Thank you, Mr. Chair and members of the committee.
I'd like to thank you for giving me the opportunity to attend this meeting as a witness. I was invited to attend as a representative of Heffel Gallery Limited. I've worked for Heffel for 20 years. I am their representative in Ottawa.
I shall start by giving a brief synopsis of the company and its place in the Canadian art auction market. Heffel was founded in Vancouver in 1978 as an art gallery specializing in high-end art. In 1995 the gallery held its first auction. Over the past 22 years, the company has grown enormously, and now has some 30 employees in locations in Vancouver, Calgary, Toronto, Montreal, and me here in Ottawa. We handle about 70% of all art sold at auction in Canada.
Heffel sells around 2,000 artworks a year, almost all by public auction. Around 300 are sold in live auctions. The remainder are sold in online auctions. A live auction will usually have a sale total of around $15 million to $20 million, while the 11 online auctions have annual sales of around $10 million. Heffel's top auction total was $42 million in 2016. The most expensive artwork sold was a Lawren Harris painting, for $11.2 million. The top annual sales were around $70 million, also in 2016. I believe the reason I was invited here is that our nearest competitors in the Canadian art auction market operate at about a tenth of this level. I hope that has given you an understanding of where Heffel stands.
Now I'll turn to the question of the vulnerability of our business to being used by money launderers. I believe there is a misconception that art auction houses operate in a shadowy world of anonymous buyers and sellers, as though we don't know the identities of the people who are asking us to sell their million-dollar paintings, or the names of the mysterious billionaire buyers who bid at our auctions. The truth is that the high-end art auction business in Canada is notably transparent. Knowing our buyers and sellers is probably the most important part of our business. Many of them are among the biggest names in Canadian business and public life. We don't take an artwork for sale unless we feel 100% confident in both the artwork and the owner's right to sell the work.
As well as the ethical barrier to selling an artwork from an unknown source, there are also huge potential financial risks for us if the work is subsequently found to have been illegitimately procured. We never accept third-party payments for purchases, and always remit the proceeds of sale to the consignor, not to a third party.
Unlike goods from other industries that can be broken down into anonymous components, an artwork is forever recognizable. One of the best tools we have for tracing the provenance of an artwork is our own database of Canadian artwork sold in auction over the past 45 years. The index includes a full description, photograph, and selling price of each work. We also send these details to independent art auction databases around the world. The art loss register is a body that traces stolen artworks, and the National Gallery of Canada keeps records of all our sales. If anyone wanted to trace a painting that had sold through us, it would take a matter of minutes, even seconds, to find when it was sold and for how much. Because this index is publicly accessible, every artwork can be researched not only by the CRA, the Canada Border Services Agency, CSIS, and anyone else, but also by a member of the general public. If you compare that with the sale of almost any other high-value movable asset, or the sale of art by private sale through dealers, you will see that the art auction business has an inherent transparency that separates us from other parts of the industry and other industries.
The due diligence we undertake to establish the identity, creditworthiness, and interests of our buyers is also important. The last thing we need in an auction process is an untraceable buyer. Imagine the loss of reputation that would follow the sale of a million-dollar painting to a buyer we did not know. It's absolutely in our interest to keep very close tabs on all our buyers. One cannot bid in one of our live auctions without having first presented ID. The registration process for our online auctions requires the inputting of significant personal and banking details. All of our offices are connected by a network to our own central database of buyers, sellers, and artworks.
Around 8% of artworks are bought by international buyers, who have to obtain an export licence to send out of the country any painting or sculpture that is over 50 years old and has a value of $15,000 or more. All of our sales are run through our bank, the Royal Bank of Canada. Heffel's accounts, which include the names, addresses, and contact details of all buyers and sellers, are obviously available for inspection by whichever appropriate authority may need access.
Another misconception that we hear about art auctions is the use of cash in purchases and sales. We encourage buyers to make payment by wire transfer. According to our terms and conditions of business, we specifically say that payment should be made by bank wire, certified cheque, bank draft, or cheque, accompanied by a letter of credit from the buyer's bank. We do also accept credit card payments, but as they represent a significant cut to our commission—the transaction fee is based on the overall value of the artwork, while our commission is based on a percentage of the value of the artwork—we try to discourage this.
We hardly ever take cash as payment. In 2016, when we sold around $70 million worth of art, the total cash payment for the whole year amounted to just over $50,000, with the greatest single amount being $7,500. Meanwhile, not a single seller is ever paid in cash. All payments are made by cheque or wire transfer.
I would expect the same extremely low proportion of cash sales to apply to our immediate competitors in the art auction business.
I hope this reassures the committee that the art auction industry in Canada, certainly exemplified by Heffel, is far from a haven for money launderers.
I look forward to any questions.
Thank you.