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Will art crime be more common in cyberspace?

What effect will the internet have on a market traditionally based on face-to-face contact and what are the implications of increased access to information?

Everyone is doing it, talking about doing it, or has done it in the last couple of hours and couldn't imagine going back to life before it. Those who aren’t, don't or haven't mostly keep quiet about it, or worse still, roll their eyes sceptically. Hype, opportunities, dangers, pitfalls, opened doors, changed lives—it's like being a teenager all over again. The internet has had an enormous impact on everyone's life, at school, home and work, but what effect will it have on art insurance?

As an underwriter of art, I welcome the internet with open arms, in spite of the potentially increased and sometimes little understood hazards I might face as an insurer. Art prices are holding up well and the internet opens a door to a world that has historically been considered exclusive and expensive to access.

Web auctions widen market but risk fraud

Almost every day the launch of another internet auction site is reported in the national or trade press. Recent launches include some of the top names in both the art trade and the internet, and it is interesting to read that an established name like Sotheby's is partnering such a young company as Amazon (sothebys.amazon.com).

The economic arguments for these new internet auction houses are compelling: wider distribution, reduced overheads, transparency of competition, and faster service are just a few financial bonuses. However, increased volume and wider distribution imply an inevitable need to relinquish a certain amount of quality control. There will be a need to transport much greater numbers of low to medium valued items all over the world: how can the suppliers guarantee to minimise physical damage in transit to these items?

Lack of face-to-face contact is the price to be paid for increased market access. In a market based to a large extent on personal relationships and trust, this makes one crucial step in the vetting process very difficult. For example, guaranteeing the provenance of every work sold via the internet will be a challenge unless more willing is shown by the commercial sector of the market. Although the paranoia over access to credit card numbers is probably exaggerated, many customers and suppliers are still deeply concerned by the implications of internet transactions.

In fact, web auctions are the biggest breeding ground for internet fraud, topping the list of internet transactions subject to scams that have been reported online via the Internet Fraud Watch program (www.fraud.org). Buying and selling at a site like eBay may be easy, cost-effective and fun, but how can you be sure that the seller is trustworthy, that a consignment is accurately described, or indeed that you will ever receive it?

At eBay’s site (www.ebay.com), there are two procedures for insuring against fraud. One is for the user to publicise details of transactions that have problems on the feedback page. If a consigner’s profile gets too many negative reviews, their user ID is then confiscated. However, this is hardly a foolproof method of preventing further scams, since the perpetrator is able simply to create a new ID.

A second option is to make use of eBay’s escrow service, i-Escrow, whereby payment is held in trust until the buyer agrees to purchase. i-Escrow will only instruct the seller to ship when it has received the money from the buyer, and will only transfer payment to the seller when the buyer has agreed to purchase. Thus the buyer can ensure receipt of a purchase, and avoid disclosing credit card details to an unknown entity, while the seller can be assured of receiving payment. The obligatory provision of the shipping company’s tracking code makes it impossible for the buyer to deny having received an item.

Opening the doors on art crime

One of the greatest attributes of the Internet is the ease with which information can be disseminated. As recently as 1995, when I started in the London insurance market, I was shocked to see how many syndicates still relied solely on paper documents to record the history of a risk. Nowadays we all expect to use the internet to glean information about our clients. If a broker asks me to quote a museum I know little about, I can immediately look it up on the internet and get a feel for the kind of risk I am looking at.

The greatest advantage, however, is the amount of information on art crime to which everyone now has open access: the Art Loss Register, Trace, and the FBI keep their pages updated regularly. Be it the latest museum theft or Nazi looted art, this news would previously have been much less accessible, especially to someone who had spent a relatively short time in a market based greatly on information.

Knowledge now no longer belongs to privileged few who have been around for a long time. Contacts are still invaluable, but the basic facts are at everyone’s fingertips. What is still lacking, however, is a comprehensive system of communication between the various suppliers and gatherers of this information, such as law enforcement groups, art dealers and middlemen, database services and the consumer. Art crime is still an enormous industry, but it would suffer severely through improved communication amongst these groups.

Originally appeared in The Art Newspaper as ‘Is art safe in cyberspace?'