Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by the Art Loss Register

  The thrust of the evidence sought from the private sector databases is around:

1.   What do you do?

(a)  Background

  The Art Loss Register was founded in 1990 as an industry initiative by the Art Trade and the Insurance companies to tackle the problem of stolen art and increase recoveries. Its mission is:

    —  To identify and recover stolen and missing works of art.

    —  To deter art theft and unauthorised sale of works of art.

    —  To provide a central "checkpoint" to prospective purchasers and lenders.

    —  To reduce the trade in stolen art.

  Its shareholders include the major auction houses, insurance companies, the International Foundation for Art Research, and management but it operates as an independent commercial concern. It is the central internationally recognised database available for searching of stolen and looted items of which there are, on the database, in excess of 140,000 uniquely described and many others which are not unique but which may have been stolen or looted at the same time and may be recovered through "proof of association". The company has a staff of 20 including 13 fine art graduates speaking 8 different languages, in offices in London, New York and Cologne. (See Flag 6) (not printed)

(b)  Recoveries

  The company has been responsible for the recovery of over £85 million of stolen art over the last 10 years, all of which are fully documented. The company is not merely a passive database matching operation but also has extensive experience in the research of Holocaust-type losses and in active recovery efforts including close liaison with the police in many countries. For example, during 1999 the company undertook 80 days negotiations for the return of a Ce«zanne, sold subsequently at Sotheby's for £18 million. At any one time the company is handling over 200 recoveries, some of which take years to complete.

(c)  Operations

  The recovery process begins with the registration on the database of lost items by theft victims and their insurers which are then systematically checked against the catalogues of the major auction houses, enquiries and searches for major museums, dealers and galleries, financial institutions and law enforcement agencies around the world. When an item is matched with an item on the database, the ALR notifies the theft victim and law enforcement authorities. At that point the work of art may be detained and the parties negotiate a settlement often with the ALR's help, or legal process commences, or efforts are made to support the police if the objects location is not known.

(d)  Holocaust research

  The company also maintains a substantial database of Holocaust victims' claims for looted art and antiques and provides a research service both for them and for the art trade who wish to confirm before they purchase that an item has no Holocaust connection.

2.   How does this assist the trade?

(a)  Auction Houses

  The major Auction Houses contract with the Art Loss Register for their catalogues to be searched prior to sale in order to identify any stolen objects which can then be withdrawn, and the experts frequently refer to the Art Loss Register on specific items before cataloguing. The catalogues often carry a statement that they are submitted to the ALR and search certificates can be obtained from us. The Company does not merely identify a stolen object, but provides a service to the Auction houses, whereby an innocent purchaser who has consigned the item for sale is them given assistance by the Art Loss Register in recovering their purchase price by a process of "down-lining" ie moving down the chain of buyer and seller until bad faith is demonstrated. This enables the object to be surrendered without undue cost to the consignor and leads to an increase in intelligence for the police and further recoveries.

(b)  Dealers

  Over 250 dealers use the Art Loss Register to check items before they purchase. The same service of "down-lining" is provided to them, together with extensive research on provenance and Holocaust related issues. The codes of conduct of many of the trade associations encourage searching with the Art Loss Register of which some are shareholders. The ALR are part of the vetting committee of the major fairs.

(c)  Museums

  Over 30 museums subscribe to the Art Loss Register for items to be checked against the database before purchases and further research undertaken if necessary and a search certificate provided.

(d)  Collectors

  Increasingly collectors require a Search Certificate before purchase and they and museums may wish to check their inventory in order to confirm that there have been no claims on items, which they hold.

(e)  Art stolen from the Trade

  A significant proportion of the items on the ALR's database were items stolen from the trade itself. Recovery of the items reduces the insurance cost for the trade and provides a deterrent to future theft.

  The searches above are all conducted under a contract between the ALR and the member of the art trade, which requires co-operation with the police in the event of a match.

(f)  Active Searching not under Contract

  In addition the Art Loss Register reviews many auctions, auction sites, dealer sites on the Internet, advertisements in trade magazines where there is no contract with the individual dealer. Searches under contract vary between 250 and 300,000 per year and those not under contract another 100-200,000 per annum. The Art Loss Register is searching approximately one third of the total art trade transactions of significant value worldwide and this proportion is growing. The art trade is contributing a substantial proportion of the costs of the operation and value the professional advice provided from the expertise of the art historians and those with specialist knowledge of problems of title.

(g)  Archaeological Losses

  Many stolen antiquities have been identified by the ALR and recently the International Association of Dealers in Ancient Art (IADAA) maintains a protocol whereby all potential purchases by their members above a value of £10,000 must be checked against the database. An audit trial of all checks of the database is maintained. The ALR has been involved in advising parties in relation to major archaeological losses. In one case involving a dispute in excess of £20 million the company developed the concept of an international trust financed by a major museum, which would have the items on display. The terms of the trust would require the items to be exhibited in those countries which had a reasonable claim and eventually repatriated to the country should complete proof be obtained of their original excavation. The ALR has assisted in the recovery of items from Iraq and Iran which have resulted in arrests.

3.   How does it benefit the police and/or Customs and Excise? and

4.   What co-ordination or co-operation is there with the police/Customs and Excise?

  The Art Loss Register works routinely and closely with the great majority of the individual police forces in the United Kingdom and with over 35 foreign police services as well as Interpol. The company's services are free to the police and include the following:

    (a)   Logging of losses submitted by police forces. The Company receives thousands of losses from police forces internationally and the database includes police losses from 1970 and earlier. This is particularly valuable because in many cases the police have destroyed their hard copy records and the ALR is the only record remaining. The police frequently recommend to victims that they should contact the Art Loss Register if their insurance company has not already done so.

    (b)   Searches. The police frequently refer to the Art Loss Register when they are investigating crime and find goods, which may be stolen. The Company also provides teams with laptops to support police raids, cataloguing items discovered as well as searching against the database.

    (c)   Training. The Company contributes to the training of policemen worldwide and participates in Interpol and other conferences.

    (d)   Gathering of intelligence. The Art Loss Register's down-lining and routine operations produce much intelligence for the police. The Art Loss Register does not in any way provide a substitute service for police but often police forces will allow the Art Loss Register to down-line on a case until evidence of criminal activity is found when the case is passed back.

    (e)   Expert Evidence. The Company provides expert evidence to police forces for trials and investigations on matters such as whether a dealer purchased in good faith, whether the Art Loss Register was checked etc. There have been a number of cases of dealers claiming to have checked with the Art Loss Register or tampering with Search Certificates.

    (f)   Negotiations. The Art Loss Register does not enter into negotiations with any parties for the surrender of stolen items or for the provision of intelligence without the approval of the police, and this may be in several different jurisdictions. The company has very clear Public Policy Principles (Annex C) (not printed) and does not countenance the payment of any money for intelligence unless this is handled by the police and nor will the Company pay ransoms or extortion money unless the police direct us to do so. The Company does provide significant funds for operations where the police request money for informers.

    (g)   Customs and Excise. The Company operates very closely with Customs and Excise in a number of countries, both in providing checks on exports and imports resulting in a number of recoveries, particularly for US Customs.

5.   What compatibility is there between the various databases (and between the databases and the ACIS database available online)?

  The ALR has already incorporated the ACIS data available on line into its own database and already has much of the Metropolitan Police old data incorporated from registrations of losses over the years.

  In terms of networking databases no progress has been made although there have been various government initiatives to do so, eg GRASP but with little success.

  Various national police forces have been reluctant to surrender their data, but a distinction should be made between case and object data. Police often give the Art Loss Register object data in order that we can find items but once a match is made the Art Loss Register has not necessarily been given the details of the owner etc and these details are held by the police.

  It is clearly important that the trade should only have to search in one place and hence why the Art Loss Register captures any publicly available data such as from the French Police, and Interpol in order that search of the Art Loss Register incorporates as much data as possible.

6.   Is your database sufficient and/or necessary in relation to "due diligence" by the industry?

  The wording of the Art Loss Register search certificate states that all relevant information on provenance, the circumstances of purchase etc, must be given to the Art Loss Register in order that a Search Certificate is valid. This is to prevent a search being undertaken by member of the trade who suspects that an item is stolen but does not give the reasons for their suspicions to the database.

  If the item is not then on the database a search certificate may be used by a dishonest member of the Art Trade as an umbrella. It is therefore probably fair to say that a search of the Art Loss Register database is a necessary part of due diligence but not necessarily sufficient. In certain cases no other research can be undertaken, but in some cases a search of the database is not considered by the Art Loss Register to be anything like sufficient and we would propose to the trade that further research should be undertaken.

  Since many police forces have not made all their data available for searching, there will be occasions in which a stolen item may be given clearance.

7.   What is the balance to be struck between "recovery of goods" and "apprehension of criminals"?

  Although police responsibility include the recovery of stolen goods, police priorities will probably always be the apprehension of criminals and the recovery of goods will usually be important in terms of evidence for trial rather than the highest priority in itself. It is therefore often helpful to the police for the Art Loss Register to concentrate on the recovery of stolen property since this may also lead to further intelligence for the police which may lead to arrests, convictions and thereby deterrents. The allocation of effort between the Art Loss Register and the police seems to work well and often takes place routinely with those police forces who in public emphasise that they do not see a particular role for a private database company.

  The recovery of stolen property is important not only to victims, for whom they may be financially, emotionally or culturally important, but also as a further deterrent to crime, the great majority of which is financially motivated. Furthermore the recovery of stolen property removes an instrument which is being increasingly used by terrorists and drug criminals to move value around the world when money laundering regulations have made it increasingly difficult for them to do this with cash.

8.   How does the UK effort relate to systems in other countries?

  No doubt the Home Office or police would wish to comment on the relationship of the police efforts to those overseas but as far as the Art Loss Register is concerned our database is highly international with offices in the USA and Germany and loggings and searches are conducted for over 50 countries with the staff travelling to 20 or 30 countries each year. Often this ability is much appreciated by the police who cannot do so themselves without a long and bureaucratic process and their overseas travel budgets are very limited.

  The UK is the world leader in terms of expertise in stolen art in the private sector.

9.   What progress has been made towards a comprehensive national database since the Committee's, and ITAP's, recommendations in 2000 (not to mention ITAP's firm demarche in 2002)?

  The Art Loss Register's operations continue to develop as the central and internationally recognised database for the insurance industry, art trade and many police forces, even though it is not a comprehensive UK national database.

  The Art Loss Register were represented on the Home Office Working Party and undertook extensive writing of draft protocols, operational procedures, addressed public policy issues etc . Because the final report by PITO was restricted, we have not been able to comment on its recommendations officially. However we understand that there was some police reluctance to be involved in a public private sector partnership.

  We have not been given the reasons for this but if there are good reasons they have certainly been overcome in relation to many other similar operation as outlined in question 10 below. Furthermore there are government agencies which rely on private contractors and partnerships in areas of much greater national and international security importance than a database of stolen art open to searching by the art trade.

10.   What are the implications for the private sector operations of developments in this direction; what models are you aware of for public-sector developments in this direction?

  The private sector is effectively providing a substantial measure of the due diligence required in terms of the number of items that should be searched, the audit trail, the follow up to matches and other assistance.

  If the Government tried to develop its own service with no reference to the private sector then there would effectively be a competitive position in which the Government would be in a difficult position. It would have to justify both legally, financially and operationally why this should be a government service rather than one run by the private sector or in partnership.

  There are a number of very close parallels where the government and private sector are co-operating to provide database services in relation to due diligence.

(a)  Stolen Vehicles

  The Government, through the DVLA makes available data on stolen vehicles to database companies who provide a searching service for those purchasing or financing second hand vehicles. This system works well with the private motor trade or finance houses being charged for searches and this searching is one of the reasons that the recovery of stolen motor vehicles is approximately 70% (albeit many of them damaged) as compared to the art trade recovery of stolen property which is probably under 5% overall even if somewhat higher for high value pictures.

(b)  Stolen Plant

  There is also the example of The National Plant & Equipment Register (TER), a private commercial company run by the same management as that of the Art Loss Register, which has developed a database of the ownership and of stolen construction and agricultural plant and equipment. This is financed by the insurance industry and the construction and agricultural trade in a similar fashion to that of the Art Loss Register. TER maintains significant expertise on the numbering systems, identification, tracing of spare parts, and active recovery efforts on stolen plant and equipment and have assisted police with over 1300 recoveries with total values of £8 million. Virtually all the insurers subscribe and the company operates closely with overseas police forces. (see TER Review for further details) (not printed)

  The Police National Computer has a section of its stolen property database for plant and equipment but the entry of data has been undertaken over the years by those who would have no responsibility for searching it and who lack the necessary expertise. It fell into disrepute and a report was requested from TER by the Police Information Technology Organisation (PITO) to take this data, cleanse it, re-order it and make it available for searching. During this process it was discovered that only about 2% of the data had been entered properly and much of the data was useless. (See Flag 7) (not printed)

  TER has worked with PITO which runs the Police National Computer (PNC) and the individual police forces in the United Kingdom for over eight years and a protocol is now being established which will govern the entire relationship between the police service in the UK and Northern Ireland and TER. This will include all matters relating to the data quality of police data held on the PNC.

  In Holland the Dutch Police gave up running their database of stolen art and antiques ( Kunst en Antiek Nationaal Systeem Art Loss Data ) because it was a relatively low priority and they found it difficult to get their provincial police forces to log stolen items with them. The data has been licensed to the Art Loss Register who now search for the stolen objects and inform the Dutch police when items are matched, who retain the case (ie details of owner address etc) themselves.

  There would appear to be no significant arguments against DCMS using the private sector to provide the necessary database. We understand that the arguments against the involvement of the private sector have come from the police. Certain overseas police forces as stated already co-operate closely with the Art Loss Register behind the scenes but publicly state that they see little if any role for a private sector company. The private sector companies have never argued in favour of being given all the case or sensitive information about the ownership or criminal aspects of the theft or investigation. The private sector has argued only in favour of the object data ie the details of what have been stolen being available in order that the trade could undertake due diligence.

  If the police forces were to provide the due diligence searching service themselves, they would have to pool their data internationally which some of them have stated that they will not do or obtain some form of search engine which would search all their object data. For a dealer to search one National database is almost bound to be inadequate because of the easy movement of stolen objects.

  The areas which would have to be addressed in any Public Private sector Partnership between the police and a private company would include:

    (a)  Follow up in the event of a match.

    (b)  Not approaching individuals who have had losses, which have been logged with the police but not by insurers to request fees for advertisements, recoveries or other services.

    (c)  The provision of statistical and other research.

  A draft protocol has been already developed in relation to The Equipment Register.

  It is important to note that the police are already using private companies in support of police operations, for forensic laboratory work, valuations, fraud investigations etc.

11.   Do the police themselves have the necessary expertise and resources to implement a specialist database of this sort?

  In general they do not. The Carabinieri in Italy with several hundred police involved in stolen art and to a lesser extent the French Police through OCBC, do have expertise and resources to run major databases but these are not currently open for searching by the art trade as envisaged for a formal process of due diligence with audit trails, follow up to recoveries etc.

  It would be very difficult for most police forces (with the possible exception of Italy and France) to recruit and retain the necessary expertise to run a database for the art trade to search and enter into competition with the Art Loss Register. The cost and liability would be considerable.

  Most police forces do provide examples of data on the Internet and this is the easy option but both the police and the Art Loss Register do not believe that the whole of their databases should be available on the Internet for searching without an audit trail or control. This would merely benefit criminals (See Principles Paper Flag 2) (not printed).

12.   Is the issue being addressed as any sort of priority—what discussions or consultation has there been since 2000, with the Home Office, DCMS, each other and/or the police, in terms of moving this project forward?

  The Art Loss Register joined the Home Office working party created in 2000 which put forward concrete proposals from the private sector to undertake a cost free trial, although we have heard nothing from the Home Office since their letter of 23 May 2001 saying that they would write when they had further progress to report

  We understand that some funding may have been made available to Scotland Yard to develop their current database and improve their data, and that one suggestion was that this should be extended to being available to all UK police forces.

  Given the points that we have made in answer to the questions above we doubt that this would be successful, in terms of providing a due diligence database for the Art Trade.

October 2003

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