OFAC Warns Art Market of Sanctions Risk

Interestingly, OFAC cautions that the “informational materials” exemptions to its regulations do not apply to transactions involving artwork where the artwork functions primarily as an investment asset or medium of exchange, including transactions where artwork is exchanged for financial assets like gold, cash, or crypto-currency. It appears that this narrowed interpretation of the informational materials exemptions is designed to close a perceived loophole in the regulations that would otherwise allow sanctioned parties to utilize the art market to gain access to the U.S. financial system.

Accordingly, OFAC advises participants in the art market, including art galleries, museums, private collectors, auction companies, agents, brokers, and others to conduct appropriate due diligence to identify high-value transactions ($100,000 or more) involving potentially sanctioned parties. OFAC also cautions that U.S. persons considering such transactions should seek guidance or an OFAC license prior to acting.

Congress passed the Berman Amendment to the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) to generally prohibit OFAC from regulating exchanges of informational materials, including artwork. See The Foreign Relations Authorization Act, Fiscal Years 1994 and 1995, Pub. L. No. 103-236 § 525, 108 Stat. 382, 474 (1994) (codified, as amended, at 12 U.S.C. § 95a, 50 U.S.C. § 1702 (2000); 50 U.S.C. § 4305(b)(4)).

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