CREDIT CARD INVESTIGATION SHOWS ART MARKET OPEN TO INTERNATIONAL FRAUD

Credit card investigation shows art market open to international fraud

Criminal charges brought after London and regional UK auction houses are targeted

By Riah Pryor. Market, Issue 235, May 2012

Published online: 17 May 2012

A criminal network is believed to have targeted more than 30 auction houses across the UK, using fake credit cards to steal works of art. While initial reports claimed that the suspects only approached regional auction houses, it is now clear that London-based Bonhams and Christie’s were also affected, and that there are problems with the way the market checks financial transactions.

Scotland Yard’s Art & Antiques Unit launched an investigation in October 2010 but the case was handed to Wiltshire Police after it emerged that the force was already looking into a number of similar offences. Simohamed Rahmoun, 30, Barbara Ursula Goossens, 60, Farouk Dougui, 39 and Jabey Alan Bathurst, 23, were arrested last year and charged with conspiracy to defraud a number of auction houses this January. Rahmoun, Dougui and Bathurst were also charged with defrauding car-part suppliers. A trial is expected later this year. At the time of going to press we were unable to contact the defendants’ lawyers and it is unknown whether they deny the charges.

“[The problem is that people] were buying goods over the phone and picking them up before the transaction had cleared,” says the director of one of the defrauded auction houses, who wishes to remain anonymous. “We trusted that banks would be doing checks at their end. Aside from the usual identity checks we can’t tell whether the card that people use over the phone is theirs.”

The amount of money lost has not yet been established. Since the arrests, police have issued further warnings about accepting credit cards from telephone bidders. Many auctioneers are now asking for clearer guidance on how to make cashless transactions less risky.

Problems at Christie’s

“As a result of this incident [Christie’s] had to take a long, hard look at itself and what was being done to regulate payments,” says a former employee of the auction house who wishes to remain anonymous. “A number of credit cards were used by the same individual, all of which failed and no one raised the alarm. There was no real policy in place to deal with suspicious transactions and a number of people in the company were unhappy with what happened. I imagine things have changed now.”

A Christie’s spokesman declined to comment, but The Art Newspaper understands that since the incident the company has taken measures to strengthen its credit-card security procedures.

The point at which police should be notified of suspicious behaviour by buyers has been increasingly discussed, most notably around the anti-money laundering legislation which passed into law in the UK in 2002. “Auction houses are now legally obliged to report any behaviour or transactions where there are reasonable grounds to suspect the person may be money laundering [the concealing of money gained through criminal activity] and failure to report could result in a conviction for negligence,” says Janet Ulph, a professor of commercial law at the University of Leicester, who has written a book on the subject. She adds that this equally applies to art dealers.

As money laundering legislation only applies to cash transactions, the point at which companies should report suspicious use of credit cards is a grey area. “The reality is, these offences happen all the time,” says detective superintendent David Clarke, who is head of the City of London Police Fraud Squad. “Regardless of whether you suspect someone is money laundering or conspiring to defraud, there needs to be a policy in place to deal with it.”

London auction houses have set up quarterly security meetings, in the style of those held by London’s museum community. But the trade has proved hesitant to share information in the same way because of concerns about data protection legislation, and business rivalry.

A global market

The way in which auction houses conduct business today has been revolutionised; online, anonymous and increasingly international bidding is now commonplace. This spate of frauds, however, suggests that the art market’s financial procedures have yet to catch up.

Banks also seem unwilling to help. “They couldn’t care less,” says Tora Farwell of Richard Edmonds auction house in Wiltshire. “I’ve asked what we should be doing but they’re uninterested. I’ve started my own system of recording details and have lost business because of this precaution.” Other auction houses told us that they have lost customers because they stopped accepting foreign-issued cards to try to reduce the risk of fraud.

“What’s the point of saying we are now reaching a global audience if we get hit with stolen items or accepting money from criminals,” says Jeremy Lamond, the director of fine art at Halls Auctioneers in Shrewsbury. “We need to get some international rules if we’re going to participate in this market. Otherwise we’ll be back to selling art in a church hall and looking people in the eye before we let go of goods.”

http://www.theartnewspaper.com/articles/Credit-card-investigation-shows-art-market-open-to-international-fraud/26406