USA – CALIFORNIA Law and Practice Contributed by: Jennifer Jordan McCall, Matt Perotti, Drew Reitz and Ashley E. Huh, Pillsbury Winthrop Shaw Pittman LLP
6.5 Role and Responsibilities of an Art Adviser An art adviser acts as a client’s representative in the art market, typically assisting the client with art acqui - sitions, serving as a consultant for art collections, and offering art investment advice, such as when to sell or purchase art. 6.6 Anti-Money Laundering Regulations and the Art Market The United States currently lacks a comprehensive regulatory framework for money laundering in the art market and is largely under-regulated. Most anti- money laundering/counter-terrorism financing regula - tions primarily apply to regulated financial institutions, such as banks and do not appear to be imposed on art market participants. The Money Laundering Con - trol Act, which criminalises money laundering, could expose art market participants to criminal liability, for example, when illegally obtained funds are used to purchase artworks. Art market participants do have compliance duties, such as cash-transaction reporting, which require any person engaged in a trade or business to file a report if they receive more than USD10,000 in cash in a single or in related transactions. The Anti-Money Laundering Act of 2020 amended the Bank Secrecy Act to bring certain antiquities market participants within the definition of “financial institu - tion” and directed FinCEN to issue implementing reg - ulations; the associated AML program, customer due diligence and suspicious activity reporting obligations apply as of the effective date of the final regulations, not automatically upon enactment.
is later determined not to be authentic, the buyer may seek contract remedies for breach of that warranty. These default protections, however, are frequently shaped by the parties’ agreement – particularly in gal - lery invoices and auction “conditions of sale” – which may limit, disclaim, or define the scope of authenticity warranties and remedies. Additionally, buyers may have some protection under the implied warranty of merchantability under Uniform Commercial Code Section 2-314 when purchasing art from prominent dealers or galleries who are con - sidered a merchant dealing in “goods of that kind.” However, as sellers can modify the express warranties through contract and it is difficult for buyers to prove a prima facie case for an implied warranty of merchant - ability, the remedies provided under the Uniform Com - mercial Code may be inadequate. A good-faith buyer may also bring a tort claim for fraud, or actions for negligent and/or fraudulent mis - representation, such as by claiming that the auction house was negligent in providing that the work was authentic. Contract law, particularly the doctrine of mutual mistake, may provide some protection for a good-faith buyer. The buyer may claim that authorship is an important provision of an art purchase contract and that the contract is unenforceable because both the buyer and seller were mistaken about a material term (ie, that the artwork was the authentic work of a specific artist). 6.4 Pre-Sale Checks for Auction Houses and Galleries There is no statutory or regulatory provision requiring auction houses to authenticate works that are sold. Nevertheless, an auction house’s duty to authenticate works of art is driven by the potential liabilities it may face under its contracts with buyers and under tort law, as well as the significant reputational damage that can result from selling inauthentic works. Reputable sellers will typically: • conduct title and provenance due diligence; • undertake an authenticity review; • prepare condition and restoration disclosures; • and conduct other due diligence checks.
7. Collections 7.1 Legal Status of Collections
Collections can be treated as “cultural heritage” when they are valued for more than their market price, such as for their historic, artistic, scientific, religious or social significance to a community or nation. The legal con - sequences of that status are still largely determined by the domestic law of the place where the collection is located (and sometimes the place of origin), but sever -
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