Mon, Feb 27, 2017 - Page 8 News List

Has the art market become an unwitting partner in crime?

Experts say anonymity is not only quaint but also reckless when art is traded like a commodity and increasingly suspected in money laundering

By GRAHAM BOWLEY and WILLIAM K. RASHBAUM  /  NY TIMES NEWS SERVICE

But the real owner was a trust controlled by Dmitry Rybolovlev, a Russian billionaire who had been using Bouvier as his art adviser. Rybolovlev agrees he had authorized the sale but says Sotheby’s should have checked who the real owner was before turning over the money.

“It is extraordinary that such a rare and high-value work could have been sold at auction without the auction house knowing the identity of the true owner,” Tetiana Bersheda, a lawyer for the Rybolovlev family office, said in a statement.

Actually, experts said, it is not that rare.

“Do auction houses know who the principal is?” asked Amelia Brankov, a lawyer who specializes in the art market. “I don’t think they always do.”

LEGAL WOES

Rybolovlev, who himself has used offshore shell companies that obscured his ownership of art, is now engaged in a sprawling legal battle in several courts with Bouvier, over matters that include the money from the Sotheby’s sale.

(Bouvier, who is also a leader in the international art storage business, said he has not turned over the money because, he said, Rybolovlev had told him to keep it to partially settle a debt from another transaction.)

Sotheby’s declined to comment on whether it believed Bouvier to be the owner. But it says it knew him very well as a customer and that he had represented to them that he had the legal right to sell the property. As to its policy of learning the identity of ultimate owners, Sotheby’s said it takes a risk-based approach — sometimes requiring disclosure depending on the specific facts and circumstances of each situation.

Auction houses live off the fees they earn for brokering sales, so it makes sense that auction houses would both value and trust customers who bring in a lot of business like Bouvier, who bought hundreds of millions of dollars of art at sales.

Other valuable customers for the auction houses and dealers were Malaysian businessmen who, beginning in 2013, bought more than US$200 million in art, usually operating as the Tanore Finance Corp, including eight works at Christie’s. The US government contends in a civil complaint that the art was purchased with money that had been embezzled from Malaysian government accounts and that the ultimate beneficiary was Jho Low, one of the businessmen. Low, who has denied any wrongdoing, has not been criminally charged.

Art was far from the only asset into which Low transferred funds, and the art world has pointed out that he passed muster with other entities such as banks and law firms before federal officials here last year identified him in its complaint.

Christie’s and Sotheby’s said they each have long had rigorous programs to curb money laundering and that until the investigation became public, there had been no reason to suspect anything was amiss with Low.

“Before extending a loan to Low, we conducted extensive due diligence in accordance with our Anti Money-Laundering and Know Your Client procedures,” Sotheby’s said in a statement.

Artworks are particularly suitable vehicles for money launderers, experts said, because they transfer easily and store quietly, perhaps in a basement or in an offshore tax haven. Unlike the real estate market, where lightning escalations in price are rare, values in art can be suddenly boosted by intangibles such as fads and personal taste.

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