The Office of Foreign Assets Control has issued an Advisory calling for due diligence on the part of dealers, museums, and other high-end market participants to comply with U.S. sanctions regulations on blocked persons.
When the Office of Foreign Assets Control (OFAC) publishes an Advisory that warns a particular business sector to maintain compliance, that typically means the U.S. Treasury Department’s enforcement agency is serious about targeting an identified national security risk. On Friday, OFAC broadcast an alert to “art galleries, museums, private art collectors, auction companies, agents, brokers, and other participants in the art market” when it issued its
Advisory and Guidance on Potential Sanctions Risks Arising from Dealings in High-Value Artwork.The October 30 Advisory, while not legally binding, strongly indicates OFAC’s enforcement posture and its likely response if an art market participant were to commit a sanctions violation. The issuance of the advisory suggests that the agency will take four factors into account when probing an offense, having given notice that
- there are “sanctions risks arising from dealings in high-value artwork associated with [blocked] persons … including persons on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List),
- “[h]igh-value artwork transactions may play a role in blocked persons accessing the U.S. market and financial system in violation of OFAC regulations,”
- “maintaining a risk-based compliance program to mitigate such risks” that applies “risk-based due diligence” is vital, and
- “the “Berman Amendment” to the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) does not categorically exempt all dealings in artwork from OFAC regulation and enforcement. ” In other words, just because the IEEPA safeguards Americans’ rights to exchange “information or informational materials,” including “artworks” under 50 U.S.C. § 1702(b)(3), does not mean that the transfer of art is excluded from sanctions enforcement. “[T]o the extent the artwork functions primarily as an investment asset or medium of exchange,” OFAC will enforce the sanctions law, according to the advisory.
In sum, OFAC’s Advisory recommends that a “U.S. person considering a transaction with a blocked person involving high-value artwork [$100,000+] should seek guidance or a license from OFAC.”
[s]hell companies and intermediaries are also frequently used to purchase, hold, or sell such artworks, as well as to remit and receive payments. These avenues for maintaining anonymity allow blocked persons and other illicit actors to obscure their true identities from other market participants, and help to hide prohibited conduct from law enforcement and regulators. The mobility, concealability, and subjective value of artwork further exacerbate its vulnerability to sanctions evasion.
Before OFAC issued its advisory this week, both the FBI’s Art Crime Team (ACT) and the Treasury Department already began focusing their sights on AML, sanctions, and the art market. “Today, we’re more concerned about money laundering in the art market,” ACT team manager Tim Carpenter plainly explained to the security organization, ASIS, in May. Treasury Deputy Secretary Justin Muzinich in December 2019, meanwhile, cautioned that “[a]rt and luxury goods dealers should be on alert to the schemes of money launderers who hide personal funds in high-value assets in an attempt to mitigate the effects of U.S. sanctions.”
©2010-2022 Cultural Heritage Lawyer Rick St. Hilaire. Content discussing cultural heritage law, art law, looted antiquities, stolen artifacts, and museum risk management that is general information only, not legal advice.
