AHRC WorkshopArt, Crime and Criminals Art Theft and VandalismQueen Mary University of London21 June 2016

Professor Janet UlphUniversity of Leicester

Current issues

Cultural Property (Armed Conflict) Bill

Extending the net in relation to high value dealers

Proposed changes to the regulated sector in relation to suspicious activity reports

Art Crime: dealers and others

Crime↓

Dealer↓

Dealer↓

Dealer

Challenges: Secrecy and Confidentiality

Cultural Property (Armed Conflict) Bill

House of Lords: Second reading on 6 June. Baroness Neville-Rolfe:“The Bill will fit into an existing legal framework to tackle the illicit trade in cultural property. The Dealing in Cultural Objects (Offences) Act 2003 and the Theft Act 1968, alongside the Syria and Iraq sanctions, already enable the UK to take action where authorities suspect that individuals might be engaged in illicit trade.”

Existing legal framework for art crime

Theft Act 1968 – dishonestyDealing in Cultural Objects (Offences) Act 2003 – dishonestyFraud Act 2006 – dishonesty

Proceeds of Crime Act 2002: knows or suspects Export Control (Syria Sanctions) Order 2014: reasonable grounds to suspectCultural Property (Armed Conflict) Bill: knowing or having reason to suspect

Iraq (United Nations) Sanctions Order? A prosecution will fail if the defendant can prove that, “he did not know and had no reason to suppose that the item in question was illegally removed Iraqi cultural property”

• Dealing with a cultural object which is “tainted” (illegally removed from a monument, site or wreck)

• Knowing or believing that it is “tainted”

• Acting dishonestly

Written question - HL2223 September 2015: no prosecutions up till that date

Conviction in May 2016: Hereford Crown Court. Christopher Cooper: sentenced to three years in prison on seven charges of theft; three years for dealing in tainted cultural objects. Also sentenced to eight months on two counts of fraud (Institute of Art and Law blog)

Dealing in Cultural Objects (Offences) Act 2003

Cultural Property (Armed Conflict) Bill –section 17

(1) It is an offence for a person to deal in unlawfully exported cultural property, knowing or having reason to suspect that it has been unlawfully exported.(3) … deals … if … the person—(a) acquires or disposes of it in the UK or imports it into, orexports it from, the UK,(b) agrees with another …(c) makes arrangements …(4) “Acquires” means buys, hires, borrows or accepts.(5) “Disposes of” means sells, lets on hire, lends or gives.

Cultural Property (Armed Conflict) Bill –Section 17

Limited in scope?

Not retrospective

Only applies to cultural property that has been unlawfully exported from an occupied territory after 1956

looting by the Taliban in Afghanistan, or by ISIS in Iraq and Syria, are not covered by the Bill on the grounds that the Taliban and ISIS are not occupying states

UN Resolution 2199

Unanimously adopted by the UN Security Council on 12 February 2015

Called upon states to prevent the trade in items of cultural, scientific and religious importance which had been illegally removed from Syria and Iraq during periods of conflict.

Expressed concern that the proceeds of sale of these items are used to finance terrorism.

Cultural Property (Armed Conflict) Bill –Committee stage on 28 June 2016

Proposed amendment?

Add at the end of the section:

“( ) Cultural property for sale originating from war zones or area of conflict shall require those responsible for the sale to assume that an item has been unlawfully exported and take all necessary steps accordingly.”

Cultural Property (Armed Conflict) Bill –Committee stage on 28 June 2016

Definition of cultural property

Section 2: In this Act “cultural property” has the meaning given in Article 1 of the Convention

Proposed amendment?

“and, consistent with this definition, “cultural property”shall be interpreted in the widest sense in order to reflect the understanding of the modern age.”

Cultural Property (Armed Conflict) Bill –Committee stage on 28 June 2016. Proposed amendment?

“Unlawfully exported cultural property: Duty to provide information(1) Auctioneers and traders within the United Kingdom have a duty to provide .. potential buyers of items of cultural property … with the information they need to make a decision as to whether the item has been unlawfully exported within the meaning of section 17.(2) In carrying out the duty under subsection (1), auctioneers must provide every buyer or potential buyer of an item of cultural property with— Information on the identity of the seller of the item, and As much information on the history of the item as the seller is reasonably able to provide(3) Subsections (1) and (2) apply in cases where an auctioneer is the owner of the item.

Cultural Property (Armed Conflict) Bill –Committee stage on 28 June 2016. Proposed amendment?

(1) Auctioneers and traders within the United Kingdom have a duty to provide .. potential buyers of items of cultural property … with the information they need to make a decision as to whether the item has been unlawfully exported within the meaning of section 17.(2) In carrying out the duty under subsection (1), auctioneers must provide every buyer or potential buyer of an item of cultural property with— Information on the identity of the seller of the item, and As much information on the history of the item as the seller is reasonably able to provide

(3) Subsections (1) and (2) apply in cases where an auctioneer is the owner of the item.4) In carrying out the duty under subsection (1), traders must provide every buyer or potential buyer of an item of cultural property with— Information on the identity of the previous owner of the item, and as much information on the history of the item as the trader is reasonably able to provide.

Cultural Property (Armed Conflict) Bill –Committee stage on 28 June 2016.Proposed amendment?

(5) Any person in possession of an item of cultural property that is valued at, or being sold for an amount specified by the Secretary of State by regulations, and who wishes to dispose of that item, must provide the item with an object passport in order to indicate whether or not the item has been unlawfully exported within the meaning of section 17.

(6) The object passport must include, but is not limited to including, the following information—(a) the names and addresses of all previous owners;(b) the date on which the item was imported into the UK; and(c) the dates on which the item was exported to other countries.

High value dealers and the regulated sector

Proceeds of Crime Act 2002, Sch.9 (1) (q), as amended:“the trading in goods (including dealing as an auctioneer) whenever a transaction involves the receipt of a payment or payments in cash of at least 15,000 euro in total, whether the transaction is executed in a single operation or in several operations which appear to be linked, by a firm or sole trader who by way of business trades in goods;”

See also the Money Laundering Regulations 2007, Reg. 3 (12)

Lower threshold by June 2017 due to the 4th Money Laundering Directive: 7,500 euro?

Dealers – high value payments: must register with HMRC

•If they do not accept cash then they must be able to demonstrate that this is business policy and that all employees and customers are aware of this;

•There are no exceptions: if a dealer accepts one cash payment above the threshold then he/she is a HVD; see James Paul (Car Sales) Ltd v Revenue and Customs Commissioners VAT and Duties Tribunal, 17 October 2008;

• Registration is not dependent upon acceptance of a large cash sum but a willingness to do so: Peter Jackson (Jewellers) Ltd v HMRC [2009] UKFTT 246

Registration with HMRC; Money Laundering Regulations 2007/2157

Most common registered HVDs are:• motor dealers• jewellers• antique and fine art dealers• boat dealers • builders, bathroom and kitchen suppliers• auctioneers and brokers

Complying with the Money Laundering Regulations 2007Register and pay fees ; Have policies and procedures in place that prevent the business being used for money laundering or terrorist financing; Apply a risk based approach to: customers products & services delivery channels (e.g. internet? cash?) geographical areas of operation

UK National Risk Assessment of Money Laundering and Terrorist Financing: October 2015

Page 9 : intelligence picture is limited in relation to high value dealers.

•Page 12: •high value dealers perceived as low risk;•Legal service providers perceived as high risk.

Page 57. Approximately 1,300 HVDs have registered with HMRC for supervision. Page 58: There are also a significant number of unregistered HVDs who have failed to identify themselves to HMRC and who are currently operating outside the supervisory regime.

Transparency International UK: “Don’t Look, Won’t Find”November 2015

Suspicious activity reports?Page 12 : low level of reporting by high value dealers.Contrast the financial services sector .

Page 14: Art and auction houses? 2013-2014: 15 SARs from 1500 firms.

(Financial Times: Auction houses have filed 15 SARs out of a total of 354,186 in the year to September 2014, according to the National Crime Agency).

Transparency International UK: “Don’t Look, Won’t Find”November 2015The arts and heritage sectors are at … risk … of attracting and enabling corrupt individuals to launder money. They offer similar lifestyle and image attractions, especially to corrupt PEPs … The core of any successful money-laundering enterprise is secrecy -- the lack of a defined 'paper trail …In art sales it is not unusual for the identities of both seller and buyer to be kept secret and cash is a commonly accepted form of payment, making it difficult to track transactions. Many of those investing in high value art choose to store their collections in air-conditioned security storage vaults housed in tax-free zones known as freeports

Transparency International UK: “Don’t Look, Won’t Find”November 2015

Major compliance issues in the sector?

• Limited knowledge of compliance issues due to lack of information from supervisor• General lack of awareness of AML obligations in the

sector • HVDs only required to carry out checks when items paid for in cash

Transparency International UK: “Don’t Look, Won’t Find”November 2015

Major compliance issues in the sector?Page 13: SARs – poor quality of reporting (i.e. the reason for the suspicion and not identifying the purpose of the transaction).

Abuse of the SARs regime There is a risk that the SAR system can be ‘gamed’. Corrupt or complicit UK professional enablers can provide some information in a SAR, but not enough for law enforcement agencies to object to or stop a suspicious transaction. The NCA only has 7 days to respond to a consent SAR.

Response of the Law Society of England and Wales – June 2016

Consultation by the Home Office and HM Treasury on the Action Plan for anti-money laundering and counter-terrorist finance – legislative proposals.Removal of consent protection?

“The defence afforded to those given consent was designed to counteract the far-reaching impact of the legislation. The 'all crimes approach' and the low threshold of ‘suspicion’ - unique among AML regimes in the world -necessitates protection for reporters. The protection offered by the consent regime works to offer balance and to avoid over-criminalisation.