The art finance market has seen an unprecedented boom in recent years, buoyed by changing perspectives amongst wealth management players and art collectors. Wealth managers increasingly see art as an integral part of any wealth management offering, while to art collectors, it is a valuable capital and investment asset.
The growth of the art-secured lending market has been accompanied by a parallel increase in the array of financial products and services specifically crafted for art collectors and dealers. Whilst the US sphere is dominated by private banks, auction houses such as Christie's and Sotheby's have also established finance arms. Loan facilities range in size and complexity – from the thousands to millions of dollars and from acquisition, personal loan, working capital, bridging, trade finance facilities to factoring and minimum price guarantee arrangements – often secured solely against portfolios of art.
Companies incorporated in the BVI are, by most measures, the most popular offshore holding structures in the world and it is therefore not uncommon for art to be owned through BVI structures. For both borrowers and lenders there are many advantages in doing so.
Given the regulatory requirements placed on financial firms, the art finance market is not as murky as it is often painted out to be. Art-market transactions are becoming more transparent, traditional informal arrangements are increasingly being replaced by written agreements, and careful due diligence is now the norm. The BVI is well placed to keep pace with the evolving regulatory landscape for the art finance market, and already has in place measures to identify ultimate beneficial owners and understand customers (KYC) and therefore reduce the risk of abuse of the art finance industry by money launderers.
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