The Art Market and the Panama Papers

/ by Noah Charney

The so-called Panama Papers, 11.5 million pages of documents from the Panamanian Mossack Fonseca law firm, which specialized in facilitating tax haven registration for the very wealthy, was leaked to the media this spring. Among its revelations were a number of cases related to art. We need not repeat those stories here, but in a recent interview I gave to Artnet, I discussed how the art market might be affected (and my conclusion that it would not be). My full side of the interview is reproduced here.


Modigliani's Homme assis.
Most of the disclosures regarding art in the Panama Papers will not involve actual crimes that were committed, but rather technically legal, though perhaps morally questionable, ways to protect assets. It would be a surprise if there were actual crimes revealed. There may well be artworks identified that were considered lost and that the press surrounding the papers will bring to the attention of the victims (as in the Modigliani painting, though that is being contested, so we don’t know the conclusion yet). It would be unlikely to find documents noting illegal activity as such. It is more about moving assets around in a way that is legal but is clearly trying to create a screen to hide assets.

The very wealthy love tax havens, and that includes criminals but criminals will be a tiny minority. Most are wealthy people who have very good accountants and lawyers who find entirely legal ways to avoid paying taxes. Governments won’t like these methods, they are obviously attempts to avoid taxation, and your man on the street who pays taxes and cannot afford the advisors and fees that make using such tax havens possible will be annoyed. But most of this is technically legal. Criminals can also use tax havens, sure, but it would be a surprise to find documents that would be so black and white. Journalists analyzing the papers will wind up using the phrase “questionable behavior” much more than “illegal activity.”

Some say that tax havens are for tax cheats, but as long as you are not actually breaking a law, then it is indeed cheating but not illegal. That’s important to keep in mind. Governments will be annoyed, but that’s all they can do. Having offshore companies is a way to make more money for a company or individual, and if they can work out something like this without breaking the law, then there’s nothing anybody can do. Avoiding taxation is the only reason to have an offshore/tax haven company. However there are legitimate reasons not to want your identity as the buyer of high-level art made public. Protecting your privacy is a legitimate enough reason. Buyers sometimes purchase at auctions remotely or by sending a proxy bidder because they want to control who knows about their purchases. That’s fair enough, then, to have a company or proxy bid for you. But the very wealthy create multiple shell companies in various countries to protect their assets and avoid taxation. Such is the game.

Art crime specialists like me and my organization, ARCA (Association for Research into Crimes against Art), do not expect any big fallout from the Panama Papers. To be honest, the behavior highlighted by their revelation is not a surprise to anyone who knows the art world. It’s a surprise to have this huge leak and for it to be talked about so openly, but everyone in the know knows about free ports and tax havens and moving art around in this way. There may be a few individual cases or artworks that come to light that otherwise would not have, and it would be great if there are some previously-considered “lost” works that are now found, but while this art in tax haven stuff may come as a surprise to the general public, it is old news in the art world. And since most of the tax haven registrations are not illegal, there will not likely be as much of a shake-up as people might think. It is more problematic for public figures who appear to have moral superiority (politicians, for instance) and who can be shown to have been behaving in a way that many would deem immoral (though not necessarily illegal). They are the ones who will feel the fallout.

It’s impossible to estimate accurately how big a problem money laundering and tax evasion is in the art world, though of course it does happen. Tax evasion works like this: you buy Painting A for X amount of money. It is technically acquired by your offshore firm. It is then sold by the offshore firm a few years later for a profit and, since the firm is offshore, you pay no taxes on the sale price. So you’ve made a profit plus saved whatever the tax would have been on-shore. It’s very simple and legal. Money laundering through art happens very infrequently, I would say, but of course it does happen. Because art is often bought with cash, wired to anonymous Swiss bank accounts, it is a good way to launder dirty money. X amount of dirty money is used to buy a work of art. The dirty money transforms into the artwork, which can then immediately be sold on for the same X amount but now of (theoretically) clean money from the new buyer (but art is such a good investment that the criminal may even make a profit).

I would not say that this phenomenon effects the greater art ecology, not only the rich. The art trade will continue to thrive as long as wealthy people want art, buy it and sell it. The art trade does not care about whether consumers are paying taxes, where and how much. As long as the art trade is not involved in illegal activity, they won’t be affected. Of course, sometimes they may be involved in illegal activity (the involvement of Spink in one of the Panama Papers suggests collusion). The art trade, from a moral perspective should be against money laundering, but the trade is not in a position to ask buyers where they got the money with which they want to purchase a work. So in practical terms, the art ecology will not be affected. The only real problem would be if there is some international crackdown on tax havens, then the wealthy will have less money to spend and may buy less art…

The revelation about the 1997 Ganz sale at Christie’s (the collection bought by a Christie’s shareholder and then “flipped” by selling it at Christie’s before its prior purchase was known) does look suspicious. But Christie’s and Sotheby’s have such a duopoly on the art market that they are pretty much bulletproof. Sotheby’s has been plagued by public scandals (read the work of Peter Watson, for example) and they are still doing just fine…I honestly don’t think there will be much fallout, as none of this will come as much of a surprise to the art world.

There is really no incentive for the art market to regulate itself. There would have to be something like a UN or EU body to regulate it, and even then, whichever countries are being regulated would simply be avoided by major players who would instead operate in countries beyond the auspices of regulation. The art market is international and the tiny number of major consumers in it are so wealthy that they employ accountants and lawyers who are extremely clever and come up with all sorts of tricks, almost all of them technically legal, so that it is unlikely that even a regulatory body, if it was not global, could have much effect.

To learn more about art crime, visit You might also considering studying art crime this summer in Italy, on the ARCA Postgraduate Program in Art Crime and Cultural Heritage Protection, the first and only interdisciplinary academic program in the field.

Noah Charney

is a professor of art history and best-selling author of, most recently, The Art of Forgery. You can learn more about his work at or by joining him on Facebook.