One of the problems with the coverage of potential money-laundering in the art market is that so few involved in policing the art market understand the basics of anti-money laundering protocols. A good example lies deep in Artsy’s otherwise quite good coverage of the Responsible Art Market Initiative’s recently released guidelines.

Artsy thinks it has a gotcha moment when it raises the case of Jho Low and the still-unfolding 1MDB scandal facing the prime minister of Malaysia. What Artsy doesn’t seem to understand is that Jho Low would not have triggered a red flag in any transaction—which is probably why he was used as the front man for the purchases—simply because his family has a great deal of its own wealth.

AML and Know Your Customer (KYC) protocols look for beneficial owners who are either on watch lists, including politically exposed persons, or cannot demonstrate a lawful source of their funds.

Jho Low’s father, Larry Hock Peng Low, was a visible figure in Asian finance in the 1990s. The generation before that, the family made a fortune in iron ore mining and other businesses. This century, Jho Low was involved in a Kuala Lumpur real estate project in 2006 that was sold in 2008.

How and why Jho Low became involved in Najib Razak’s 1MDB machinations isn’t known beyond the fact that Low was a close friend of the prime minister’s step-son Riza Aziz who has also been implicated in the 1MDB investigation.

The point here is that Jho Low was prima facie someone who could pass through a strict AML program. Nonetheless, here’s Artsy suggesting the Responsible Art Market Initiative’s members didn’t follow their own best practices:

one of RAM’s founding members, Christie’s, sold works to the Malaysian collector Jho Low, a businessman who, as The Wall Street Journal reported, U.S. prosecutors have accused of using funds stolen from the country’s investment fund 1MDB to buy paintings worth more than $100 million, raising the question of how the auction house missed the “red flags” described in the guidelines.

Not to beat this point to death but the auction house didn’t miss red flags because nothing was known about the 1MDB abuses at the time he bought works from the auction house. To Christie’s, he would appear to be the wealthy real estate developing son of a wealthy Malaysian finance executive, grandson of a Malaysian industrialist. These are the sort of persons and auction house caters to. Mr. Low would have had plenty of private bankers to vouch for him.

Artsy goes further:

A firm linked to Thomas Seydoux, the founder of Seydoux & Associés Fine Art, was also described as “lining up to sell him pieces.” And several Swiss financial institutions, as well as auction house Sotheby’s, were also said to have transacted with Low.

Again, we can’t say that the firms mentioned here would have followed the proper KYC procedures. But there’s a very good chance, when the firms were selling art to Low, that he would have passed scrutiny.

Finally, Artsy is misreading the stories about 1MDB. There are four investigations taking place right now. Swiss, Singapore and US officials are all combing through the 1MDB dealings trying to determine what became of the money.

As yet, there has been no solid explanation of what Low’s intentions were in buying the works of art (or the many luxury real estate properties.) If money-laundering was the goal, they did a very poor job of it. Low seemed to go out of his way to attract attention to himself. More to the point, at this moment Low is accused of helping mis-appropriate funds. Buying expensive art and luxury real estate with money that is not your own is not yet money laundering. One has to sell the assets acquired with that money and present the funds from those transactions as legitimate proceeds.

Believe it or not, Jho Low had not gotten to the second part of the act yet.

The point of all of this is not to excuse anyone’s behavior but to point out that the assumptions about the art market and money-laundering often assume the worst without first having made an effort to understand a very complex situation.

Major Art Market Players Band Together to Shake Industry’s “Shady” Image (Artsy)