The Office of Foreign Assets Control of the US Department of the Treasury has issued an advisory concerning the sanctions risks inherent in some transactions involving fine art worth more than $100,000. The advisory, directed especially to art galleries, museums, private art collectors, auction companies, agents, and brokers, describes the aspects of the global art market that make it susceptible to sanctions violations, including:
- The anonymity and confidentiality that may shield both buyer and seller in high-value transactions;
- The use of shell companies and intermediaries to purchase, sell or hold artworks, and to make and receive payments;
- The mobility and concealability of art, and;
- Subjectivity in the assessment and valuation of works of art.
Persons subject to sanctions have been known to exploit these vulnerabilities. The advisory cites as an example the case of Nazem Said Ahmed, a diamond dealer and art collector designated in December 2019 pursuant to Executive Order 13224 for providing material support to Hizballah. According to OFAC, Ahmad used his art collection, worth tens of millions of dollars, to store some of his personal funds in an effort to mitigate the effects of sanctions, and he used his Beirut art gallery to launder money.
Another example offered in the advisory is the case of Arkady and Boris Rotenberg, Russian oligarchs designated by OFAC in March 2014 pursuant to Executive Order 13661, whose shell companies are reported to be involved in the purchase of valuable works of art. Likewise, the Mansudae Art Studio in Pyongyang, designated by the United Nations Security Council in August 2017, is alleged to have produced tens of millions of dollars for North Korea through the sale of art to galleries in Beijing and Hong Kong.
Through the Advisory, OFAC encourages all persons potentially involved in high value art transactions to implement a risk-based compliance program in order to mitigate the exposure to sanctions-related violations – including by the performance of risk-based due diligence.
The Advisory also clarifies that the so-called “Berman Amendment” to the International Emergency Economic Powers Act and the Trading with the Enemy Act should not be deemed to protect players in the luxury art market from sanctions liability: OFAC does not interpret the Berman Amendment, which generally exempts imports and exports of artwork, as allowing blocked persons or those acting on their behalf to evade sanctions by exchanging works of art for cash, cryptocurrency, or other financial assets.