Looting and Trafficking of Cultural Artifacts and Art Enables Terrorism (and many other crimes)
In February 2015, the FATF pointed out:
“Reports on the smuggling of cultural artefacts by ISIL are limited, given that they are sold on the black market. ISIL’s ability to earn revenue from the illicit sale of antiquities is contingent upon the presence of antiquities within territory where ISIL operates, knowledge of their existence, and ISIL’s ability to recognize materials as artefacts and develop some estimation of their value.
Although it might be impossible to show a direct link between the ISIL and the sale of a specific artefact, ISIL makes money in two ways from antiquities, both through selling looted artefacts and taxing traffickers moving items through ISIL-held territory. However, the total amount that ISIL is earning is difficult to estimate, particularly as the activity is taking place across Syria, in the midst of the conflict, not just in ISIL-held areas.
National Geographic reports that according to flash drives seized by Iraqi security forces, ISIL and other illicit groups operating in Syria could have earned as much as tens of millions of USD to date from antiquities stolen from Syria. ISIL also occupies more than 4500 archaeological sites, some of them UNESCO World Heritage sites. According to the same report, 90 percent of the country’s cultural artefacts are located in war torn areas, which has allowed for large scale looting. “
(Reference: FATF (2015), Financing of the terrorist organisation Islamic State in Iraq and the Levant (ISIL), FATF, www.fatf-gafi.org/topics/methodsandtrends/documents/financing-of-terrorist-organisation-isil.html)
That same year, the FBI added a warning with,
“The Bureau is asking U.S. art and antiquities market leaders to spread the word that preventing illegally obtained artifacts from reaching the market helps stem the transfer of funds to terrorists.”
As we move to the middle of 2019, it is important to note that we are still challenged with how to address the continued thefts of art and cultural artifacts around the world. The fact that these historical items and tremendous works of art are being coopted to commit a wide range of crimes, including terrorism, should be a call for the AML community to work towards improving methods to detect and report suspicious activity related to these illegal acts. With that in mind, let us focus on a recent panel discussion that gave us some excellent direction on this complicated area.
An Introduction to Art and Antiquity Theft for the AML Community
I had the honor of moderating a lively panel discussion at the ACAMS 24th Annual International AML and Financial Crime Conference in early April. The session’s experts ranged from the FBI, the US Attorney’s office from the Southern District of NY, the financial community, and the internationally known Antiquities Coalition. The perspectives were unique, but the goals were the same—create and enhance global awareness.
We learned that art is vulnerable to a plethora of financial crimes like insurance fraud, tax evasion, money laundering, and of course, terrorist financing. Some portions of the art market are training on detection of illegal activity, but much more needs to be done, including amending the US Bank Secrecy Act (BSA) to add regulatory obligations to art dealers. The law enforcement community had added that collaboration with foreign partners and the private sector are key, while adding several potential warning signs or “red flags.”:
- Use of third party entities/shell companies
- Online auction houses: secondary sellers, linked entities
- Vague or intentionally misleading provenance information
These signs were follow by a basic, but useful piece of advice: don’t assume (if you are filing a suspicious activity report (SAR) ) that law enforcement is already aware of a particular scheme.
An extremely riveting part of the panel conversation came from Citigroup, while discussing their proactive unit dedicated to investigating these issues.
(Note: No financial institution is required to have training on art and antiquity theft but they do file SARs when appropriate.)
The ability to investigate is predicated on understanding why art is conducive to financial crime. We learned that the high value, strong demand, and relative anonymity are key characteristics that can encourage art galleries to co-mingle illegitimate activity with legal sales. Several case studies were discussed and emphasized to watch for art being sold though counterparties when issues are identified from negative news.
The common thread on how to manage all of these potential risks is training and increased awareness to the first and second lines of defense at financial institutions. The awareness should not end there; instead, institutions should be looking to reach out to their art customers (especially the small and medium size art markets) and offer direction and practical guidance on detecting illegal actions.
The short session resonated well with an overwhelming number of representatives from the private and public sector in attendance, as many offered to volunteer for the Financial Crimes Task Force (created to address this challenge) at the session’s conclusion. The panel concluded with a number of takeaways to improve due diligence, including responding to the question, “are the volumes consistent with the art market/auction sales?”
Conclusion and Next Steps
We hope that this session is only the beginning of a series of steps to both educate and learn from the art community on how there can be partnership on stopping the flow of illicit funds from the theft of cultural artifacts that enable terrorism and other financial crimes. Regulation alone won’t solve the problem. We need commitment from all stakeholders.
Here’s to open dialogue on transparency, awareness and sincere partnership.
*“Don’t Come Around Here No More” was a 1985 hit from Tom Petty and the Heartbreakers (and co-written by Dave Stewart of the Eurythmics) from the Southern Accents album.