by Sharon Cohen Levin, Anthony Lewis, Eric Kadel, Jennifer Sutton, Claudia Kassner, Samantha Rosenthal, and Sheeva Nesva
On February 4, 2022, the U.S. Department of the Treasury (“Treasury”) published a study identifying art market participants and sectors of the U.S. high-value art market that may present money laundering and terrorist finance risks to the U.S. financial system (the “Study”). The Study also examines efforts that U.S. government agencies, regulators, and market participants might explore to further mitigate these risks. The Study found that the high-value art market is susceptible to abuse by illicit financial actors due to, among other characteristics, its historical culture of anonymity, the transferability of high-value items in the art trade, and the inconsistency in due diligence practices among participants. The Study further cautions that the emerging digital art market embodies all of these qualities. Coupled with the untraditional structure of this submarket’s transactions, the risk of money laundering is heightened in this emerging submarket. Treasury’s recommendations include enhanced private sector information sharing, widespread voluntary anti-money laundering/countering the financing of terrorism (“AML/CFT”) compliance programs, and consideration of international harmonization of regulation.