Full of art heists and recovery of stolen work - due diligence on artwork is probably the most public aspect of due diligence. Yet, many of our community members may be unfamiliar with the practicalities of DD when applied to a physical artwork. As part of your regulatory requirements, we cleared up some common FAQ’s with Olivia Whitting from the Art Loss Register. Full Q&A below.

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Many of our community members are familiar with Due Diligence as it relates to Know Your Customer procedures, but may be unfamiliar with Due Diligence being applied to a physical artwork; could you quickly explain what due diligence is for artwork and why it is required?

Due Diligence for artwork is primarily used to check that the piece can be sold with good title and does not have any claim against it. These claims can vary due to the nature of the item; for example, an antiquity may be claimed by a government or museum; a Monet may have been the subject of a forced sale in Europe during the Nazi period; or a Basquiat may be partially owned by a number of people and the current vendor does not have the right to sell more than their share; not to mention the claims on artworks that are “simply” stolen from homes or galleries.

Through Due Diligence on an artwork and its ownership history, one can avoid the financial and reputational damage that might be faced by all parties to the transaction.

Due diligence on artworks also involves checking for authenticity, though that is not the area in which the ALR specialises. That said, one of the best routes to proving the authenticity of an artwork is its provenance, which is a significant area of overlap between the work that the ALR does regarding title claims, and the work that others might do to prove authenticity.

This overlap is a prime example of the way in which due diligence should be seen as a cohesive whole, involving checks on the object, the transaction, and the parties.

Issues that can appear in one area of checks may inform the research in other areas. Therefore, the due diligence on an artwork sits very comfortably next to the due diligence carried out in KYC checks.

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Could you tell us a little bit about who is responsible for conducting Due Diligence on a piece of artwork, and when should Due Diligence occur in the chain of an acquisition?

A buyer should always either carry out Due Diligence themselves or satisfy themselves that the seller has carried it out fully. This is because it is the one chance a buyer has to ensure they do not end up getting dragged into any problems as once they own the work they will inevitably have to deal with any issues that arise, and may end up suffering serious reputational and financial damage.

That said, in practice, it is often the seller or their agent, such as an auction house or dealer, who carries out much of the due diligence because of their access to the information needed to carry out checks, such as full provenance, or publications and documentation.

A buyer can always ask to verify what Due Diligence has in fact been carried out, such as by requesting an Art Loss Register certificate. It is also harder to say a buyer bought in good faith if they themselves did not at least check any Due Diligence carried out.

We would advise that Due Diligence occurs early enough in the process to avoid any delays to the transaction.

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Walk us through the Due Diligence process - what are the key things that you look for as you begin your research?

We check over 450,000 items for the art market each year and these always begin with checking our database of 700,000 lost, stolen, or claimed items. Our database includes all manner of items, from those stolen and looted, to those embroiled in ownership disputes where a sale by either party would be problematic and possibly illegal without a settlement, to items where lenders have registered a security interest in order to protect their interest in a work against which a client has borrowed.

The aim of these registrations is so that the registrants can be informed should any of these pieces be offered for sale and action taken to recover them or protect their position. 

The ALR has incorporated numerous sources of information such as the Carabinieri’s public database, Interpol and the FBI’s National Stolen Art File. All of these are therefore checked in the check of the ALR’s own database that is the first step in our work. If the item was created prior to 1946 and in a category at risk of Nazi looting, we also check numerous specialised external databases that are focussed on this issue.

Our focus does differ depending on the nature of the item, as not every piece carries the same type of risks.

For example, for cultural property we ask clients to provide provenance back to 2000 as a minimum and we often ask for documentation supporting prior ownership or export. This is due to the fact that much of the risk that arises from cultural property is that it could have been looted or smuggled out of a country.

For Old Masters, Impressionist and Modern pieces, we are particularly focused on any provenance during the years 1933-1946 as that can often be where the risk lies. For contemporary works the risk usually lies in theft or fraud.

Once we have checked our resources and completed the research, providing we have not run into any issues, we can issue a certificate for the item. This is very useful for buyers and sellers as it is evidence of the Due Diligence that has been carried out. If we do discover any issues, whether that is in a sale check for an auction house, or a search for a dealer, we notify the parties involved and offer to work towards a resolution.

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As with KYC and AML regulations, how do you address concerns regarding privacy and confidentiality as you move through your Due Diligence on a piece of art or antiquity?

At the ALR we never request the name of the current owner of the piece, and our searchers, whether they are dealers or auction houses, would in any event be unwilling to reveal this information to us. That means that the most confidential personal information never reaches us in any event. The identifying information we receive regarding prior provenance, such as names of collectors or addresses on invoices is used purely for our research to highlight any issues arising from an item being in the collection of a particular person at a particular time and given the nature of provenance it is often the case that the people named are sadly now deceased and thus no longer a risk from a GDPR perspective, albeit the information may still be confidential. 

It is rare that the current owner is the source of an issue, usually problems start further back in the provenance and have not arisen at an earlier stage due to a lack of prior Due Diligence. That means that often it is possible to address issues without needing significant volumes of information regarding the current holder. 

We are also aware that the mere fact a transaction is taking place may be confidential and having been working in this area for over 30 years the ALR has built up a significant level of trust amongst the market as to its discretion in handling confidential information.

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As with any kind of Due Diligence, there is an ever-present concern of causing disruption to the end buyer or client. If you could suggest anything to a gallery or dealer looking to integrate Due Diligence into their sales pipeline, what would it be?

Due Diligence is something we recommend be carried out as early as possible, this ensures that delays or disruptions to a transaction can be minimised.

Should an item have any claims or issues attached to it, it is much better to know as soon as possible since it may be possible to clarify or resolve the issues quickly enough that a transaction can still proceed, or to avoid the reputational damage that might follow if the work is advertised and then a third party identifies it as subject to a claim.

Given that many issues are resolved with settlements we have in the past been able to notify a client of an issue, worked to resolve it, and come to a settlement, within a very short time period so that the item can still be sold as planned. We know that sometimes there is not much time to carry out the due diligence so we do have an option of an urgent search which takes just 24 hours, but we always advise that clients look to carry out their due diligence as early as possible.

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What are some of the most rewarding recoveries/discoveries you have made through your work?

Working at the ALR is so rewarding because of the huge range of cases and objects we are working on at any one time.

One of my favourite recoveries was in 2019 when we were checking an upcoming sale against our database for one of our subscribing auction houses. One of the lots, a limestone block with sculpted bulls, was flagged by us as being a match with an item on our database which should have been in the National Museum of Afghanistan.

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We had registered this museum’s collection as part of our Cultural Heritage at Risk Database (CHARD) so that we could ensure that if anything was stolen during any upheaval or conflict, we could enable its return should it be offered for sale. This piece was likely stolen from the museum during the Civil War of 1992-1994. We were so delighted to be able to help return it to Afghanistan, although it became a bittersweet feeling when the Taliban once again took power, given their history with cultural heritage.

Another case I was delighted to work on was the case of the missing Lions! In 2000 a pair of rampant lions were stolen from the gateposts of a property in Cornwall having been in the family since the 19century. 20 years later they were consigned to one of our subscribing auction houses by someone who had acquired them from a scrap metal dealer, and we matched them with the lions on our database.

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This was such a special recovery as the family was so overjoyed to have them returned as they had meant so much to all of them over the years.

This highlights the central place art and antiques have in all our lives and that when they are taken, it is sometimes much more than a loss of capital. 

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