This is getting ridiculous. The Wall Street Journal’s Risk & Compliance Journal trots out Sharon Cohen Levin, who is now a partner at WilmerHale, to speak darkly about the threat of art and money laundering because she used to be the head of the US Attorney’s office money laundering and asset forfeiture unit.
In that role, you would think that Ms. Cohen Levin would have more examples of how art has been used for money laundering than the dead horse of Jean-Michel Basquiat’s Hannibal which was seized when Brazilian banker Edemar Cid Ferriera shipped it to the US claiming it was worth $100.
Based on this one case, the Journal takes an unproven conclusion as its premise:
Part of the reason art has become an attractive vehicle for money laundering is that other channels have been narrowed by tighter regulation, tougher law-enforcement efforts and stronger compliance, experts say.
“The more tightly the international financial sector is regulated, the more funds flow into the art world,” said Fausto Martin De Sanctis, a Brazilian judge who wrote a book in 2013 called “Money Laundering Through Art.”
Judge de Sanctis may have more examples to fill his book. The Journal doesn’t cite them. Instead they go to the Jho Low case, which we’ve pointed out is problematic to use as an example of money laundering.
Meanwhile, the full story of Cid Ferreira’s Hannibal illustrates just why it is unlikely that a great deal of money laundering is accomplished using art.
After the US seized the painting and returned it to the Brazilian government, the work as consigned to Sotheby’s. The first time it was offered at auction, it failed to find a buyer. Months later, it was auctioned in London and sold for more than expected.
Now imagine Cid Ferreira had not been caught. He needs money. He has a Basquiat stashed in a New York storage facility. Is he going to wait six months for Sotheby’s to hold an auction? It doesn’t sell. He has to wait another year before they offer it in London. He might be able to get money loaned against the work, but then he’ll be subject to AML protocols.
As the Journal’s story shows, the auction houses are part of the “international financial sector” that is tightening its controls. So Cid Ferreira’s best option would be to see if he can sell it privately. If the US Attorney’s office had thought it was a good use of their time and resources, they would have subpoenaed dealers’ records to see how many other high value paintings were connected to possible money laundering. New York’s Attorney General did just that to make several high profile cases involving Gagosian Gallery, Aby Rosen, Victoria Gelfand and Michael Shvo.
Prosecutors live to make cases that get press. Ms. Cohen Levin ought to have more than Edemar Cid Ferreira to show for her campaign against money laundering through art if she really believes it is a significant problem.