Performing due diligence on your art collection can make all the difference between safely enjoying your artworks or being involved in an expensive court battle, fighting to minimise reputational damages and keep your collection intact.
Actually, it's not a secret that since the 1960s art crime has evolved into the third-highest-grossing annual criminal trade in the world, with illegal profits running at an estimated $6 billion every year. Nevertheless, the art market has failed to find a solution to increase its transparency and regulations. More often than not high-value art transactions keep being based on trust, hand-shakes and verbal promises. All the while, news of art fraud, scams, money laundering and stolen artworks reappearing on the market keep hitting the headlines.
It's an interesting logic, isn't it? You wouldn't buy a $1 million house without checking the real estate agent's credentials, the structure of the house, its market value and signing a written agreement of sale. Yet it seems perfectly normal to purchase a $50 million painting by Francis Bacon without the blinking of an eye, after a quick hand-shake with the dealer and his promise that "it's a fantastic work, in perfect conditions"!
Well, when it comes to multi-million dollar art acquisitions or sales, I believe in the old good saying: "Trust is good, but control is better".
To protect yourself, your reputation, your bank account and your collection in this unregulated art market you need to perform your own due diligence.
Here below you will find the minimum due diligence steps you should take before buying an artwork. These steps will help you greatly reduce the risk of being involved in illicit art traffic and will prove that you were acting in good faith, should you ever need to defend your actions in the future.
1. THE SELLER'S CREDENTIALS
First of all, understand where you are buying the artwork from. Just because you are in touch with Mr. John Smith, it doesn’t mean that the painting belongs to him. He could be acting as an agent on behalf of the real seller or have no rights to sell the work at all.
Don't be afraid to ask questions and request a signed letter stating the nature of the relationship between Mr. John Smith and the seller, as well as a written confirmation of his right to sell the work.
If you don’t know Mr. John Smith, ask for references to your connections in the art world. Does anyone know him? Does he have a good reputation? Google his name and check the results. Does any news - recent or old - link him with any illicit art transactions?
Does Mr. John Smith’s email address seem reliable? Does he use a professional signature in his correspondence with you? Do you know where he lives and operates his business? Do you have a valid phone number for him?
Having a copy of his passport on file could be useful too. Particularly in case of multi-million transactions, this may be requested from your bank as part of its own due diligence process before transferring any money.
2. THE MARKET PRICE
From time to time news of art dealers being sued by collectors, who claim to have paid too much for an artwork, hit the headlines. Don’t get to this point: do your due diligence on the price before making the payment.
There are many ways to verify whether the work offered to you is fairly priced. Auction houses, such as Sotheby’s and Christie’s, publish the results of their public sales on their websites. These can be traced online back to 2007-2008. Has any similar work by the same artist sold recently? For how much?
Alternatively, you can hire a professional art appraiser to evaluate the painting. However, please be aware that a professional appraisal takes its time and involves additional costs. In fact, appraisers don’t usually share their thoughts on the price on the spot, but need some time to do their own market research after viewing the work. Some experts accept to do so-called “desktop appraisals”. This means that they will appraise your artwork based on a digital photograph only. Personally, I am very sceptical of such appraisals, as they don’t take into account the actual condition of the work and its provenance - both factors which can have a huge impact on the market price.
3. INFORMATION ABOUT THE ARTWORK
I've seen it way too often: a collector falls in love with a beautiful artworks, he buys it and kindly requests me to inventory it in his art database. The problem: dimensions are roughly estimated, the currency of the purchase price is not even mentioned on the invoice (!!), no picture is available, the latest condition report is 20 years old and the collector is not even sure if the work is unique or an edition of 500. Real story.
Before proceeding with the acquisition, you should at the very least collect the following information about the artwork: artist's name, title of the work, date of production, edition number, dimensions, medium, number in the catalogue raisonné (if applicable). Additionally, always request high-resolution images (at least 300dpi), a recent detailed condition report and evidence supporting provenance, literature and exhibition history.
These are all pieces of information that the seller should be able to provide you without objections and prior to finalising the sale.
4. PROVENANCE RESEARCH
Checking the provenance of an artwork can be a pain, particularly if it has been circulating on the market for centuries, passing from an undisclosed private collection to the next undisclosed private collection.
Nevertheless, verifying the provenance is essential, particularly for those works that may have been exposed to art looting over the years. For example, works that were in Europe during the Nazi regime or works from countries, whose governments are fighting for their return. So what can you do?
Ask the seller or his agent first. Do they have any documentation to support the provenance information they provided you with? Any letter, final will, inventory list or picture could be useful.
If nothing is available, try looking for more information in the catalogue raisonné of the artist. If the work has been sold at auction, check the old auction catalogues. The Getty Research Institute has a vast database of digitised documents that may help collectors clarify the provenance of their collection. The website Looted Art and its database Jeu de Paume are two main sources for works plundered during the Nazi regime.
5. ART LOSS REGISTER
The Art Loss Register is the largest database for stolen or lost artworks currently available. Upon request (and after paying a fee), its team will check for you whether a given artwork is registered in their database and, if they find no matching entry, they will issue a certificate stating so.
You can request this certificate from the Art Loss Register yourself, but usually the seller should be able to provide you with it.
Please kindly note that receiving a certificate from the Art Loss Register is not a 100% guarantee that the work was not stolen, as it may be missing and not be registered in the database, or be registered on a different one, such as the Interpol’s. However, having no matching entry on the Art Loss Register considerably minimises the probability of the work being a stolen item.
6. AUTHENTICITY OF THE ARTWORK
Always request a Certificate of Authenticity. Depending on the type of work, this may come as a signature by the artist on the work itself, a letter signed by the gallery, a recognised expert on the artist’s work, the artist’s heir or foundation.
For archaeological artefacts, laboratory results such as CIRAM are recommended.
A certificate of authenticity is unique and it will not be issued a second time, if lost or destroyed. Therefore, sellers don’t usually send it to the buyer until the transaction has been finalised. However, you can request a digital or paper copy of the certificate prior to committing to the purchase of the work.
7. IMPORT AND EXPORT REQUIREMENTS
Antiquities, manuscripts, archaeological objects, cultural goods and national treasures, but also some modern and contemporary artworks can be subject to restricted import and export rules, which vary from country to country.
Let’s remember what happened to the American singer Kelly Clarkson: in 2013 she purchased a ring, which had belonged to Jane Austen, at an auction house in England, just to have the government issue an export ban on it after the sale to prevent a rare piece of English cultural heritage from leaving the country.
Similarly, a contemporary installation by Damien Hirst, which includes dead butterflies, may need a CITES licence to cross the border, while an Art Deco couch table may require a French artwork passport to leave Paris.
Cultural property that falls within the categories listed in the UNESCO Convention of 1970 (Art. 1), presents risks more often than not, if the seller is not able to prove that it was legally excavated (in case of archeological objects) and exported from their source country.
To avoid surprises at the border, request a copy of previous import/export documents from the seller and the respective licenses, as applicable. Verify in advance, if there is an existing risk of the work being prohibited from leaving the country or if it needs additional paperwork from the Customs Office in order to do so.
Writing a seller’s warranty clause on the invoice or agreement of sale, including a confirmation that any past imports and exports of the work were executed in accordance to the country’s legislation, is also good practice.
8. AGREEMENT OF SALE
An agreement of sale protects both buyer and seller and prevents misunderstandings.
Have your lawyer draft it (or check it, if prepared by the other party’s lawyer) and ensure it contains at least the following information: name and addresses of the parties involved in the transaction, full details of the artwork being sold/purchased, current location of the artwork, date and location of the release and transfer of title to the buyer, terms of insurance, gross price and net proceeds to the seller, terms of payment and bank account details (in case of wire transfer), seller’s warranties on authenticity, condition of the work, legitimate imports and exports, liens and claims on the work, seller’s right to engage in the sale of the work, a confidentiality clause, governing law and jurisdiction.
Make sure that all parties sign the agreement BEFORE making any payments, and keep the agreement on file.
CONCLUSION
There are an infinite number of steps you can take to protect yourself from being involved in illicit art transactions or being taken advantage of. The above forms a solid basis, not an exhaustive guide.
Here I would like to add two personal pieces of advice to bear in mind during art transactions. First of all, use your head and critical sense. Don’t just collect documentation, but read it, analyse it. If anything doesn’t seem above board, take a step back and withdraw from the purchase.
Finally, trust your gut instinct. If the documents seem clean, but your gut tells you that something is wrong, don’t dismiss the feeling. You might be thankful for it in the future.