Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art
4
For example, in September 2005, Brazilian financial institution Banco Santos went bankrupt, and its
owner, Edemar Cid Ferreira, was convicted of bank fraud and ML in Brazil.
11
As part of the case, a Sao
Paulo Court judge also ordered the search, seizure, and confiscation of assets that Ferreira, his associates,
and members of his family had acquired with unlawfully obtained funds from Banco Santos.
12
Brazilian
authorities ordered the seizure of his art collection, valued at $20 to $30 million, which included high-value
works of art. However, when Brazilian law enforcement searched Ferreira’s properties, several of the most
valuable works of art were missing. In 2007, a U.S. investigation revealed that one of these high-value
works of art had been illegally imported into the United States from a storage facility in the Netherlands
with an invoice that valued the work at $100; however, it had been recently appraised for approximately
$8 million.
13
The Ferreira case highlights the ease of transfer, even across international borders, of high-value art.
National border authorities can struggle to identify when high-value works are mis-declared as they lack
the specialized experience to detect and appraise high-value art.
14
AML/CFT and Other Reporting Requirements in the United States
In the United States, AML/CFT laws and implementing regulations require that financial institutions
establish and implement AML/CFT programs, which generally include the following elements: (1)
designation of a compliance oicer; (2) maintenance of a system of internal compliance controls; (3)
ongoing, relevant training of employees; and (4) independent testing and review.
15
As part of their
AML/CFT programs, certain financial institutions are also required to identify and verify the identity
of the beneficial owners of legal entity customers who own, control, and profit from companies when
those companies open accounts.
16
Most financial institutions are also required to file Suspicious
Activity Reports (SARs) with Treasury’s Financial Crimes Enforcement Network (FinCEN) when they
know, suspect, or have reason to suspect that a transaction or group of transactions involve funds over
applicable thresholds that are designed to evade federal reporting requirements, have no business or
apparent lawful purpose, involve the use of the financial institution to conduct criminal activity, involve
funds derived from illegal activity or are intended or conducted in order to hide or disguise funds or
assets derived from illegal activity, or when the financial institution believes the reporting may be
11
See, for example, Helgi Gudmundsson, “Banco Santos bankruptcy proceedings near end,” S&P Global Market Intelligence,
June 10, 2019, available at https://www.spglobal.com/marketintelligence/en/news-insights/trending/cCz6KPRXa3bIfwx_
IQnXQw2.
12
U.S. Department of Justice (DOJ), “Manhattan U.S. Attorney Announces Return To Brazil Of Two Masterpieces Linked To
Bank Fraud,” June 18, 2015, available at https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-return-
brazil-two-masterpieces-linked-bank-fraud.
13
U.S. Immigration and Customs Enforcement, “ICE returns masterpiece linked to bank fraud to Brazilian government,” May 8,
2014, available at https://www.ice.gov/news/releases/ice-returns-masterpiece-linked-bank-fraud-brazilian-government.
14
Under Chapter 97 in the Harmonized Tari Schedule, original works of art such as paintings, drawings, pastels, collages,
and decorative plaques are duty free on import into the United States. For works of art entering commercially at a land
border with a value of under $2,500, importers must use the Entry and Manifest of Merchandise Free of Duty CBP Form CF-
7523, which collects a nominal amount of information related to value, description, and ownership. If the item is valued
over $2,500, formal entry through a Customs Broker and ACE manifest is required.
15
The U.S. AML/CFT legal framework, as amended by the AML Act of 2020, is codified at 12 U.S.C. 1829b, 12 U.S.C. 1951-
1959 and 31 U.S.C. 5311-5314, and 5316-5336 (this set of laws is commonly referred to as the Bank Secrecy Act or BSA).
Implementing regulations are codified at 31 CFR Chapter X.
16
Specifically, these are banks, mutual funds, broker dealers in securities, futures commission merchants, introducing brokers
in commodities, and mutual funds. 31 CFR 1010.230(f) (citing 31 CFR 1010.605(e)(1)).