Cultural Property (Armed Conflict) Bill [Lords]

Written evidence submitted by Professor Janet Ulph, School of Law, University of Leicester (CPB 08)

Re: Clause 17 of the Cultural Property (Armed Conflict) Bill

1.0 INTRODUCTION

1.1. I am the main author of the first Law book which discusses all relevant laws relating to the illicit trade in art and antiquities (The Illicit Trade in Art and Antiquities: International Recovery and Criminal and Civil Liability. Oxford: Hart Publishing, 2012). I received a Fellowship from the Leverhulme Trust to carry out the necessary research. In the last 5 years, I have received two research grants from the Arts and Humanities Research Council to work with the museums sector and to provide guidance on dealing with museum collections.

I am a leading expert in the UK as regards the law and ethics relating to museum collections. I have an excellent understanding of the problems which confront museum professionals. In contrast, I have not worked in the art trade and my knowledge of this industry stems primarily from my expertise in relation to the relevant laws and the trade’s professional codes of conduct.

1.2. I wish to comment upon the mental test (mens rea) in clause 17 of the Bill, which states:

"It is an offence for a person to deal in unlawfully exported cultural property, knowing or having reason to suspect that it has been unlawfully exported."

2.0 SUMMARY

2.1. I will discuss in turn three possible tests:

· dishonesty (which may be sought by certain traders)

· knowing or having reason to suspect (the proposed test)

· knowing or suspecting

I argue against a test of dishonesty. I suggest that a subjective test of "knowing or suspecting" might be best.

In my discussion below, I suggest that museum professionals would have no difficulty with any of these tests because of the high ethical standards set by their Code of Ethics and their close adherence to agreed due diligence procedures. But the test which is chosen may affect the art trade far more because there are a diverse group of participants; their goals are different from museum professionals; they encounter practical problems which do not confront museum professionals.

3.0 MUSEUM SECTOR

3.1. The range of objects in museum collections is remarkable and the missions of museums reflect the diversity of the collections and their historical development. However, museum professionals form a cohesive group. As the Code of Ethics 2015 produced by the Museums Association ("MA") states in its introduction, all museums "are public-facing, collections-based institutions that preserve and transmit knowledge, culture and history for past, present and future generations." All museums in the UK will follow the MA’s Code of Ethics; in addition, some museums will also use the Code of Ethics produced by the International Council of Museums (ICOM).

3.2. Principle 2.4 of the MA’s Code of Ethics states:

Conduct due diligence to verify the ownership of any item prior to purchase or loan, and that the current holder is legitimately able to transfer title or to lend. Apply the same strict criteria to gifts and bequests.

Principle 2.5. of the MA’s Code of Ethics states:

Reject any item for purchase, loan or donation if there is any suspicion that it was wrongfully taken during a time of conflict, stolen, illicitly exported or illicitly traded, unless explicitly allowed by treaties or other agreements, or where the museum is co-operating with attempts to establish the identity of the rightful owner(s) of an item.

3.3. The Code of Ethics therefore refers to "any suspicion" and places an emphasis upon proper due diligence procedures. These principles are reinforced in the Additional Guidance to the Code of Ethics which provides further detail (and which is available on the MA’s website). For example, Provision 2.7 states that museums should "Reject any item if there is any suspicion that since 1970 (the agreement of the UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property), it may have been stolen, illegally excavated, removed from a monument, site or wreck contrary to local law or otherwise acquired in or exported from its country of origin (including the UK), or any intermediate country, in violation of that country’s laws or any national or international treaties …"

3.4. The Arts Council’s Accreditation documents build upon those principles. Every accredited museum must follow the Collections Development Policy Template, which emphasises the importance of due diligence procedures in deterring the illicit trade. In particular, paragraph 9.3. states:

In accordance with the provisions of the UNESCO 1970 Convention … and the Dealing in Cultural Objects (Offences) Act 2003, [1] the museum will reject any items that have been illicitly traded. The governing body will be guided by the national guidance on the responsible acquisition of cultural property issued by the Department for Culture, Media and Sport in 2005.

Museums also have the benefit of supplementary material which is freely available. For example, there is an excellent 2004 publication entitled Acquisition: Guidance on the Ethics and Practicalities of Acquisition, which is available on the MA’s website.

3.5. I have drawn the attention of members of the museum sector to clause 17 of the Bill. They confirm my own view that, if the test of "knowing or having reason to suspect" is retained in the Bill, it will not cause the museum sector any difficulties. There are rigorous due diligence procedures in place and every museum professional is required to comply with them. The museum sector wholeheartedly supports the Bill and the ratification of the Hague Convention 1954.

4.0 THE ART TRADE

Dishonesty

4.1. In my opinion, it would not be appropriate to substitute "dishonesty" as the test, in the light of a report published by Transparency International in November 2015 entitled: "Don’t Look, Won’t Find: Weaknesses in the Supervision of the UK’s Anti-Money Laundering Rules."

Money laundering is concerned with concealing the origin, ownership or destination of money or things derived from criminal activity. It is feared that money laundering is facilitated by an environment which is secretive and where no questions are asked, because it encourages reckless dealings. At page 60 of the Report it is suggested that the art and heritage sectors are attractive to corrupt individuals as a route for laundering proceeds of crime. The Report expressed concern that there seemed to be insufficient anti-money laundering awareness in all sectors but revealed at page 14 that art traders and auction houses had a particularly low level of reporting suspicious transactions. The summary states that, "In the art and auction house sectors, only 15 reports of suspicious activity were submitted (out of a total of 0.004 per cent of the total), despite money laundering risks being well recognised in this sector."

4.2. At page 63 of the Report by Transparency International, it is suggested that, "Art is appealing for money laundering for many reasons. Typically the price is difficult to determine and verify. It is portable and easily shipped across borders. Transactions may be brokered by advisers, who are not regulated. In art sales it is not unusual for the identities of both seller and buyer to be kept secret and cash is a commonly accepted form of payment, making it difficult to track transactions."

4.3. The Report by Transparency International should not be accepted uncritically. For example, the statement that "cash is a commonly accepted form of payment," in the art trade is not supported by further evidence within the Report. However, given the criticisms made in the Report, I would argue that the mental test should not be one of dishonesty because it does not clearly address the fear that traders who are reckless, and who deliberately fail to make enquiries, thereby facilitate money laundering.

"knowing or having reason to suspect"

4.4. The phrase "reasonable grounds to suspect" involves an objective test. An offence could therefore be committed if the accused ought to have been suspicious. It could therefore encompass neglience.

4.5. An obvious justification for using the phrase "reasonable grounds to suspect" is that it can be linked to profesional codes of conduct. For example, the phrase is used extensively in the International Code of Ethics for Dealers in Cultural Property (UNESCO 1999). Article 1 of the Code states that, "Professional traders in cultural property will not import, export or transfer the ownership of this property when they have reasonable cause to believe it has been stolen, illegally alienated, clandestinely excavated or illegally exported."

4.6. This phrase can also be found in section 330 of the Proceeds of Crime Act 2002. An offence is committed where a person working in the regulated sector (such as banks, financial institutions, lawyers, accountants and high value dealers in cash transactions) fail to submit a suspicious activity report where they know or suspect, or have reasonable grounds to know or suspect, that another person is engaged in money laundering. However, it should be noted that this test may be easier to apply in the financial sector because this sector is relatively cohesive so that detailed guidance on conduct from the Joint Money Laundering Steering Group will be relevant and appropriate to the whole sector. Solicitors have their own guidance provided by the Law Society.

4.7. Traders could object to the test of "reasonable grounds to suspect" because they do not form a uniform group. In the Basel Art Trade Guidelines, 2012, it is observed in an international context that, "One half of the trade is dominated by a few auction houses, while the other half is an open playing field for a myriad of art-dealers. These in turn are organised in a variety of trade associations and subscribe to a great range of different ethical standards." I would suggest that this comment reflects the UK position. There may even be some variations in codes of conduct within the same specialist groups. For example, the due diligence procedures set out in the Antiquities Dealers Association’s Code of Conduct include a requirement that a search should be made of the Art Loss Register if an object is worth more than £3,000. In contrast, the Code of Conduct of the Association of International Antiquities Dealers requires this type of search where the object is worth more than £2,000. Furthermore, a clear answer to the question of whether a dealer should have searched an online register may be elusive because objects of antiquity can be difficult to value accurately.

4.8. Codes of conduct vary in relation to the phrasing of the mental test. The British Art Market Federation’s Principles of Conduct include the statement that "Members have agreed to take appropriate steps if they know, suspect, or have reason to believe that they are in possession of stolen property." By comparison, the Sotheby’s Code of Business Conduct refers to "suspect" subjectively in relation to reporting conduct which is inconsistent with the law. The position is made more complex by the fact that some forms of guidance are far more detailed than others. For example, Dr. Vigneron (University of Kent) and I responded to a call for responses to the Green Paper for Consultation on the Basel Art Trade Principles on Anti-Money Laundering (J une 2016 ) . The Principles use the subjective test of suspecting (paragraph 42) but included discussion of enhanced due diligence procedures for certain groups of people persons, such as politicians.

"Knows or suspects"

4.9. According to section 340(3) of the Proceeds of Crime Act 2002, any person could be charged with a principal money laundering offence if s/he "knows or suspects" that the money or object constitutes a benefit from criminal conduct or that it represents such a benefit (in whole or part, and whether directly or indirectly). The principal money laundering offences are set out in sections 327 to 329 of the 2002 Act. Sections 327 and 329 are concerned with concealing, transferring or possessing the proceeds of crime; section 328 is concerned with those who become involved in any arrangement which they know or suspect will facilitate the acquisition, retention, use or control of criminal property.

4.10. The test is subjective: as regards the phrase, "knows or suspects," the existence of suspicion is a subjective fact: K Ltd v National Westminster Bank plc [2007] 1 WLR 311.

4.11. A test of "knows or suspects" in clause 17 could be more appropriate because:

1) The new offence created by clause 17 may overlap with one of the money laundering offences and it might therefore aid clarity in the law to have the same mental test. For example, if the accused has purchased a looted cultural object from an occupied state which has been smuggled into the UK, he may be guilty of money laundering if he suspected the true position.

2) It would deter secrecy in transacting whilst providing a proportionate and credible deterrent in relation to the clause 17 offence.

3) The Crown Prosecution Service and the police are familiar with this phrase because of prosecutions in relation to money laundering legislation.

4) There is judicial guidance on the word "suspects." In R v Da Silva [2006] EWCA Crim 165, [2007] 1 WLR. 303, the Criminal Court of Appeal provided guidance in the context of the statutory predecessor to section 328 of the Proceeds of Crime Act 2002. Longmore L.J. suggested at paragraph 16 that "the defendant must think that there is a possibility, which is more than fanciful that the relevant facts exist. A vague feeling of unease would not suffice."

Longmore L.J. went on to add in paragraph 17 that,

"The only possible qualification to this conclusion, is whether, in an
appropriate case, a jury should also be directed that the suspicion must be
of a settled nature; a case might, for example, arise in which a defendant
did entertain a suspicion in the above sense but, on further thought,
honestly dismissed it from his or her mind as being unworthy or as contrary
to such evidence as existed or as being outweighed by other considerations.
In such a case a careful direction to the jury might be required. But, in
our view, before such a direction was necessary there would have to be some
reason to suppose that the defendant went through some such thought process as set out above."

5) The above guidance regarding "suspects" for criminal cases has been adopted for civil cases aiding clarity in the law: K Ltd v National Westminster Bank plc [2006] EWCA Civ 1039, [2007] 1 WLR 311 at paragraph 16.

5.0 CONCLUSIONS

5.1. It is desirable to achieve a consensus on the mental test for the Clause 17 offence. Traders must appreciate the views expressed both at domestic and international level in relation to the risks of money laundering. At the same time, traders’ views on whether a particular test will work in practice are important. Recommendation 16 in the Report by Transparency International emphasises the need to strengthen information sharing between not only law enforcement authorities and anti-money laundering supervisors but also between "key private sector entities." A similar recommendation can be found at pages 6-7 of the UK National Risk Assessment of Money Laundering and Terrorist Financing, published in October 2015. In this Report, the overall objective is stated to be to ensure the financial system is a hostile environment for illicit finance while minimising the burden on legitimate businesses and individuals. But, as part of that strategy, it is hoped that information will be shared between the private sector and law enforcement agencies. A free exchange of ideas is therefore desirable.

5.2. In this search for the appropriate mental test, it occurs to me that a "dishonesty" test mooted by traders might not be as positive to them as it first appears. Members of groups with codes of conduct which hold them to a high standard (such as the Antiquities Dealers Association) could be put at a commercial disadvantage by those who operate with codes of conduct which are less demanding. The phrase "knows or suspects" provides flexibility but deters secrecy in the trade and reckless dealings.

5.3. Although I do not have an extensive practical knowledge of the problems which traders confront in transacting, I accept that due diligence procedures may well need to vary with the perceived financial and cultural value of an object, its nature, and what is already known about its provenance. It is therefore desirable to have a mental test which takes account of the context, the object(s) in issue, and any relevant code of conduct. In these circumstances, a subjective test of "suspects" could be preferable.


November 2016


[1] Museums in Scotland currently omit the reference to the 2003 Act because the Act does not apply to Scotland.

 

Prepared 16th November 2016