MIAMI – The coronavirus pandemic is not the only threat that Miami’s art scene is facing. There is a fear that there may not be enough exhibitors to merit an Art Basel Miami Beach fair this year and that the U.S. could start regulating the art market.
U.S. Senate investigators are urging Congress to put an end to the art world’s “secretive nature” and implement “the same anti-money laundering requirements” to art market transactions “that apply to financial institutions.”
Doing so could scare away high-net-worth clients who have been able to remain anonymous when making purchases at galleries in areas like the Design District, Wynwood, Little River, Allapattah, and at satellite fairs during Art Basel Miami Beach.
Amid the coronavirus pandemic, Art Basel canceled fairs in Switzerland and Hong Kong this year. The organizers of the Dec. 3-6 fair in Miami Beach sent a letter to exhibitors on Wednesday giving them more time to decide whether or not they will be attending.
“It is still challenging to predict what the global situation will be like in December,” organizers wrote. “We nevertheless remain deeply committed to holding the fair in Miami Beach if at all feasible.”
Art dealers stand to lose big if the fair is canceled. They earn about half of their income when they conduct private sales through galleries and the other half at art fairs. They earn still earning very little from purchases online. If the regulations are implemented, dealers would have to spend on compliance since they connect art owners with art buyers in private sales.
The fear of regulation comes after the U.S. Senate’s Permanent Subcommittee on Investigations released the 150-page Art Industry and U.S. Policies That Undermine Sanctions report on Wednesday. Investigators warned the art market has loopholes that criminals are abusing.
It’s already starting to happen in the United Kingdom and the European Union. The new anti-money laundering regulations implemented there earlier this year are forcing sellers of artwork priced at $11,100 or more to report the true identity of the buyer. A shell company doesn’t cover it.
Regulating the U.S. market would have rippling effects in Latin America and the Caribbean. According to the Art Basel and UBS Global Art Market Report, the U.S. accounts for 44% of the $64.1 billion global market share. The U.K. accounts for 20% and China for 18%. There was a decline of 5% from 2018 attributed in part to the U.S.–China trade war.
Art fairs not only play an important part in Miami-Dade County. According to the Art Market Report, aggregate sales from art fairs worldwide reached an estimated $16.6 billion. Last year, Art Basel Miami Beach attracted 269 galleries from about 30 countries ― including Colombia and Mexico ― at the Miami Beach Convention Center.
By switching the withdrawal deadline from Aug. 1 to Oct. 1, Art Basel Miami Beach organizers are aiming to help exhibitors deal with the uncertainty of the pandemic’s impact in Miami-Dade County. After the Oct. 1 deadline, an exhibitor’s withdrawal would come with a 75% loss.
“We very much hope that you will remain committed to participating in Art Basel Miami Beach in December,” organizers wrote. “However, please know that if you ultimately decide to withdraw, this will by no means impact your relationship with Art Basel.”