Blood Antiquities: Financial crime risks arising from the art and antiquity industry

Introduction: The current problem

The illicit trade of art and artefacts dates back centuries and has occurred across the world. Modern day conflicts such as those in Syria, Iraq and Ukraine have increased the scale of destruction of cultural property and, as a result, their illicit trade. Criminal groups are generating income from engaging directly or indirectly in the smuggling of cultural heritage items, and engaging in money laundering to help further their objectives.¹

Research also shows that markets are emerging in Iran, Turkey, the Gulf States and their neighbours for art and artefacts from Syria and Iraq.² The Russia-Ukraine conflict led to significant damage to Ukrainian cultural heritage sites. Recent reports suggest that dozens of Russian specialists and aides loaded two trucks with approximately 10,000 artworks without proper packing to be delivered to Russian controlled museums in Crimea.³

These activities have been facilitated by the internet providing enhanced global communication and the ability to move objects quickly, leading to stolen objects from the Middle East appearing in Western markets.⁴

Australia’s obligations under international law

As the International Criminal Court has acknowledged, “crimes against or affecting cultural heritage have an impact on our shared sense of humanity and the daily lives of local populations.”⁵ This is why international law has taken a strong human rights approach to condemning and criminalising such conduct.

1954 Hague Convention for the Protection of Cultural Property in the Event of Armed Conflict

Australia owes a number of obligations to the international community both in relation to the protection and transport of cultural property. Under the 1954 Hague Convention cultural property includes: “movable or immovable property of great importance to the cultural heritage of every people, such as monuments of architecture, art or history, whether religious or secular; archaeological sites; groups of buildings which, as a whole, are of historical or artistic interest; works of art; manuscripts, books and other objects of artistic, historical or archaeological interest; as well as scientific collections and important collections of books or archives or of reproductions of the property defined above.”⁶

This Convention affords cultural property special protection in times of conflict, requiring parties to protect and respect such property in times of war,⁷ and also undertaking preparation in peacetime against the foreseeable effects of armed conflict.⁸

1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property

Significantly, Australia is a signatory to the 1970 UNESCO Convention which requires state parties to make a number of commitments to advance the protection of cultural property. Amongst other things, this includes:

• Setting up national services for the protection of cultural heritage;
• Taking necessary measures to prevent museums and other institutions from acquiring illegally exported cultural property;
• Prohibiting the import of such property from another country’s museums or similar institutions; and
• Taking appropriate steps to recover and return any such cultural property.⁹

With the increasing level of illicit trade from the conflicts in Syria and Iraq, the UN Security Council urged States to develop ‘broad law enforcement and judicial cooperation in preventing and combating all forms and aspects of trafficking in cultural property and related offences.’¹⁰

Australia previously sought to implement some of these obligations domestically through the Protection of Moveable Cultural Heritage Act 1986 (Cth) which seeks to control the export and import of moveable cultural heritage from both Australia and foreign countries. Objects of ‘ethnological, archaeological, historical, literary, scientific or technological’ significance are covered, as well as protected objects from foreign countries.¹¹ Art industry participants should turn their minds to their obligations under this Act when importing and exporting objects, as failing to do so could leave them facing criminal penalties.¹²

Trafficking in cultural property in Australia

Often perceived as the largest unregulated market in the world, the art and antiquities market remains an attractive way for money launders and those financing terrorism to conceal the origin of their funds and move ill-gotten gains. Items lacking original records about their provenance make it difficult for enforcement officials or well-intentioned buyers to identify illegally acquired items.¹³ The value of certain items means demand exceeds legal supply, which can help facilitate the concealment of large sums of money by purchasing art and antiquities.¹⁴ Further, the industry offers participants anonymity through private sales and cash payments. This may call for further regulation under the AML/CTF Act.¹⁵

The UN Security Council has recognised the clear “connection between terrorism and transnational organised crime, including illicit trafficking in drugs, arms, and persons, as well as money-laundering, and the trafficking in cultural property”,¹⁶ leading some museums to leave the antiquities market. After returning more than a dozen stolen sculptures acquired for over $8.7 million, the National Gallery of Australia removed itself from the antiquities market entirely, noting:

It’s very, very rare for objects to have the level of provenance that we would need to be able to ethically acquire them…We’ve judged that the antiquities market is just too risky and ethically fraught, and would prefer instead to explore new and creative ways of representing diverse cultures by working collaboratively with source countries and communities.¹⁷

Further, Australia’s implementation of international sanctions against Russia through the Charter of the United Nations Act 1945 (Cth), Autonomous Sanctions Act 2011 (Cth) and Autonomous Sanctions Regulations 2011 (Cth), provides another layer of complexity for art industry participants. Currently the sale or supply of luxury goods to parties in Russia is sanctioned as export sanctioned goods. This includes any “works of art, collectors’ pieces and antiques.”¹⁸ These sanctions apply to both Australian citizens and companies, whether engaging in conduct in Australia or internationally, as well as conduct engaged in by any person in Australia.¹⁹

Steps to mitigate risk

Art industry participants need to closely monitor international sanctions to ensure they are not facilitating the illicit trade or acquisition of cultural property. We suggest art industry participants take the following steps to limit their risk exposure:

1. Regularly review Australia’s sanctions in relation to countries such as Russia and Syria, as well as other countries where Australia imposes sanctions;
2. Screen third parties/counterparties to determine if they are on Australia’s Department of Foreign Affairs and Trade consolidated list of sanctioned persons and entities;
3. Identify any current contracts or activities which relate to Russia, Crimea, Sevastopol Donetsk or Luhansk, as well as other areas on Australia’s sanctions list, and reviewing:
   1. all contracts for existing sanctions clauses to identify any risks and consider including sanctions clauses in new contracts; and
   2. existing and future contracts to ensure cancellation and force majeure provisions provide the business with adequate protection.
4. Develop training programs and guidance for employees with respect to international sanctions compliance;
5. Develop and regularly review policies and procedures around the acquisition of cultural property and the responsibilities of senior management and all employees in relation to compliance with Australia’s criminal laws (such as anti-money laundering);
6. Raise awareness both internally and externally regarding good practices and potential trafficking and facilitation of illicit activity in the industry;
7. Train their employees to identify red flags such as pricing anomalies in how much an artwork or antiquity is sold for compared to past prices, the use of large amounts of cash to purchase an item and lack of knowledge from the seller regarding an item’s provenance and acquisition;
8. Using available databases in both Australia and other jurisdictions such as Interpol's Stolen Works of Art database to identify stolen objects; and  
9. Develop strong procurement, due diligence measures and record keeping procedures, whether these are related to supply chain management or ESG risk.