Analysis & Opinions - Belfer Center for Science and International Affairs, Harvard Kennedy School

The Art Market’s Next Inflection Point

| Feb. 08, 2021

In January 2021, lawmakers pushed through long awaited legislation to strengthen the existing Bank Secrecy Act (BSA) of 1970. Though there had been prior updates to the terms that regulated the work of financial institutions and limited the ability of illicit actors to launder money through the United States, little had been done to restrict another prominent avenue of moving illegal cash – transactions in artwork.

According to the Antiquities Coalition, “the statute (had) already appli(ed) to sellers of precious metals, stones, jewels, automobiles, planes, and boats, as well as to casinos, real estate professionals, travel agencies, and pawn shops.” As frankly stated by US Senator Tom Carper, “It is alarming and completely unacceptable that common sense regulations designed to prevent money laundering and the financing of terrorism do not apply if someone is purchasing a multi-million-dollar piece of art.” However, years of shadowy money moved through shell entities and auction houses by sanctioned individuals from Russia to Indonesia – sparked by a U.S. Senate investigation in the summer of 2020 – finally seems to have crossed the line. 

Former U.S. Treasury Deputy Assistant Secretary for intelligence and analysis Matt Leavitt has made note of the Senate report, saying that “the art industry was the ‘largest, legal unregulated industry’ in the United States, lagging behind our European counterparts and undermining the international community’s ability to effectively address money laundering through art and antiquities. This (legislation) is a strong step in the right direction.”

In my prior piece, “A Brush of Oversight Coming to the Art World,” I discussed the reasons why it has taken the regulatory bodies of the world so long to crack down on this method of storing illegal wealth. Due to its traditional culture of anonymity and opaque valuations process, it has been incredibly difficult to impose effective legislation to limit illicit transactions. Additional clauses in the legislation of the BSA are being welcomed by auction houses, who are responsible for a vast amount of formalized art trading. Art advisors from the major auction houses Sotheby’s, Christies, and Philips all welcome these important developments. 

Jean-Paul Engelen, Deputy Chairman and Worldwide Co-Head of 20th Century & Contemporary Art at Phillips noted, “At Phillips, we take our responsibilities in this area very seriously and have long had in place anti-money laundering rules and procedures which mirror those anticipated in the legislation. The important thing is to ensure that effective compliance is achieved without dampening the spontaneity of buying and selling art. So we are hoping for a measured risk-based approach by the authorities which protects but does not involve an unnecessary administrative burden. Measured, balanced and clear rules and regulations are a good thing as they will provide more oxygen for a healthy and thriving art market.” One contemporary art advisor told me that “preserving and protecting the reputation of the art market is of paramount importance and concern for our major clients and museums we work with globally.” 

Dima Abdul Kader, the Co-founder of Emergeast, an online art gallery promoting and selling artworks from the Middle East’s rising artists noted that, “The future of the art market will indeed benefit from this long overdue step by regulatory frameworks. As well as facilitating the roles of galleries, cultural institutions and auction houses in the meaningful exchanges that define the nature of this asset class—the move protects the sanctity of artworks and artifacts by curbing subsequent inflated market valuations in the wrong hands.” Though some art traders may be inconvenienced by additional due diligence steps taken to verify beneficial ownership and valuations of art pieces, the key players in the process are beginning to commit to lasting change. 

Philips Deputy Chairman Engelen noted that “it is also important to bear in mind that not all categories of art face the same risks. The market for contemporary art is very different from antiquities. In particular it has a thriving primary and open secondary market which means that provenance is usually well recorded. There are also clear pricing reference points and expertise available as all three major auction houses are selling contemporary art.”

Nicole Jacoby, Head of Compliance at Christie’s Americas, said that “Christie’s welcomes the opportunity to work with U.S. regulators on appropriate and enforceable AML guidelines for all participants in the art market. It is important to note that the international auction market is already governed by strict legal frameworks. Christie’s maintains a rigorous global AML program that aligns with the more stringent EU AML regulations and is designed to prevent exploitation of the legitimate marketplace by those involved in criminal activities.”

2021 Legislation – The Fine Print

The US Senate report detailing the extent of money laundering through art in the summer of 2020 highlighted the industry as the “largest, legal, unregulated industry” in the United States. So, what steps do the new additions to the BSA actually take to change this? In terms of official action and initiatives, very little. Though it certainly draws awareness to the problem and holds the art market under the same standards as the other industries and entities listed above, it does not create any new bodies to enforce these regulatory measures. As a result, what we are left with is a step in the right direction, however there is much more ground to cover. 

Diana Wierbicki, Partner and Global Head of Art Law at Withersworldwide cautioned that “We can’t forget that despite the high dollar amounts, many of the galleries and dealers in the art market are operating small businesses.  They do not have the same compliance and technological resources that the auction houses do, and it will take time to put protocols in place. While I believe many in the industry will welcome more uniformity in due diligence and compliance measures, the additional business expense of putting protocols in place will likely not be welcomed during a period when the art industry is undergoing furloughs and layoffs.” 

The Antiquities Coalition, which has taken a strong stance against criminals exploiting the American art market, has made several strong recommendations to improve existing regulation and strengthen the new declaration in the BSA. Among the most relevant are:

  • The White House to assign a Senior Director at the National Security Council to drive U.S. policy in the fight against transnational crimes via cultural property. 
  • The Financial Crimes Enforcement Network to conduct extensive outreach to the art world and financial sector; and the Internal Revenue Service to require proof of legal title and known ownership history in support of tax deductions for art and antiquities. 
  • The State Department to combat crimes via art and antiquities through the interagency Cultural Heritage Coordinating Committee and encourage foreign nations to take their own measures. 
  • Art industry associations to develop and implement training programs and professional standards; to consider establishing a collaborative consortium to pool data and technology or a group like the Jewelers Vigilance Committee; and to explore adopting blockchain technology. 

Specific highlights in this document focus on long term education processes and the appointment of high-level officials that can have substantial, lasting impact on corrupt wealth moving through art.

Chip Poncy, Former Senior U.S. Treasury Official on Counter-Terrorist Financing and current global co-head of the K2 Integrity Financial Crimes Risk Management practice, noted that “Congressional action extending coverage of the Bank Secrecy Act to dealers in antiquities and requiring an assessment of the broader art market is a welcome step both in protecting the integrity of the global art market from illicit actors and in assisting financial institutions manage the illicit financing risks associated with this important sector of the global economy. Industry now has an important opportunity to inform Treasury’s implementation of these requirements through the rulemaking process and broader engagement with U.S. counter-illicit financing authorities.”

Jennifer Fowler, Former U.S. Treasury Deputy Assistant Secretary for Terrorist Financing and Financial Crimes, and Former Vice President of the Financial Action Task Force (FATF) who is currently a Director at the Brunswick Group, stressed that “The next year is critical in determining what obligations antiquities dealers and the broader art world will face in the fight against financial crime. Now is the time for the sector to help policymakers understand those risks and play a cooperative role in shaping how to address them.” 


In the next ten years, we are facing a great inflection point in the art market, much like the one real estate markets and banks reacted to in the earlier part of the century. The United States Government has been attentive to the methods terrorists and corrupt officials use to hide and transfer their money. They have continued to shut down vital pathways for this lifeline of funds and a relative few remain. As author of How We Win: How Cutting-Edge Entrepreneurs, Political Visionaries, Enlightened Business Leaders, and Social Media Mavens, Farah Pandith, comments, “Thus, this new regulation on the art market nearly 20 years since 9/11 is welcome and very important. It not only destroys the delivery system of financial assets, but also puts others on notice.” However, as she goes on to say, “Stolen antiquities will continue if buyers exist – naming, shaming, and eliminating access is essential.” 

 The U.S. Treasury has some important work ahead that will determine what the world looks like for antiquities dealers and the art world from an Anti-Money Laundering/Combating the Financing of Terrorism AML/CFT perspective.  The Treasury has to issue regulations in the next year for antiquities and there is a lot to be determined in terms of scope of the problem. The Treasury will likely have to conduct a study/risk assessment to look at the art sector more closely over the next year. As such, without the institution of concrete actions and regulatory bodies following up on this legislation, the art loophole will continue to exist. Cooperation between the private and public sectors will be necessary if we want to continue squeezing the stream of illicit funds that travel across the globe. Just as gold and cash are stores of wealth, we need to remember that art has a similar function – when it comes to money laundering and terrorism, it must be treated as such.

Statements and views expressed in this commentary are solely those of the author and do not imply endorsement by Harvard University, Harvard Kennedy School, or the Belfer Center for Science and International Affairs.

Michael B. Greenwald is Director at Tiedemann Advisors. He is a fellow at Harvard Kennedy School’s Belfer Center for Science and International Affairs and a Senior Fellow at the Atlantic Council Geoeconomics Center. From 2015-2017, Greenwald served as the first US Treasury attaché to Qatar and Kuwait. 

This article is supported by research advisor Logan Weber. Weber is a graduate of Harvard University and graduate student at Texas A&M University studying International Affairs.

For more information on this publication: Belfer Communications Office
For Academic Citation: Greenwald, Michael.“The Art Market’s Next Inflection Point.” Belfer Center for Science and International Affairs, Harvard Kennedy School, February 8, 2021.

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