, or if they are later convicted of a relevant offence, they can be precluded subsequent to that conviction. The relevant offences are set out in the ML Regulations 2017, Sch 3.

137 The relevant CDD checks are set out in reg 28. CDD checks must be done before the establishment of a business relationship or the carrying out of the transaction: reg 30.

138 Reg 35 further requires ‘appropriate risk-management systems and procedures’ to be put in place to determine whether a person is, or is associated with, a PEP.

139 NCA, above n 48, p 38.

140 See for example Christie's Buying at Christie's, available at https://www.christies.com/buying-services/buying-guide/financial-information/#anti-money-laundering.

141 See Z Yen Ltd Anti-Money Laundering Requirements: Costs, Benefits and Perceptions (Corporation of London, 2005).

142 See generally Artingstall, D et al. Drivers and Impacts of De-risking: A Study of Representative Views and Data in the UK (John Howell & Co Ltd, 2016).

143 V Ramachandran et al ‘De-risking: an unintended negative consequence of AML/CTF regulation’ in King et al, above n 46.

144 Such KYCC could operate both ways – ie dealers might do KYCC themselves to manage risk or they might be requested by other firms (eg other dealers or banks or solicitors, etc) to provide further information about their own clients.

145 The 2018 FATF Evaluation rated the UK money laundering investigation and prosecution provisions as having ‘a substantial level of effectiveness’: FATF United Kingdom: Mutual Evaluation Report (December 2018) p 71.

146 The 2018 FATF Evaluation rated the UK preventive provisions as having ‘a moderate level of effectiveness’: FATF, above note 145, p 122.

147 La Vigne, above n 22.

148 La Vigne, above n 22, at 204.

149 ‘Europe needs a central anti-money laundering body’ (Financial Times, 4 September 2018).

150 T Keatinge ‘We cannot fight cross-border money laundering with local tools’ (Financial Times, 9 September 2018).

151 See Helgesson, K SvedbergPublic-private partners against crime: governance, surveillance and the limits of corporate accountability’ (2011) 8(4) Surveillance and Society 471.

152 La Vigne, above n 22, at 206.

153 See eg FATF, above note 145.

154 Alldridge, above n 23. For discussion of ‘implementation failure’ see Grabosky, above note 76, at 359–360.

155 In an EU-wide study, involving interviews with policy-makers, practitioners, and prosecutors, Ferwerda notes how there were a range of answers to the question: ‘what is the goal of AML policy?’ See J Ferwerda ‘The effectiveness of anti-money laundering policy: a cost-benefit perspective’ in King et al, above n 46.

156 La Vigne, above n 22, at 207.

157 Verhage, above n 16, pp 65–66.

158 N Tilley ‘Privatizing crime control’ (2018) The Annals of the American Academy of Political and Social Science 55.

159 There continue to be AML failures across different sectors, for example: FCA – Press Release, ‘FCA fines Standard Chartered Bank £102.2 million for poor AML controls’ (9 April 2019); BBC News ‘Countrywide fined £215,000 over money-laundering failings’ (4 March 2019); Gambling Commission ‘Daub Alderney to pay £7.1m fine for anti-money laundering and social responsibility failures’ (13 November 2018); ‘Europe's biggest banks fined for money laundering’ (The Week, 10 October 2018); J Garside and N Hopkins ‘UK lawyers failing to report suspected money laundering, says watchdog’ (The Guardian, 14 September 2018). Notwithstanding the positive report from the FATF (above n 145), it has been argued ‘that ‘“effectiveness” in fulfilling FATF's IOs [ie Immediate Outcomes] in aggregate does not necessarily translate into real-world effectiveness in achieving the overarching objectives of an AML regime’: Keatinge, T et al. No Rest for the Wicked: Driving Change in the UK's Post-FATF Evaluation AML Regime (RUSI, 2019) pp 1213.

160 Tyler, T Why People Obey the Law (Yale University Press, 1990); Beetham, D The Legitimation of Power (Palgrave Macmillan, 2nd edn, 2013).

161 See Gallie, WBEssentially contested concepts’ (1956) 56 Proceedings of the Aristotelian Society, New Series 167.

162 See Tyler, TPsychological perspectives on legitimacy and legitimation’ (2006) 57 Annual Review of Psychology 375.

163 It is worth noting, however, that during numerous presentations of this article to market participants, the response was overwhelmingly against the proposed expansion of the AML regime to art dealers.

164 Grabosky, above note 76, at 351.

165 Michaud v France App No 12323/11 (06/03/2013); Ordre des Barreaux Francophones et Germanophone v Conseil des Ministres (C-305/05) [2007] CMLR 28.

166 See Dahabshiil Transfer Services Ltd v Barclays Bank plc [2013] EWHC 3379 (Ch).

167 See generally Ramachandran et al, above n 143.

168 See S Kamali Dehghan ‘UK bank accounts of Iranian customers still being closed, says law firm’ (The Guardian, 21 April 2017).

169 National Crime Agency Suspicious Activity Reports (SARs) Annual Report 2018.

170 CINOA, above n 81.

171 See Sunstein, C The Cost-Benefit Revolution (MIT Press 2018).

172 See for example Barone, R and Masciandaro, DWorldwide anti-money laundering regulations: estimating the costs and benefits’ (2008) 10(3) Global Business and Economics Review 243, though the authors do acknowledge the lack of robust empirical studies on money laundering activities.

173 See for example S Rose-Ackerman ‘Putting cost-benefit analysis in its place: rethinking regulatory review’ (2011) University of Miami Law Review 335.

174 Unger, B et al. The Economic and Legal Effectiveness of the European Union's Anti-Money Laundering Policy (Edward Elgar, 2014).

175 With a population of 10 million and a price level of 100. The authors acknowledge, though, the deficiencies in such an approach.

176 Unger et al, above note 174, at 218.

177 Grabosky, above note 76, at 364.

178 La Vigne, above n 22, p 211.

179 P van Duyne et al ‘A “risky” risk approach: proportionality in ML/TF regulation’ in King et al, above n 46. For criticism of the 2018 UK MER, see T Keatinge, ‘Mission creep and a credibility crisis: Is the Financial Action Task Force still fit for purpose?’ Sussex Centre for the Study of Corruption blog (1 February 2019).

180 See generally Alldridge, above n 23.

181 Vettori, BEvaluating anti-money laundering policies: where are we?’ in Unger, B and van der Linde, D (eds) Research Handbook on Money Laundering (Edward Elgar, 2013) p 474.

182 Grabosky, above note 76, at 364.

183 Conklin, above note 6; Charney, above note 6; see also the areas of art crime addressed in Hufnagel, S and Chappell, D (eds) The Palgrave Handbook on Art Crime (Palgrave, 2019).

184 Such as the UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property 1970.

185 Charney, above note 32.

We would like to thank Peter Alldridge, Janet Ulph and Mark Walters for their helpful comments on a previous draft.

Keywords

Anti-money laundering regulation and the art market

  • Saskia Hufnagel (a1) and Colin King (a2)

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