relevant Blocked Parties list."[1] The document instructs Sotheby's employees to contact the Compliance Department if they "believe that an active Sotheby's client is listed on any relevant Blocked Parties lists."[2]
Sotheby's also "conducts regular screening through an automated tool to ensure that no counterparty is on any relevant Blocked parties list. Sotheby's also reruns the filter against its counterparties following the release of updates to the OFAC Lists and other relevant lists."[3] This process is monitored by the Compliance Department.[4] Sotheby's Compliance Department also conducts due diligence on individual transactions and requires contractual clauses and representations from consignors and purchasers to ensure that such purchases are consistent with Sotheby's compliance requirements and that the real party in interest is not subject to U.S. prohibitions.
Sotheby's Briefing. On October 25, 2018, senior employees from the Sotheby's Compliance Department briefed Subcommittee staff on the company's policies and practices. The briefing was led by Sotheby's former Chief Global Compliance Counsel, Head of Regulatory Affairs ("Chief Compliance Counsel").[5] She explained to the Subcommittee that while the art industry is not technically regulated, many regulatory environments apply to the art business.[6] She continued that Sotheby's has a "mature and well-developed" AML and sanctions compliance program, in which employees use a risk-based approach.[7] She said the higher the value of the art transaction, the more Sotheby's needs to understand about the background of the client or the ability of the client to purchase the item.[8]
The Chief Compliance Counsel explained that, in some cases, dealers will purchase a work of art and may subsequently sell it to another person.[9] In those instances, she stated that Sotheby's "doesn't have a way to get that information" about the person to whom the dealer may subsequently sell the artwork.[10] She stated that, at times, Sotheby's has asked dealers on whose behalf they are purchasing an item, but there is an economic disincentive for dealers to provide that information to Sotheby's.[11] The dealers believe that if Sotheby's knew the identity of their clients, Sotheby's would go straight to their client and cut out the dealer.
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