Payment diversion fraud in the art market
The diversion of an artwork's price by a fraudster who breaks into the seller's or buyer's email and substitutes their bank details, a cyber risk typical of a market of large sums handled by email.
The art market combines all the conditions for payment diversion fraud: sums in the millions, transactions between parties who barely know each other, many intermediaries and heavy use of email for invoices and payment instructions. The fraudster compromises the mailbox of a dealer, adviser or buyer, watches the negotiation, then at the right moment sends an invoice identical to the original but bearing a different account. The buyer pays, the seller receives nothing, and the question becomes legal: who bears the loss, the party whose email was compromised or the party that did not verify the change of details? Fine art policies do not cover this risk, which falls under cyber or crime policies, often with sublimits for social engineering. It is a junction between fine art and cyber that underwriters of both lines should read together.
In 2018, the Rijksmuseum Twenthe paid about 2.4 million pounds for a Constable landscape bought from London dealer Simon C. Dickinson into an account supplied by fraudsters who had broken into the transaction's email; the dispute over who bore the loss went to the High Court in London.
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