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Freeports, art and global finance




Getting a grip on problems such as tax evasion and money laundering has become a matter of utmost urgency. In this context, the Panama Papers drew attention to the dubious role of free trade zones (FTZs), and in particular of freeports as repositories of artworks and other valuables. Media reports pointed to the connection between the international art trade and offshore secrecy:
“The documents reveal sellers and buyers of art using the same dark corners of the global financial system as dictators, politicians, fraudsters and others who benefit from the anonymity these secrecy zones offer.” (Jake Bernstein)
But even the legitimate side of freeports is calling for greater scrutiny. With increasing regulations and sanctions in the world of finance the widely unregulated art market is attracting more and more banks, hedge funds and other financial players thereby posing new challenges to financial supervision.

Free trade zones have become central to the world economy. In 1975, according to the International Chamber of Commerce only 79 FTZs existed worldwide. In 2008, there were approximately 3,000 FTZs in 135 countries (FATF Report 2010).

Freeports are warehouses in free trade zones: “Originally they were intended as spaces to store merchandise in transit, but they have become popular for the storage of valuables, including art, gold and wine collections – often for long periods of time. Goods entering freeports are not subject to customs duties. Goods sold in the freeports are not subject to value added tax. No withholding tax is collected on capital gains, though sellers may need to report to the tax authority in their country.” (Financial Times)

In recent years, freeports have benefitted from two developments. One is an unprecedented art boom which was fuelled by the expansion of private collections, a worldwide expansion of museums and the entrance of market players such as new multimillionaires in emerging markets. According to the European Fine Art Foundation, the estimated annual turnover of art rose from €18bn in 2003 to €47bn in 2013 (Cynthia O’Murchu). At the same time, prices exploded in certain market segments: With the increasing number of museums and private collections the supply of traditional art was shrinking which boosted both demand for the rare major works coming up for sale and interest in contemporary art (Don Thompson).

The second influence is a changing financial environment and a growing link between art and finance. In an era of ultra-low interest rates and a booming art market there are increasing numbers of buyers and sellers who consider art as an investment or as vehicle for speculation. This in turn is attracting financial players who offer financial services or trade art for themselves in search for higher returns.

Used as a way to diversify portfolios and as collateral for loans artworks increasingly resemble other types of assets. Quoting Deloitte’s Art and Finance site:

“The unprecedented development of the art market over the past few years has resulted in the ‘financialisation’ of the art market. Art is now seen not only as an object of pleasure, however, also as a new alternative asset class with interesting business opportunities.”

As one observer, quoted by Graham Bowley and Doreen Carvajal, said: “For some collectors, art is being treated as a capital asset in their portfolio. They are becoming more financially savvy, and free ports have become a pillar of all of this.”

Restrained by regulatory requirements, financial firms are facing particular challenges in this market. In a non-exhaustive list of market characteristics the Art & Finance Report 2016 mentioned authenticity, lack of provenance, forgery and attribution, but also lack of professional and qualification standards and law enforcement. These factors make an assessment of the quality of a loan or an investment and related risks more difficult than elsewhere.

Market practices favour secrecy. Although recently written agreements have become more common, informal arrangements prevail. Even multi-million-dollar sales of art can be carried out with no written sales contracts (Cynthia O’Murchu).

Informality and lack of transparency make the market vulnerable to misuse. The Basel Art Trade Guidelines, a self-regulation initiative, pointed to issues such as disclosure, due-diligence, conflict of interest and money laundering.

In her book Big Bucks: The Explosion of the Art Market in the 21st Century Georgina Adam described the role the art market is playing in illegal transactions:

“In addition to its confidentiality, the high level of monetary transactions, the unfamiliarity of enforcement agencies over values and the portable nature of art itself all contribute to the art market being a suitable vehicle for illegal activity. As other money-laundering techniques are coming under closer scrutiny, smugglers, drug traffickers and arms dealers are increasingly turning to the art market.”

Freeports are conducive to secrecy. In their preferential treatment they resemble offshore financial centres offering both high security and discretion and allowing transactions to be made without attracting attention of regulators and tax authorities.

Storing art requires precautions in order to keep it and prevent paintings, canvases and materials from deteriorating. The new generation of freeports is tailored to the needs of high-end art collectors. These “fortresses of art” are equipped with surveillance systems, climate control and private showrooms. They have strong rooms and offices for galleries and art lenders where clients can view, buy and sell art, and they provide a wide range of services including transport and logistics. In addition, firms offering art-related services like restoration and financing set up shop on the grounds.

The biggest three of this kind of freeports are located in Geneva, Singapore and Luxembourg.

Geneva is the oldest among them. Its first freeport was set up in 1854. Today, Geneva Free Ports are said to concentrate the greatest amount of art of any storage in the world, much of it of museum quality. An audit Swiss officials initiated in 2012 estimated that more than 1.2 million pieces of art are stored there, some of which had not left the buildings in decades (Graham Bowley and Doreen Carvajal). For example, Francois Pinault, the owner of Christie’s, the world’s biggest auction house by revenue, is believed to keep his private collection in Switzerland, which numbers over 2,000 artworks (Georgina Adam). Another household name is the Nahmad family, an art dynasty with roots in banking, who, as Jake Bernstein mentioned in his article on the Panama Papers, were early adopters of the benefits of offshoring art. According to Bowley and Carvajal, London art dealers estimate that the Nahmad family keep about 4,500 works in the Geneva Free Ports.


Geneva Free Ports offer a wide range of services. One company, Natural Le Coultre, rents almost a quarter of its space. The firm is one of the world’s biggest specialist companies for the storage and shipping of art. Its owner, Yves Bouvier, plays a key role in the development of the new generation of freeports. Bouvier is also a primary owner of the freeports in Luxembourg and Singapore and a consultant to the Beijing Freeport (Jake Bernstein). In this context, it’s worth having a look at an article by Simon Bradley  with a video of Yves Bouvier and the operation of freeports.

Luxembourg’s “fortress of art”, Le Freeport, opened its doors in 2014. It is a 22,000 square metres building with about 160 rooms and eight private showrooms off the main lobby for artworks. Furthermore,

“studded with stones and surrounded by walls and barbed wire, the Luxembourg Freeport has four bullion chambers guarded with 50cm-thick metal doors, and four other chilled rooms designed to hold 700,000 bottles of fine wine, said staff.” (Philip Blenkinsop)

Fine Art Logistics Natural Le Coultre, Luxembourg, is advertising its services as follows:

“Our warehouse is ideally located at LE FREEPORT Luxembourg, the highest maximum-security vault in Europe. This location allows speed, connectivity, and cost optimisation of the logistics processes.

We guarantee maximum security 24 / 7 / 365, ultra-modern alarm systems, the latest sophisticated technologies monitoring temperature, humidity and fire suppression, direct access to the tarmac and supervision on-site at all times.”

Blenkinsop quoted Yves Bouvier explaining:

“We had to move on to Luxembourg because Geneva was full. With Luxembourg we have an airport that can handle cargo. In Geneva you have to move everything by road.”

In this video, David Arendt, CEO of Le Freeport. Luxembourg, describes the point of view of the host country. Luxembourg, he says, depends on its financial centre which has changed in recent years. Banking secrecy does no longer exist. As a consequence, the clients the financial centre must seek to attract now are the rich and super-rich.

The third of the BIG THREE specialized in art and other valuables is located in Asia. Quoting Antony Dapiran on Le Freeport Singapore:

“Singapore launched its freeport in 2010, adjacent to Changi Airport, with storage areas, showrooms, workshops and offices. It enjoys free-trade-zone status, with artwork stored there exempt from import duties and Goods & Services Tax, which would normally be levied at a rate of seven percent. Collectors may also move works temporarily to local museums in Singapore for exhibition without incurring duties or taxes.”


Le Freeport Singapore praises itself to offer “integrated services to handle the shipping, storage, display and trade of these valuables. Art collectors and dealers, auction houses, banks, museums and fine art logistic companies will find in LE FREEPORT the perfect partner.”

Georgina Adam remarked: “The stability, safety and discretion of Singapore have led to it being dubbedthe Switzerland of Asia’.”

The freeport’s motto is: “Swiss Precision, Singaporean Safety.”

Singapore is attracting clients not only from Asia, but also Europeans who are looking to diversify where they store their properties, for example, because insurance companies are asking them to, as Joseph Stasko, International MD, Christie’s Fine Art Storage explained in this video. Another advantage mentioned in the video is superior confidentiality: In Singapore, unlike in Switzerland, customers only register the general category of goods. There is no assigned value and no inventory list.

In Asia, free ports have become an important element in the competition of cities for the role as Asia’s “art-market hub.” Singapore’s main competitor in this respect is Hong Kong:

“… the duty-free port of Hong Kong, while lacking purpose-built art facilities, continues to be an attractive trading hub from a tax point of view. Hong Kong does not levy any import or export duties on artwork, and there are no local sales, consumption or value-added taxes.” (Antony Dapiran)

Other rivals are located in mainland China. In March 2012, construction began on the Beijing Free Port of Culture at Beijing Capital International Airport (David Segal). This time, Yves Bouvier, who also signed a deal to develop a facility in Shanghai, acted as an advisor (Cynthia Munchu).

But, observers doubted whether the Beijing freeport which opened in 2014 will prevail against locations such as Singapore and Hong Kong:

“Despite a freeport’s status as a customs-exempt zone, the property is still located in the host country and subject to that country’s laws. Local laws on “bailment,” the law governing the entrusting of property to a third party, will need to be considered, and collectors should seek advice as to what protections local law provides in the event that their property is lost, damaged or misappropriated. Gaps in local law may be covered with appropriate contractual arrangements with the freeport facility.

In addition, any disputes arising in relation to property located in the freeport are likely to be resolved in the local courts unless collectors specify otherwise. Collectors should be certain to include contractual provisions that select a court with which they are comfortable or that provide for arbitration as a dispute resolution mechanism—bearing in mind of course that the physical location of the property and the ability to enforce any court or arbitration order in that location will be the ultimate consideration.” (Antony Dapiran)

There is a longer-term vision for Beijing which has a strong focus on the relation between art and global finance:

“Beijing has far greater ambitions for the free port, which is run by the municipal government-owned Gehua Culture Development Group.

… One of the favorable policies under consideration is to build an offshore financial market at the port to serve cultural companies. In the free port, financial institutions will be encouraged to set up outlets to do foreign exchange settlement, currency exchange and tax clearance services.

Private banks dedicated to serving the cultural and entertainment industry will be welcome in the free port. The port also plans to allow offshore cultural investment funds to be set up so that foreign investors will face fewer limitations in investing in China’s cultural industry”. (Zhang Xinmo)

Two other mainland centres which may contest Beijing’s new role are Shanghai and Shenzhen. Zhang Xinmo stressed that “Shanghai, in particular, is taking advantage of its status as China’s first national-level pilot free trade zone, to roll out many preferential policies to support cultural companies, especially foreign ones.”

Meanwhile, freeports specialized in storing art and other luxury goods have been mushrooming around the world. One of the latest is in Newark, Delaware, the well-known “onshore-offshore” market and tax haven in the United States.

With growing focus on art as an asset class the wish of investors to display artworks in their homes or business premises is becoming less important compared to the aspect to store them adequately. In 2016, wealth managers in the art market said to expect 55 percent of their clients to increase their focus on art as an asset class in the future, compared to 38 percent in 2014, the year the Luxembourg Freeport was launched (Art & Finance Report 2016). At that time, 28 percent of art collectors and art professionals said they already used or had a relationship with a freeport provider and more than 40 percent expected they or their clients to use a freeport facility in the future.

On the finance side, the existence of freeports specialised in artworks, and access to secure storage, encouraged banks to offer art secured lending or increase their art lending business (Art & Finance Report 2014). This coincides with another development increasing the attractiveness of the art business for the financial industry which may reduce the mentioned challenges and result in a convergence of practices in art and financial markets:

“The regulatory landscape is changing as laws have been established or amended in several countries imposing anti-money laundering requirements on art dealers: stakeholders in the art market can learn from regulated financial institutions and gradually implement essential measures to identify ultimate beneficial owners, understand customers (“know your client”), and monitor deal transactions. These measures will ultimately reduce the risk of abuse of the art market by money launderers and lower the risk of civil fines, criminal charges, and reputational damage to stakeholders.” (Art & Finance Report 2016)

Traditionally, the financial side of the art market is the territory of family offices and private banks which manage the wealth of the rich and super-rich.

There are several definitions of rich in this context. High-net-worth individuals (HNWI) are generally defined as holding financial assets with a value greater than US$1 million. Ultra high-net-worth individuals (UHNWI) are those with net assets of US$30 million and above.

Family offices manage the assets of affluent families. There are single family offices (SFO) and Multi-family offices (MFO). Usually, the latter are independent organizations supporting multiple families to manage their wealth.

The term private bank is somewhat fuzzy. In the narrow sense, it is rooted in history and describes unincorporated banks owned by individuals or general partners with or without limited partners which are especially dedicated to serving and advising private clients:

“Private banking forms a more exclusive (for the especially affluent) subset of wealth management. At least until recently, it largely consisted of banking services (deposit taking and payments), discretionary asset management, brokerage, limited tax advisory services and some basic concierge-type services, offered by a single designated relationship manager. …

Private banking is the way banking originated. The first banks in Venice were focused on managing personal finance for wealthy families. Private banks became known as ‘Private’ to stand out from the retail banking & savings banks aimed at the new middle class. Traditionally, private banks were linked to families for several generations. They often advised and performed all financial & banking services for families. Historically, private banking has developed in Europe … Some banks in Europe are known for managing assets of some royal families. The assets of the Princely Family of Liechtenstein are managed by LGT Group (founded in 1920 and originally known as The Liechtenstein Global Trust). The assets of the Dutch royal family are managed by MeesPierson (founded in 1720). The assets of the British Royal Family are managed by Coutts (founded in 1692).” (Wikipedia)

In the broader sense, private banking “refers to banking, investment and other financial services generally provided by banks to its clients, usually to high-net-worth individuals who enjoy high levels of income or invest sizable assets. “Private” means that products and services provided by the bank are rendered on a more personal basis than in mass-market retail banking, and delivered to the client via dedicated bank advisers.” (

These days, most of global banks provide private banking services – with rising tendency as increased financial regulation, low returns and volatile markets drive them away from investment banking activities towards managing the wealth of others (Landon Thomas Jr.). Credit Suisse, Barclays, BNP Paribas, Citibank, Deutsche Bank, HSBC, JPMorgan Chase, UBS and others established separate business units with designated teams of client advisors and product specialists exclusively for UHNWI (Wikipedia).

Some of those banks show a strong presence in the art market. UBS, Citigroup, Deutsche Bank and Crédit Suisse, for example, have set up departments to advise clients on art investment. Advisory services include art collecting, financing, releasing liquidity and using art as collateral (Clare McAndrew).

Global banks are generous sponsors of art fairs and other events. Among the four big international fairs which “are to art what Cannes is to movie festivals” (Don Thompson), ABN AMRO and ING are sponsors of TEFAF Maastricht,  Deutsche Bank is the main sponsor of  Frieze, and UBS is the global Lead Partner of Art Basel and Art Basel Miami Beach.

Sponsorship is giving banks “the chance to offer something to their high net worth individuals (HNWI) clients as well as enhancing their ‘cultural’ credentials. Frieze sponsor Deutsche Bank has a separate area, with ist own entrance, where clients can await the 11 am opening: they are then launched into the heart of the fair while other VIP visitors are still queuing up.” (Georgina Adam)

Banks are art collectors as well. The outstanding example is the Deutsche Bank corporate collection, which with more than 57,000 works is the largest in the world (Elena MartiniqueDon Thompson). “Founded in 1979, today it is one of the world’s most important collections of drawings and photographs since 1945. Art characterizes the bank’s business rooms in financial centers such as Frankfurt, Hong Kong, London, Milan, New York, and Zurich.” (Deutsche Bank)

Deutsche’s art-related activities are beyond comparison. The collection includes more than 5,000 artists from more than 40 countries. Parts of  it are displayed under the Deutsche Bank global art programm in the Bank’s Group Head Office in Frankfurt, in its London Head Office as well as in over 30 branches in the Americas, “from Toronto to Sao Paulo and Miami to San Francisco.”

In 1997, the bank founded the Deutsche Guggenheim, together with the Solomon R. Guggenheim Foundation, and ran the gallery space for 15 years before it became Deutsche Bank KunstHalle. There is a Deutsche Bank Collection at the Städel Museum in Frankfurt which it has sponsored for many years. Furthermore, Deutsche chooses an Artist of the Year, publishes an art magazine and, in tandem with its exhibition, KunstHalle provides an impressive tailor-made art program for kids, youths, and families.

Other financial institutions’ interests and ambitions in the art market are much more modest. The question is: Why should their activities and the newly strengthened bond between art and finance give cause for concern?

The short answer is: temptations, risks and lack of regulation.

Temptations: The art market offers extraordinary chances. A van Gogh sold for $82.5 million, a Renoir sold for $78.1 million, a Picasso, purchased for $7,000 in 1941 and sold in 1997 for $48.4 Million – this is the stuff investors’ dreams are made of.  (All examples from Don Thompson’s book The 12 Million Stuffed Shark – The Curious Economics of Contemporary Art).  No media report the losers.

Risks: For example, the risk that prices decline dramatically or markets for art works dry up unpredictably. Quoting Don Thompson:

“As you read about different works of art … and the prices involved, ask whether each purchase seems to you a decent investment. Not just ‘Will this art be important twenty-five years from now?’ but ‘Will this art double in value in ten years as would a moderate-risk bond portfolio?’ For almost all art the answer is no. Of the thousands of artists who had serious Gallery shows in New York and London during the 1980s, no more than twenty were offered in evening auctions at Christie’s or Sotheby’s in 2007. Eight of ten works purchased directly from an artist and half the works purchased at auction will never again resell at their purchase price.”

Don Thompson further asked: “Will people who as traders try to outguess the market do the same when it comes to art? If they anticipate a culture shift or a market decline, will they dump art before the market catches on?”

Two examples he gave may illustrate the point: “When Japanese markets crashed in the late 1980s, banks seized art from about twenty major borrowers who had pledged their collections against bank loans. The first Japanese bank soon dumped art on the international auction market; others tried to follow, but it was soon too late.”


“There was a sense of foreboding in October 2005 when Steve Cohen [a very rich Connecticut hedge-fund executive, as Thompson noted elsewhere in his book] paid more than $100 million for two paintings by Paul Gauguin …

[But] was Cohen switching into Impressionism and dumping the 1,200 works in his contemporary collection? If Cohen was selling contemporary art, every other investor wanted to sell right now, not next month Cohen could have produced a market decline by his own actions”.

The latter example points to the third aspect: regulation. The art market, like the financial markets, is a true global market. Spillover effects and contagion may easily spread a crisis from one end of the world to the other. Financial regulation tries to contain this risk for financial markets – with limited success. For the opaque and highly unpredictable art market no comparable framework exists. There is a danger that frictions and instabilities in both markets reinforce one another.

Don Thompson listed a number of “art-fund disasters” which gives rise to the idea that financial institutions may not fare better in this market than in their own turf:

“Between 1989 and 1991, the Banque Nationale de Paris invested $22 million in a portfolio of sixty-eight French and Italian paintings and drawings. They lost $8 million when the works were sold in 1998. New York’s Chase Manhattan Bank with a $300 million art fund, Morgan Grenfell with a $25 million fund and the Japanese Itoman Mortgage Corporation, which invested $500 million in Western paintings, each lost much of its investments. Each said that its model would have worked with a holding period of twenty to twenty-five years, but no investor was willing to commit funds for that long.”

From the Scylla of investment banking to the Charybdis of wealth management – or tossed between the two?


In the art world itself, the growing emphasis on the money-making side of the business and the dubious role of freeports has not gone unnoticed as the following examples illustrate.

“’The missing element in the art world which has been atrophying and been pushed aside in recent years is the cultural conversation,’ says Michael Short, who has worked as a dealer in New York and London: ‘The reason why this or that artist should be worth so much money is because of his or her contribution to the culture, and that’s not even part of the discussion anymore.’” (Interview with Georgina Adam)

Graham Bowley and Doreen Carvajal asked whether the boxing up of millions of valuable works perverts the very essence of what art is supposed to do. They quote Eli Broad, an American entrepreneur and major contemporary art collector, who said: “Treating art as a commodity and just hiding it in storage is something that to me is not really moral.”

Actually, the topic has found its way into art itself. In Die Sonne und der Kampf (art 04/2016) Kito Nedo is asking:

“Gibt es einen Ort, der für das Böse in der Kunstwelt steht? Einiges spricht dafür, dass es die Freeports sind – jene Freilager in Singapur und anderswo, in denen steuerfrei Kunst gelagert werden kann.“

[Is there a place which is exemplary for evil in the art world? There is some evidence that these are the freeports – those depositories in Singapore and elsewhere where art can be stored tax free.]

“So diskret, dass auch Geldwäsche und andere Wirtschaftskriminalität hier stattfinden kann. Freeports sind zum Symbol der Gier des immer noch wachsenden globalen Kunstmarkts geworden. Doch der Widerstand hat schon begonnen.“

[So discreet that even money laundering and other economic crime can take place there. Freeports have become a symbol of the greed of the still growing global art market. But resistance has already begun.]

Nedo reports of the film Factory of the Sun of German-Japanese artist Hito Steyerl and describes that in this film there is a virtual character who has taken part in storming a freeport. “Big Boss Hard Facts”, as he calls himself, had been killed in the 2018er riots in Singapore. Since then, he is wandering around in the internet as avatar telling his story: “We occupied the freeport and converted it into a render farm cooperative.”

The film was shown 2015 in the German Pavilion at the Venice Biennale. This video allows a short glimpse (starting at 22:30 min.):


The accompanying text says: “What is photography today? How can we live productively with this stream of images?”, Florian Ebner asks. He is the curator of the German Pavilion at the 56th International Art Exhibition – La Biennale di Venezia. Works of art by Olaf Nicolai, Hito Steyerl, Tobias Zielony and the artist duo Jasmina Metwaly & Philip Rizk transform the German Pavilion into a factory (german: „Fabrik“) of (re-)producing images. This Deutsche Welle video is an exclusive documentation of the German contribution at the Venice Biennale 2015.

The German contribution to the 56th International Art Exhibition La Biennale di Venezia is realised on behalf of the Federal Foreign Office. Since 1971, ifa (Institut für Auslandsbeziehungen – Institute for International Cultural Relations) is in charge of the coordination of the German Pavilion at the Venice Biennale. Germany is the only country recognized by three Golden Lion Biennial Awards (1986, 2001 and 2011).”

The text shows that far from being a lone voice in the wilderness Hito Steyerl’s message is widely acknowledged. Art is fighting back.







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