![\"Money](\"https:\/\/1.bp.blogspot.com\/-spDRLVECM_Q\/YYWr1chND0I\/AAAAAAAADBA\/ovX7rEjYG5IDJfj_5IFv4HYu_7fWzBQpwCNcBGAsYHQ\/s1200\/AML%2BAntiquities.png\")
<\/a><\/span><\/div>\nAntiquities sellers soon will be covered by the Bank Secrecy Act.<\/span><\/span><\/h2>\nFinCen recently completed an advance public comment period over anticipated enforcement rules, sparking debate among heritage advocates, cultural property groups, archaeologists, dealers, auction houses, and museum directors.<\/span><\/h2>\nThe Anti-Money Laundering Act of 2020 (AML Act) is a hot topic in the cultural property world as the US Treasury Department\u2019s Financial Crimes Enforcement Network<\/a> (FinCen) prepares rules to enforce the new statute.<\/span><\/p>\nHeritage groups, cultural property advocates, archaeologists, museums, antiquities dealers, and auction houses clashed on issues ranging from the nature of the antiquities trade, whether the trade actually is involved with money laundering and terrorist financing (ML\/TF), the need for confidentiality, who or what should be subject to new reporting requirements, and much more as they submitted written public comments.<\/span>
The AML Act took effect when <\/span>Section 6110 of <\/span>the massive <\/span>National Defense Authorization Act became law in January<\/span><\/a>. This section\u00a0<\/span>requires Suspicious Activity Reports (SARs) from those \u201cengaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities.\u201d
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\u201cThis action is an important step in strengthening U.S. national security by protecting the U.S. financial system from money launderers and terrorist financiers that seek to exploit the antiquities trade,\u201d FinCen announced in a September\u00a0<\/span>news release<\/a>.<\/span>
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<\/span>The law brings antiquities dealers under the umbrella of the Bank Secrecy Act\u2019s (BSA) anti-money laundering\/countering financing of terrorism (AML\/CFT) regime so that sellers of antiquities share the same legal duties already undertaken by jewelry and precious metals dealers. pawnbrokers, real estate closing professionals, casinos, vehicles salespersons, travel agents, and other high-value business participants. The BSA enlists these sectors and other financial institutions to root out marketplace abuse by\u00a0<\/span>undertaking customer due diligence and <\/span>spotting questionable financial transactions. Suspicious reports are forwarded to law enforcement.
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Because federal regulations must be adopted to implement the AML Act, FinCen issued an\u00a0<\/span>advance notice of proposed rulemaking<\/span>\u00a0in September\u00a0<\/span>and completed its public comment period on October 25, which garnered approximately three dozen thought-provoking submissions from opposing stakeholders.<\/span><\/p>\n<\/div>\n\n\n- Should FinCen\u2019s regulations be broad or narrow?
<\/span><\/li>\n- Should the rules make a distinction about the kinds of objects that should be covered? Such as by age or by date? Or by dollar value of the transaction? Should ethnological objects be counted as antiquities? What about coins?
<\/span><\/li>\n- Should the rules apply to commercial transactions only, or should they embrace non-commercial transfers as well?
<\/span><\/li>\n- What about including museums and archaeologists in the BSA\u2019s enforcement regime?
<\/span><\/li>\n- What about online sales platforms?<\/span><\/li>\n<\/ul>\nRisks in the Antiquities Trade
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<\/span><\/span>Cultural heritage protection advocates, archaeologists, and AML consultants generally described the antiquities trade as ripe ground for criminal infiltration.\u00a0<\/span>\u201cBecause of the lack of oversight, the antiquities sector provides a target rich environment for illicit actors,\u201d <\/span>wrote The Antiquities Coalition<\/a> and its associated <\/span>Financial Crimes Task Force<\/a> (ACFCTF), emphasizing that the \u201crisks of money laundering and terror finance, avoidance of sanctions, and other illicit financial crimes are very high with antiquities \u2026.\u201d\u00a0<\/span>The Antiquities Coalition also expressed concern over \u201cbuilt-in anonymity and masking of beneficial ownership, ineffective protection of artifacts at archeological sites in high-risk countries, counterfeits and forgeries, fraudulent provenance and use of social media in suspect transactions.\u201d Global Financial Integrity estimated revenues from the cultural property market to be worth approximately <\/span>$1.2 billion to $1.6 billion annually<\/a>, the Antiquities Coalition reported, and \u201cthis market operates with a business model inherent with risk, including the ability to acquire and sell products with little to no proof of ownership, the use of anonymity in sales and auctions, and, of course, the ability to transact businesses in cash.\u201d
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<\/span><\/span>The <\/span>U.S. Committee of the Blue Shield<\/a> (USCBS)\u2014joined by <\/span>the Archaeological Institute of America, the American Anthropological Association, and the American Society of Overseas Research<\/a>\u2014raised the \u201cquestion of possible financing of terrorism,\u201d warning that \u201c[f]reshly looted archaeological artifacts \u2026 are particularly suited as a means of transferring funds internationally.\u201d The USCBS explained that \u201c[a]ntiquities are easily moved through different jurisdictions or maintained in freeport zones and other locations that make it difficult to trace the origins of a particular object.\u201d \u201cThis problem,\u201d the group highlighted, \u201cis further exacerbated by the proliferation \u2026 of false or forged provenance documentation.\u201d The USCBS pressed that dealers and auction houses also \u201cengage in a variety of \u2018creative\u2019 financing schemes,\u201d which the group conceded \u201cmay not be illegal,\u201d but which illustrated how \u201cart merchants are increasingly acting more like financial institutions in lending money, securitizing loans, and monetizing works of art.\u201d The USCBS, furthermore, brought attention to <\/span>UN Security Council Resolution 2347<\/a> that \u201cnoted the connections between looting, theft, and smuggling of antiquities and other art works and the funding of terrorism.\u201d
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<\/span><\/span>Two United Kingdom-based AML compliance firms warned about latent potential illegalities that are concealed within the antiquities market. <\/span>ArtAML<\/a> advisedthat \u201cthere is a general lack of awareness of possible suspicious activity,\u201d and that \u201cwith the exception of large auction houses that have voluntarily introduced compliance measures, the vast majority of industry players will not introduce such compliance measures until legally required to do so.\u201d <\/span>Corinth Consulting<\/a>, moreover, named specific risks in the antiquities marketplace \u201csuch as theft, authenticity, provenance and illegal export from countries with national patrimony laws.\u201d The firm assessed that the \u201cillegal excavation and export risks seem more likely to occur in countries suffering from war, dictatorship or extreme poverty\u201d and that \u201cthese factors may in turn increase the risk of terrorist financing.\u201d For that reason, attention should be placed on the seller \u201cand the need to \u2018follow the object\u2019\u201d as opposed to \u201cthe typical \u2018follow the money\u2019 focus on buyers.\u201d
<\/span><\/span><\/span><\/div>\nQuestioning Money Laundering and Terrorist Financing<\/b>
Several advocacy and trade groups representing sellers and collectors predominantly rejected the risk-laden picture of the antiquities trade, and they criticized the AML Act and its forthcoming rules. The <\/span>Committee for Cultural Policy (CCP) called the regulations \u201cinappropriate due to the lack of hard evidence for money-laundering activities by antiquities businesses in the United States.\u201d The <\/span>American Council for the Preservation of Cultural Property<\/a> (ACPCP) objected that the AML Act became law \u201cwithout there ever having been a single documented criminal case in the United States or Europe of antiquities being used as an asset with which to launder ill-gotten funds.\u201d<\/span> The <\/a>Authentic Tribal Art Dealers Association<\/a>(ATADA) derided \u201cthe false claims of involvement of the U.S. antiquities trade in general in money laundering or activities supporting terrorism.\u201d Likewise, <\/span>Conf\u00e9d\u00e9rationInternationale des N\u00e9gociants en \u0152uvres d\u2019Art<\/a> (CINOA) expressed the view that \u201cthe scope of \u2018illicit activity\u2019 involving antiquities has been highly exaggerated by advocates of implementing such controls.\u201d\u00a0
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GlobalHeritage Alliance<\/a> (GHA) protested that \u201cFinCEN should focus on promulgating regulations solely designed to counter serious money laundering issues, and not be influenced by those with an axe to grind against the antiquities trade to issue overly complicated and draconian rules that can be exploited to repatriate artifacts in questionable cases.\u201d The GHA specifically reproached the Manhattan District Attorney\u2019s office for allegedly \u201cmisus[ing] investigative subpoenas for fishing expeditions directed against prominent New York City collectors.\u201d The cultural property trade advocacy group portended that \u201cthere is a real danger information originally gathered to fight terrorism will instead be used to harass collectors and dealers in the hopes of forcing repatriations of objects to authoritarian countries \u2026.\u201d
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Major auction houses, meanwhile, advised FinCen that the majority of their sales are not even cash-based, with <\/span>Christie\u2019s<\/a>explaining that \u201c[c]ash transactions \u2026 in New York are rare\u201d and that \u201cthe vast majority of auction house transactions are settled by bank wire transfer or credit\/debit card.\u201d <\/a><\/span>Bonhams and Butterfields Auctioneers<\/a> additionally <\/span>called attention to the fact that \u201cthe revenue of entities in the art market is tiny when compared to that of the financial institutions.\u201d Although Christie\u2019s affirmed \u201cthat there can be money laundering and terrorist financing risk in the trade of antiquities,\u201d it offered that \u201cthe vast majority of sales in antiquities are made for legitimate purposes.\u201d In this vein, the <\/span><\/span>ACPCP implored that transactions <\/span>using \u201ccredit card, check, or bank transfer through an AML compliant financial institution must be exempt from further data collection and reporting.\u201d
<\/span><\/span><\/p>\n![\"Secrecy](\"https:\/\/culturalheritagelawyer.com\/wp-content\/uploads\/2023\/04\/Untitled2Bdesign2B2528502529.png\")
<\/span><\/a><\/b><\/div>\nSecrecy<\/span><\/b><\/p>\nThe USCBS and its allies spotlighted opacity as a \u201ckey characteristic of the art market,\u201d <\/a>underscoring that there is \u201cno requirement within the United States for an art merchant to maintain records of transactions or of the buyers, sellers, or consignors.\u201d \u201c[T]hat very secrecy,\u201d USCBS argued, \u201cis the reason why Know-Your-Customer (KYC) and Suspicious Activity Report (SAR) requirements are so necessary.\u201d Notably, the group professed that \u201cthe antiquities market in the United States has indulged in even greater efforts to maintain secrecy of sales and those involved in transactions\u201d as a result of \u201cU.S. law enforcement efforts to interdict the illegal aspects of the antiquities market \u2026, particularly \u2026 due to the activities of the New York District Attorney\u2019s Office.\u201d ArtAML observed, \u201cWhile this [secrecy] can be for good reason such as collectors not wanting it to be known that they hold expensive items in a personal collection (potentially attracting robbery), this culture can open opportunities to criminals who wish to not be detected.\u201d
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<\/a><\/span>The art market has been characterised by some as \u2018opaque\u2019 creating ML\/TF risk,\u201d Bonhams otherwise contended. \u201cThis is to overlook the reality that a seller\u2019s identity will always be known to the parties needing to know it.\u201d The auctioneer, therefore suggested, \u201cProvided the intermediary \u2013 the auction house \u2013 knows the identity of both parties and can perform due diligence on those parties, it would not seem to us to be necessary to make further disclosure<\/a>.\u201d
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<\/span><\/span>Christie\u2019s concurred, insisting, \u201cWhere an intermediary, such as an auction house, is involved, there is no business reason for buyers and sellers to have the right to know each other\u2019s identity.\u201d Christie\u2019s pointed out, \u201cBoth buyers and sellers expect confidentiality and rely on an auction house\u2019s discretion.\u201d That is because there are \u201cjustifiable reasons of personal safety and security of the property. In addition, sales of objects may be necessitated by circumstances, some very sensitive, such as financial difficulties, family disputes, or divorce.\u201d Christie\u2019s added that their auction house and others \u201cconduct reasonable due diligence on the property for sale and the parties to the transaction\u201d and that \u201c[p]rovenance appears in public sales catalogues, which are published on auction house websites and include information about an item\u2019s country of origin and the date on which it left that country.\u201d The ACFCTF, nevertheless, expressed a concern about fraudulent provenance circulating in the antiquities trade.<\/span><\/span><\/span><\/div>\n
\u201c[I]f it is to be made a legal requirement to identify principals in any transaction involving antiquities in the US,\u201d Bonhams suggested \u201cthat it should only be necessary for one person in the transaction to carry out due diligence to establish agents\/principals to ensure there are no ML\/TF risks\u201d in order to avoid an \u201cunduly burdensome\u201d situation \u201cwith no reliance allowed between entirely reputable entities.\u201d Bonhams further advised that \u201c[i]t would be much less burdensome if governments could set up and manage a mandatory register of beneficial ownership of all entities that carry on business in their jurisdiction.\u201d And Christie\u2019s, in a footnote, pushed for the opening of the Becchina and Medici archives to \u201cstrengthen the ability of legitimate market players to complete their diligence process.\u201d
<\/span>Who and What Should be Covered<\/b>
FinCen regulations should be sweeping, according to stakeholders like the <\/span>Clooney Foundation for Justice.<\/a> They \u201cmust be broad and stringent\u201d in order to \u201cprovide law enforcement with information on illicit financial flows to further dismantle criminal networks currently exploiting the antiquities market.\u201d That means the regulations must have \u201cno monetary thresholds, stringent due diligence requirements, disclosure of beneficial ownership information, and comprehensive SARs filings,\u201d asserted the human rights organization led by George and Amal Clooney.
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In fact, attested the Antiquities Coalition, \u201c[u]nless and until the U.S. public and private sectors close the loopholes \u2026 they will leave wide open the world\u2019s biggest economy to money launderers, artifact traffickers, drug smugglers, kleptocrats, oligarchs, terrorists, and the many other criminals proven to have exploited the art and antiquities market\u2019s weaknesses.\u201d
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But Bonhams retorted that \u201c[i]f a balance is not achieved, any regulation will militate against the art market as a whole \u2026 rather than focussing on identifying any potentially suspicious transactions.\u201d
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Both Sotheby\u2019s and the Antiquities Coalition agreed with the idea of globally harmonized rules, but for different reasons. Sotheby\u2019s called for AML\/CFT regulations to be \u201cproportionate\u201d and \u201crisk based\u201d so as \u201cto preserve the US share of the art market,\u201d which it called \u201cconsiderable.\u201d For the American antiquities market to remain competitive, Sotheby\u2019s said that \u201cit will be important that AML measures mandated in the US are similar to those imposed in jurisdictions outside the US.\u201d The Antiquities Coalition concurred that, \u201c[a]t a minimum, FinCEN should mirror the regulations in other major market countries.\u201d However, the Antiquities Coalition stated that the rationale should be \u201cto ensure that incommensurate regulations don\u2019t present loopholes for bad actors to take advantage of the U.S. financial system.\u201d
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ArtAML recommended rules \u201ca) simple enough for the market to understand; b) clear enough for enforcement officials to understand; and c) flexible enough to allow for changes needed as implementation challenges arise.\u201d
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Monetary thresholds<\/i>
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<\/u>Given that market participants generally seek the narrowest application of FinCen rules, and given that overseas AML\/CFT rules already establish monetary thresholds, several commenters argued for the adoption of a minimum dollar value that would serve as a predicate before the BSA\u2019s requirements would kick in.
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Primarily smaller sellers urged the highest thresholds\u2014in the millions. <\/span>Marcy Schillay<\/a>, a dealer in Native American art and artifacts, pleaded, \u201c<\/span>It would be a tremendous burden for me to have to report according to requirements by AML laws \u2026 that I would probably be forced to retire. I urge you to omit \u2018antiquities dealers\u2019 from the Bank Secrecy act for sales below $5 million.\u201d Don Siegel<\/a>, another dealer, agreed, as did the Director of Native American Art at Hindman\/Cowan\u2019s Auctions<\/a>. In a similar vein, Tegan Johnson<\/a>urged a\u201d $2 million annual [minimum] to protect the majority of smaller businesses from unnecessary investigation.\u201d Additionally, the ACPCP urged that the \u201c<\/span>threshold for individual sales to new clients should not be less than $1,000,000, and \u201c[t]he threshold for annual sales for a gallery specializing in ancient art must be over $3,000,000.\u201d
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CINOA, nonetheless, advocated \u201cfor concentration on only \u2018high-value\u2019 transactions and higher-risk \u2018conflict zone\u2019 associated antiquities,\u201d suggesting a $500,000 threshold so that \u201cmicro-businesses will not be overburdened \u2026 and any risk associated with high value antiquities transactions would be addressed (especially in conjunction with existing reporting required by a third-party facilitator, such as banks or insurers).\u201d
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Seeking either a 10,000 USD or Euro threshold were auction houses and the USCBS et al.\u00a0<\/span>Both Christie\u2019s and Sotheby\u2019s agreed to a minimum transaction amount and suggested \u20ac10,000, roughly equal to the minimums used by the AML\/CFT regulations of the United Kingdom and the European Union. \u201cWe are in favour of an industry wide threshold applicable on a transaction basis,\u201d Sotheby\u2019s wrote, because it \u201censures a level playing field among market participants,\u201d with Christie\u2019s reminding that \u201c[m]arket participants will need guidance from FinCEN on how to calculate the transaction threshold (e.g., whether it includes sales tax and commissions).\u201d <\/span>HindmanAuctions<\/a> urged a $10,000 individual transaction threshold too, but \u201cwith an annual transaction threshold for sellers of $100,000.\u201d And despite the fact that the USCBS and its allies \u201coppose the incorporation of any monetary threshold for the definition of what is an antiquity,\u201d there was agreement that \u201cthe [FinCen] regulations should apply to transactions that are valued at more than $10,000 per transaction \u2026.\u201d
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Antiquities, art, and archaeology
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Even if a baseline transaction amount were to be selected by FinCen, which antiquities would be covered? Once again, the Antiquities Coalition advanced a broad, anti-crime approach. \u201cWe strongly believe that separately defining and regulating \u2018art\u2019 and \u2018antiquities\u2019 creates more problems than it solves,\u201d pressed the organization. \u201cAs such, we have suggested that FinCEN consider regulating both art and antiquities as \u2018cultural property,\u2019\u201d which would be categorized as \u201ccovered goods\u201d under the BSA.
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The USCBS also wished to cast a wide net over antiquities, but it applied an archaeological perspective to narrow the definition to \u201call objects that are at least one hundred years in age, that are the product of human activity, and that are of cultural, historical, art historical, archaeological, scientific, or religious significance.\u201d
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Market stakeholders echoed this archaeological approach<\/span>. <\/a>The Art Dealers Association of America<\/a>(ADAA) defined \u201cantiquities\u201d as \u201can object of archaeological interest,\u201d and Hindman Auctions labeled an antiquity as \u201can archaeological object of ancient origin that was discovered through excavation or exploration underwater.\u201d They are different from other works of art, the auction house said, because the \u201cantiquity was preserved through burial on land or in the ocean.\u201d Sotheby\u2019s called antiquities \u201ca category of art.\u201d
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The online seller, <\/span>1stdibs.com, stressed that antiquities should not include <\/span>\u201cmore recent \u2018vintage\u2019 items or colloquial \u2018antiques\u2019 from the last century, or that are only a few hundred years old,\u201d \u201cnatural items such as fossils or aged natural items,\u201d or \u201colder furniture, rugs, tapestries and furnishings for domestic or commercial furnishing [that] normally would not be considered \u2018antiquities.\u2019\u201d
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Cut-off dates
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<\/i>Several stakeholders suggested a cutoff date, hovering either around the beginning of the Middle Ages or approximately a millennium later. <\/span>The Holocaust Art Restitution Project<\/a> (HARP) proposed, \u201cAntiquities should be defined broadly as works of art and cultural objects made in antiquity. These works of art and objects should encompass objects of cultural significance created before the year 500 C.E., including objects that were discovered through archaeological means \u2026.\u201d HARP added, \u201cObjects created before 500 C.E. that are considered to be works of art since their creation, i.e., objects that were not discovered as a result of any form of terrestrial or aquatic excavation, should also be considered antiquities for the purposes of FinCEN\u2019s regulations.\u201d The organization also boldly suggested that sellers \u201cshould be required to provide provenance for the object dating back to the year 1907 at minimum.\u201d
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The <\/span>CCP counseled that \u201can \u2018antiquity\u2019 should be defined as an artwork or artifact made for public or private use dating to before 500 A.D., the end of the Roman Empire \u2026.\u201d <\/span>The GHA endorsed this concept but further recommended, \u201cIf FinCEN thinks a more recent date is more appropriate, 1500 AD makes sense because it roughly corresponds to the Renaissance, the Fall of Constantinople, the Discovery of the Americas, the end of Pre-Columbian civilizations, and the highpoint of Empires in China and India.\u201d
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Bonhams currently employs a more recent date for an antiquity in its business, explaining that its \u201ctraditional definition of antiquities is objects from 4000 BC to the 12th Century AD and geographically originating from Egypt, the Near East and Europe.\u201d It confirmed that \u201cother major auction houses are consistent in this approach,\u201d and pointed out that \u201cothers use the term more broadly to include ancient Chinese, Tibetan, African, South-East Asian and South American\u2026.\u201d
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Ethnological objects
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<\/i>Mark Johnson<\/a>, a Los Angeles dealer of ethnographic art, expressed concern that an even more recent cut-off date would encompass \u201c[t]he vast majority of ethnographic art, which normally consists of non-excavated items like textiles, beadwork, basketry, costumes, and wood carving are less that 100 years old.\u201d That is perhaps why several market participants backed specific exclusions for ethnological items. <\/span>\u201c<\/span>We believe the U.S. domestic tribal and international ethnographic art trade should be specifically excluded from the definition of \u2018antiquities\u2019 and exempted from regulatory reporting requirements,\u201d wrote the ATADA. Similarly, the owner of the MatoskaTrading Company<\/a>\u00a0anxiously was \u201cconcerned that I could become subject to onerous regulation should historic American Indian art become classified as an \u2018antiquity.\u2019\u201d
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<\/span><\/span><\/p>\nCoins
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<\/i><\/span><\/span>Numismatic advocacy groups, at the same time, urged exemptions for coins and for coin dealers because, as the International Association of Professional Numismatists<\/a> (IAPN)\u00a0averred, the \u201cantiquities and numismatic trade are distinct.\u201d And both the IAPN and the <\/span>Ancient Coin Collectors Guild<\/a> (ACCG)<\/span> advanced their contention that the numismatic trade has a low AML\/CFT risk.
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<\/span><\/span>\u201cAll coin dealers,\u201d the ACCG further claimed, \u201care micro or small businesses.\u201d Therefore, \u201c[i]mposing expensive and time-consuming regulations \u2026 may drive many out of business \u2026. Without proof of a serious money laundering problem in the industry, coin dealers should not be subject to regulations designed for antiquities dealers.\u201d<\/p>\n![](\"https:\/\/culturalheritagelawyer.com\/wp-content\/uploads\/2023\/04\/Untitled2Bdesign2B2528512529.png\"\/)
<\/a>The IAPN, ACCG, and others drew attention to the fact that the United Kingdom carved out a coin dealer exception from its own money laundering regulations.
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\u201cThe term [\u201cantiquities\u201d] should explicitly exclude coins and ethnological objects,\u201d entreated the GHA, and the CCP likewise petitioned that an \u201c\u2019antiquity\u2019 \u2026 should exclude coins manufactured for use in trade.\u201d The GHA\u2019s stated rationale was that coins \u201care traded separately from antiquities, are serviced by different trade associations, are the subject of separate academic treatment, and typically are of limited monetary value.\u201d<\/p>\n<\/span><\/span><\/span><\/div>\n
The <\/span>National Federation of Independent Business<\/a> (NFIB) took a step further by petitioning for a small business carve-out from the BSA\u2019s AML\/CFT reporting requirements. \u201cAmerica\u2019s small businesses, and their owners and employees, should not have to yield their freedom,\u201d NFIB scripted, \u201cbecause the [Treasury] Department thinks doing so might someday and somehow contribute something of interest to the Department\u2019s efforts against crime and terrorism.\u201d
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More carve-ins and carve-outs
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<\/i>The list of sought-after inclusions and exclusions abounded further as various stakeholders lobbied to add or subtract commercial and non-commercial transactions and other categories from the BSA\u2019s mandate. Some highlights are presented:<\/span><\/span><\/span><\/p>\n\n- USCBS et al.: \u201cWe believe that \u2018trade in antiquity\u2019 should include nonprofit as well as for-profit transactions.
<\/span><\/li>\n- \u201cAAMD, on behalf of its members, urges FinCEN to exclude non-profit museums from any definition of participants engaged in the \u201ctrade in antiquities.\u201d
<\/span><\/li>\n- \u201cThe \u2018trade of antiquities\u2019 should relate to commercial activity as opposed to charitable donations to museums and other institutions. GHA does not believe non-commercial, not-for-profit activity should be targeted. However, to the extent it is covered, it should include activities of US archaeologists excavating in countries with high risks of corruption, money laundering and terrorist activities.\u201d
<\/span><\/li>\n- The <\/span>ADAA \u201crespectfully requests that FinCEN recognize the clear intent of Congress to narrowly cabin the scope of the BSA amendments to only capture dealers in antiquities and not dealers in art.\u201d
<\/span><\/span><\/li>\n- ACPCP: <\/span>\u201cMembers in good standing of the top dealer\u2019s organizations should be exempt (CINOA, IADAA, AADLA) as they are already required to observe strict business practices that preclude suspicious transactions.\u201d
<\/span><\/span><\/li>\n- \u201cTherefore, CCP recommends that if regulations are imposed on antiquities dealers that [] the definition of an \u201cantiquities dealer\u201d should be limited to businesses that actually purchase and sell art and artifacts\u2026.\u201d
<\/span><\/span><\/li>\n- 1stdibs.com, Inc.: \u201c<\/span>Thus, any definition of \u2018trade in antiquities\u2019 should be careful to exclude online marketplaces that are neither the buyer nor seller of goods. This is particularly important for marketplaces that support a broad range of items and are not specialized in or limited to antiquities.\u201d
<\/span><\/span><\/li>\n- Christie\u2019s: \u201cSARs should be encouraged but not mandatory, similar to the requirements for precious metals dealers.\u201d<\/span><\/li>\n<\/ul>\n
Next Steps<\/b><\/span><\/span><\/p>\n
Regular readers of\u00a0<\/span>CHL<\/i>\u00a0will recall that this blog has been calling for a law like the AML Act\u00a0<\/span>in\u00a0<\/span>posts<\/span><\/a>\u00a0since 2014. Now that the statute has been enacted, final rules must be adopted.\u00a0<\/span>The AML Act requires the US Treasury Secretary to issue proposed rules by the end of December, and it is expected that FinCen will publish a notice of proposed rulemaking in the coming weeks. That will prompt another comment period before Treasury issues a final rule.<\/span><\/p>\nMeanwhile,\u00a0similar BSA AML\/CFT requirements for\u00a0<\/span>art\u00a0<\/i>
The Anti-Money Laundering Act of 2020 (AML Act) is a hot topic in the cultural property world as the US Treasury Department\u2019s Financial Crimes Enforcement Network<\/a> (FinCen) prepares rules to enforce the new statute.<\/span><\/p>\n Heritage groups, cultural property advocates, archaeologists, museums, antiquities dealers, and auction houses clashed on issues ranging from the nature of the antiquities trade, whether the trade actually is involved with money laundering and terrorist financing (ML\/TF), the need for confidentiality, who or what should be subject to new reporting requirements, and much more as they submitted written public comments.<\/span> Questioning Money Laundering and Terrorist Financing<\/b> Secrecy<\/span><\/b><\/p>\n Who and What Should be Covered<\/b> <\/span><\/span><\/span><\/div>\n Next Steps<\/b><\/span><\/span><\/p>\n Meanwhile,\u00a0similar BSA AML\/CFT requirements for\u00a0<\/span>art\u00a0<\/i>
The AML Act took effect when <\/span>Section 6110 of <\/span>the massive <\/span>National Defense Authorization Act became law in January<\/span><\/a>. This section\u00a0<\/span>requires Suspicious Activity Reports (SARs) from those \u201cengaged in the trade of antiquities, including an advisor, consultant, or any other person who engages as a business in the solicitation or the sale of antiquities.\u201d
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\u201cThis action is an important step in strengthening U.S. national security by protecting the U.S. financial system from money launderers and terrorist financiers that seek to exploit the antiquities trade,\u201d FinCen announced in a September\u00a0<\/span>news release<\/a>.<\/span>
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<\/span>The law brings antiquities dealers under the umbrella of the Bank Secrecy Act\u2019s (BSA) anti-money laundering\/countering financing of terrorism (AML\/CFT) regime so that sellers of antiquities share the same legal duties already undertaken by jewelry and precious metals dealers. pawnbrokers, real estate closing professionals, casinos, vehicles salespersons, travel agents, and other high-value business participants. The BSA enlists these sectors and other financial institutions to root out marketplace abuse by\u00a0<\/span>undertaking customer due diligence and <\/span>spotting questionable financial transactions. Suspicious reports are forwarded to law enforcement.
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Because federal regulations must be adopted to implement the AML Act, FinCen issued an\u00a0<\/span>advance notice of proposed rulemaking<\/span>\u00a0in September\u00a0<\/span>and completed its public comment period on October 25, which garnered approximately three dozen thought-provoking submissions from opposing stakeholders.<\/span><\/p>\n<\/div>\n\n
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<\/span><\/span>Cultural heritage protection advocates, archaeologists, and AML consultants generally described the antiquities trade as ripe ground for criminal infiltration.\u00a0<\/span>\u201cBecause of the lack of oversight, the antiquities sector provides a target rich environment for illicit actors,\u201d <\/span>wrote The Antiquities Coalition<\/a> and its associated <\/span>Financial Crimes Task Force<\/a> (ACFCTF), emphasizing that the \u201crisks of money laundering and terror finance, avoidance of sanctions, and other illicit financial crimes are very high with antiquities \u2026.\u201d\u00a0<\/span>The Antiquities Coalition also expressed concern over \u201cbuilt-in anonymity and masking of beneficial ownership, ineffective protection of artifacts at archeological sites in high-risk countries, counterfeits and forgeries, fraudulent provenance and use of social media in suspect transactions.\u201d Global Financial Integrity estimated revenues from the cultural property market to be worth approximately <\/span>$1.2 billion to $1.6 billion annually<\/a>, the Antiquities Coalition reported, and \u201cthis market operates with a business model inherent with risk, including the ability to acquire and sell products with little to no proof of ownership, the use of anonymity in sales and auctions, and, of course, the ability to transact businesses in cash.\u201d
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<\/span><\/span>The <\/span>U.S. Committee of the Blue Shield<\/a> (USCBS)\u2014joined by <\/span>the Archaeological Institute of America, the American Anthropological Association, and the American Society of Overseas Research<\/a>\u2014raised the \u201cquestion of possible financing of terrorism,\u201d warning that \u201c[f]reshly looted archaeological artifacts \u2026 are particularly suited as a means of transferring funds internationally.\u201d The USCBS explained that \u201c[a]ntiquities are easily moved through different jurisdictions or maintained in freeport zones and other locations that make it difficult to trace the origins of a particular object.\u201d \u201cThis problem,\u201d the group highlighted, \u201cis further exacerbated by the proliferation \u2026 of false or forged provenance documentation.\u201d The USCBS pressed that dealers and auction houses also \u201cengage in a variety of \u2018creative\u2019 financing schemes,\u201d which the group conceded \u201cmay not be illegal,\u201d but which illustrated how \u201cart merchants are increasingly acting more like financial institutions in lending money, securitizing loans, and monetizing works of art.\u201d The USCBS, furthermore, brought attention to <\/span>UN Security Council Resolution 2347<\/a> that \u201cnoted the connections between looting, theft, and smuggling of antiquities and other art works and the funding of terrorism.\u201d
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<\/span><\/span>Two United Kingdom-based AML compliance firms warned about latent potential illegalities that are concealed within the antiquities market. <\/span>ArtAML<\/a> advisedthat \u201cthere is a general lack of awareness of possible suspicious activity,\u201d and that \u201cwith the exception of large auction houses that have voluntarily introduced compliance measures, the vast majority of industry players will not introduce such compliance measures until legally required to do so.\u201d <\/span>Corinth Consulting<\/a>, moreover, named specific risks in the antiquities marketplace \u201csuch as theft, authenticity, provenance and illegal export from countries with national patrimony laws.\u201d The firm assessed that the \u201cillegal excavation and export risks seem more likely to occur in countries suffering from war, dictatorship or extreme poverty\u201d and that \u201cthese factors may in turn increase the risk of terrorist financing.\u201d For that reason, attention should be placed on the seller \u201cand the need to \u2018follow the object\u2019\u201d as opposed to \u201cthe typical \u2018follow the money\u2019 focus on buyers.\u201d
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Several advocacy and trade groups representing sellers and collectors predominantly rejected the risk-laden picture of the antiquities trade, and they criticized the AML Act and its forthcoming rules. The <\/span>Committee for Cultural Policy (CCP) called the regulations \u201cinappropriate due to the lack of hard evidence for money-laundering activities by antiquities businesses in the United States.\u201d The <\/span>American Council for the Preservation of Cultural Property<\/a> (ACPCP) objected that the AML Act became law \u201cwithout there ever having been a single documented criminal case in the United States or Europe of antiquities being used as an asset with which to launder ill-gotten funds.\u201d<\/span> The <\/a>Authentic Tribal Art Dealers Association<\/a>(ATADA) derided \u201cthe false claims of involvement of the U.S. antiquities trade in general in money laundering or activities supporting terrorism.\u201d Likewise, <\/span>Conf\u00e9d\u00e9rationInternationale des N\u00e9gociants en \u0152uvres d\u2019Art<\/a> (CINOA) expressed the view that \u201cthe scope of \u2018illicit activity\u2019 involving antiquities has been highly exaggerated by advocates of implementing such controls.\u201d\u00a0
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GlobalHeritage Alliance<\/a> (GHA) protested that \u201cFinCEN should focus on promulgating regulations solely designed to counter serious money laundering issues, and not be influenced by those with an axe to grind against the antiquities trade to issue overly complicated and draconian rules that can be exploited to repatriate artifacts in questionable cases.\u201d The GHA specifically reproached the Manhattan District Attorney\u2019s office for allegedly \u201cmisus[ing] investigative subpoenas for fishing expeditions directed against prominent New York City collectors.\u201d The cultural property trade advocacy group portended that \u201cthere is a real danger information originally gathered to fight terrorism will instead be used to harass collectors and dealers in the hopes of forcing repatriations of objects to authoritarian countries \u2026.\u201d
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Major auction houses, meanwhile, advised FinCen that the majority of their sales are not even cash-based, with <\/span>Christie\u2019s<\/a>explaining that \u201c[c]ash transactions \u2026 in New York are rare\u201d and that \u201cthe vast majority of auction house transactions are settled by bank wire transfer or credit\/debit card.\u201d <\/a><\/span>Bonhams and Butterfields Auctioneers<\/a> additionally <\/span>called attention to the fact that \u201cthe revenue of entities in the art market is tiny when compared to that of the financial institutions.\u201d Although Christie\u2019s affirmed \u201cthat there can be money laundering and terrorist financing risk in the trade of antiquities,\u201d it offered that \u201cthe vast majority of sales in antiquities are made for legitimate purposes.\u201d In this vein, the <\/span><\/span>ACPCP implored that transactions <\/span>using \u201ccredit card, check, or bank transfer through an AML compliant financial institution must be exempt from further data collection and reporting.\u201d
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<\/a><\/span>The art market has been characterised by some as \u2018opaque\u2019 creating ML\/TF risk,\u201d Bonhams otherwise contended. \u201cThis is to overlook the reality that a seller\u2019s identity will always be known to the parties needing to know it.\u201d The auctioneer, therefore suggested, \u201cProvided the intermediary \u2013 the auction house \u2013 knows the identity of both parties and can perform due diligence on those parties, it would not seem to us to be necessary to make further disclosure<\/a>.\u201d
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<\/span><\/span>Christie\u2019s concurred, insisting, \u201cWhere an intermediary, such as an auction house, is involved, there is no business reason for buyers and sellers to have the right to know each other\u2019s identity.\u201d Christie\u2019s pointed out, \u201cBoth buyers and sellers expect confidentiality and rely on an auction house\u2019s discretion.\u201d That is because there are \u201cjustifiable reasons of personal safety and security of the property. In addition, sales of objects may be necessitated by circumstances, some very sensitive, such as financial difficulties, family disputes, or divorce.\u201d Christie\u2019s added that their auction house and others \u201cconduct reasonable due diligence on the property for sale and the parties to the transaction\u201d and that \u201c[p]rovenance appears in public sales catalogues, which are published on auction house websites and include information about an item\u2019s country of origin and the date on which it left that country.\u201d The ACFCTF, nevertheless, expressed a concern about fraudulent provenance circulating in the antiquities trade.<\/span><\/span><\/span><\/div>\n
\u201c[I]f it is to be made a legal requirement to identify principals in any transaction involving antiquities in the US,\u201d Bonhams suggested \u201cthat it should only be necessary for one person in the transaction to carry out due diligence to establish agents\/principals to ensure there are no ML\/TF risks\u201d in order to avoid an \u201cunduly burdensome\u201d situation \u201cwith no reliance allowed between entirely reputable entities.\u201d Bonhams further advised that \u201c[i]t would be much less burdensome if governments could set up and manage a mandatory register of beneficial ownership of all entities that carry on business in their jurisdiction.\u201d And Christie\u2019s, in a footnote, pushed for the opening of the Becchina and Medici archives to \u201cstrengthen the ability of legitimate market players to complete their diligence process.\u201d
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FinCen regulations should be sweeping, according to stakeholders like the <\/span>Clooney Foundation for Justice.<\/a> They \u201cmust be broad and stringent\u201d in order to \u201cprovide law enforcement with information on illicit financial flows to further dismantle criminal networks currently exploiting the antiquities market.\u201d That means the regulations must have \u201cno monetary thresholds, stringent due diligence requirements, disclosure of beneficial ownership information, and comprehensive SARs filings,\u201d asserted the human rights organization led by George and Amal Clooney.
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In fact, attested the Antiquities Coalition, \u201c[u]nless and until the U.S. public and private sectors close the loopholes \u2026 they will leave wide open the world\u2019s biggest economy to money launderers, artifact traffickers, drug smugglers, kleptocrats, oligarchs, terrorists, and the many other criminals proven to have exploited the art and antiquities market\u2019s weaknesses.\u201d
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But Bonhams retorted that \u201c[i]f a balance is not achieved, any regulation will militate against the art market as a whole \u2026 rather than focussing on identifying any potentially suspicious transactions.\u201d
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Both Sotheby\u2019s and the Antiquities Coalition agreed with the idea of globally harmonized rules, but for different reasons. Sotheby\u2019s called for AML\/CFT regulations to be \u201cproportionate\u201d and \u201crisk based\u201d so as \u201cto preserve the US share of the art market,\u201d which it called \u201cconsiderable.\u201d For the American antiquities market to remain competitive, Sotheby\u2019s said that \u201cit will be important that AML measures mandated in the US are similar to those imposed in jurisdictions outside the US.\u201d The Antiquities Coalition concurred that, \u201c[a]t a minimum, FinCEN should mirror the regulations in other major market countries.\u201d However, the Antiquities Coalition stated that the rationale should be \u201cto ensure that incommensurate regulations don\u2019t present loopholes for bad actors to take advantage of the U.S. financial system.\u201d
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ArtAML recommended rules \u201ca) simple enough for the market to understand; b) clear enough for enforcement officials to understand; and c) flexible enough to allow for changes needed as implementation challenges arise.\u201d
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Monetary thresholds<\/i>
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<\/u>Given that market participants generally seek the narrowest application of FinCen rules, and given that overseas AML\/CFT rules already establish monetary thresholds, several commenters argued for the adoption of a minimum dollar value that would serve as a predicate before the BSA\u2019s requirements would kick in.
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Primarily smaller sellers urged the highest thresholds\u2014in the millions. <\/span>Marcy Schillay<\/a>, a dealer in Native American art and artifacts, pleaded, \u201c<\/span>It would be a tremendous burden for me to have to report according to requirements by AML laws \u2026 that I would probably be forced to retire. I urge you to omit \u2018antiquities dealers\u2019 from the Bank Secrecy act for sales below $5 million.\u201d Don Siegel<\/a>, another dealer, agreed, as did the Director of Native American Art at Hindman\/Cowan\u2019s Auctions<\/a>. In a similar vein, Tegan Johnson<\/a>urged a\u201d $2 million annual [minimum] to protect the majority of smaller businesses from unnecessary investigation.\u201d Additionally, the ACPCP urged that the \u201c<\/span>threshold for individual sales to new clients should not be less than $1,000,000, and \u201c[t]he threshold for annual sales for a gallery specializing in ancient art must be over $3,000,000.\u201d
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CINOA, nonetheless, advocated \u201cfor concentration on only \u2018high-value\u2019 transactions and higher-risk \u2018conflict zone\u2019 associated antiquities,\u201d suggesting a $500,000 threshold so that \u201cmicro-businesses will not be overburdened \u2026 and any risk associated with high value antiquities transactions would be addressed (especially in conjunction with existing reporting required by a third-party facilitator, such as banks or insurers).\u201d
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Seeking either a 10,000 USD or Euro threshold were auction houses and the USCBS et al.\u00a0<\/span>Both Christie\u2019s and Sotheby\u2019s agreed to a minimum transaction amount and suggested \u20ac10,000, roughly equal to the minimums used by the AML\/CFT regulations of the United Kingdom and the European Union. \u201cWe are in favour of an industry wide threshold applicable on a transaction basis,\u201d Sotheby\u2019s wrote, because it \u201censures a level playing field among market participants,\u201d with Christie\u2019s reminding that \u201c[m]arket participants will need guidance from FinCEN on how to calculate the transaction threshold (e.g., whether it includes sales tax and commissions).\u201d <\/span>HindmanAuctions<\/a> urged a $10,000 individual transaction threshold too, but \u201cwith an annual transaction threshold for sellers of $100,000.\u201d And despite the fact that the USCBS and its allies \u201coppose the incorporation of any monetary threshold for the definition of what is an antiquity,\u201d there was agreement that \u201cthe [FinCen] regulations should apply to transactions that are valued at more than $10,000 per transaction \u2026.\u201d
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Antiquities, art, and archaeology
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Even if a baseline transaction amount were to be selected by FinCen, which antiquities would be covered? Once again, the Antiquities Coalition advanced a broad, anti-crime approach. \u201cWe strongly believe that separately defining and regulating \u2018art\u2019 and \u2018antiquities\u2019 creates more problems than it solves,\u201d pressed the organization. \u201cAs such, we have suggested that FinCEN consider regulating both art and antiquities as \u2018cultural property,\u2019\u201d which would be categorized as \u201ccovered goods\u201d under the BSA.
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The USCBS also wished to cast a wide net over antiquities, but it applied an archaeological perspective to narrow the definition to \u201call objects that are at least one hundred years in age, that are the product of human activity, and that are of cultural, historical, art historical, archaeological, scientific, or religious significance.\u201d
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Market stakeholders echoed this archaeological approach<\/span>. <\/a>The Art Dealers Association of America<\/a>(ADAA) defined \u201cantiquities\u201d as \u201can object of archaeological interest,\u201d and Hindman Auctions labeled an antiquity as \u201can archaeological object of ancient origin that was discovered through excavation or exploration underwater.\u201d They are different from other works of art, the auction house said, because the \u201cantiquity was preserved through burial on land or in the ocean.\u201d Sotheby\u2019s called antiquities \u201ca category of art.\u201d
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The online seller, <\/span>1stdibs.com, stressed that antiquities should not include <\/span>\u201cmore recent \u2018vintage\u2019 items or colloquial \u2018antiques\u2019 from the last century, or that are only a few hundred years old,\u201d \u201cnatural items such as fossils or aged natural items,\u201d or \u201colder furniture, rugs, tapestries and furnishings for domestic or commercial furnishing [that] normally would not be considered \u2018antiquities.\u2019\u201d
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Cut-off dates
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<\/i>Several stakeholders suggested a cutoff date, hovering either around the beginning of the Middle Ages or approximately a millennium later. <\/span>The Holocaust Art Restitution Project<\/a> (HARP) proposed, \u201cAntiquities should be defined broadly as works of art and cultural objects made in antiquity. These works of art and objects should encompass objects of cultural significance created before the year 500 C.E., including objects that were discovered through archaeological means \u2026.\u201d HARP added, \u201cObjects created before 500 C.E. that are considered to be works of art since their creation, i.e., objects that were not discovered as a result of any form of terrestrial or aquatic excavation, should also be considered antiquities for the purposes of FinCEN\u2019s regulations.\u201d The organization also boldly suggested that sellers \u201cshould be required to provide provenance for the object dating back to the year 1907 at minimum.\u201d
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The <\/span>CCP counseled that \u201can \u2018antiquity\u2019 should be defined as an artwork or artifact made for public or private use dating to before 500 A.D., the end of the Roman Empire \u2026.\u201d <\/span>The GHA endorsed this concept but further recommended, \u201cIf FinCEN thinks a more recent date is more appropriate, 1500 AD makes sense because it roughly corresponds to the Renaissance, the Fall of Constantinople, the Discovery of the Americas, the end of Pre-Columbian civilizations, and the highpoint of Empires in China and India.\u201d
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Bonhams currently employs a more recent date for an antiquity in its business, explaining that its \u201ctraditional definition of antiquities is objects from 4000 BC to the 12th Century AD and geographically originating from Egypt, the Near East and Europe.\u201d It confirmed that \u201cother major auction houses are consistent in this approach,\u201d and pointed out that \u201cothers use the term more broadly to include ancient Chinese, Tibetan, African, South-East Asian and South American\u2026.\u201d
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Ethnological objects
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<\/i>Mark Johnson<\/a>, a Los Angeles dealer of ethnographic art, expressed concern that an even more recent cut-off date would encompass \u201c[t]he vast majority of ethnographic art, which normally consists of non-excavated items like textiles, beadwork, basketry, costumes, and wood carving are less that 100 years old.\u201d That is perhaps why several market participants backed specific exclusions for ethnological items. <\/span>\u201c<\/span>We believe the U.S. domestic tribal and international ethnographic art trade should be specifically excluded from the definition of \u2018antiquities\u2019 and exempted from regulatory reporting requirements,\u201d wrote the ATADA. Similarly, the owner of the MatoskaTrading Company<\/a>\u00a0anxiously was \u201cconcerned that I could become subject to onerous regulation should historic American Indian art become classified as an \u2018antiquity.\u2019\u201d
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<\/i><\/span><\/span>Numismatic advocacy groups, at the same time, urged exemptions for coins and for coin dealers because, as the International Association of Professional Numismatists<\/a> (IAPN)\u00a0averred, the \u201cantiquities and numismatic trade are distinct.\u201d And both the IAPN and the <\/span>Ancient Coin Collectors Guild<\/a> (ACCG)<\/span> advanced their contention that the numismatic trade has a low AML\/CFT risk.
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<\/span><\/span>\u201cAll coin dealers,\u201d the ACCG further claimed, \u201care micro or small businesses.\u201d Therefore, \u201c[i]mposing expensive and time-consuming regulations \u2026 may drive many out of business \u2026. Without proof of a serious money laundering problem in the industry, coin dealers should not be subject to regulations designed for antiquities dealers.\u201d<\/p>\n<\/a>The IAPN, ACCG, and others drew attention to the fact that the United Kingdom carved out a coin dealer exception from its own money laundering regulations.
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\u201cThe term [\u201cantiquities\u201d] should explicitly exclude coins and ethnological objects,\u201d entreated the GHA, and the CCP likewise petitioned that an \u201c\u2019antiquity\u2019 \u2026 should exclude coins manufactured for use in trade.\u201d The GHA\u2019s stated rationale was that coins \u201care traded separately from antiquities, are serviced by different trade associations, are the subject of separate academic treatment, and typically are of limited monetary value.\u201d<\/p>\n
The <\/span>National Federation of Independent Business<\/a> (NFIB) took a step further by petitioning for a small business carve-out from the BSA\u2019s AML\/CFT reporting requirements. \u201cAmerica\u2019s small businesses, and their owners and employees, should not have to yield their freedom,\u201d NFIB scripted, \u201cbecause the [Treasury] Department thinks doing so might someday and somehow contribute something of interest to the Department\u2019s efforts against crime and terrorism.\u201d
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More carve-ins and carve-outs
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<\/i>The list of sought-after inclusions and exclusions abounded further as various stakeholders lobbied to add or subtract commercial and non-commercial transactions and other categories from the BSA\u2019s mandate. Some highlights are presented:<\/span><\/span><\/span><\/p>\n\n
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Regular readers of\u00a0<\/span>CHL<\/i>\u00a0will recall that this blog has been calling for a law like the AML Act\u00a0<\/span>in\u00a0<\/span>posts<\/span><\/a>\u00a0since 2014. Now that the statute has been enacted, final rules must be adopted.\u00a0<\/span>The AML Act requires the US Treasury Secretary to issue proposed rules by the end of December, and it is expected that FinCen will publish a notice of proposed rulemaking in the coming weeks. That will prompt another comment period before Treasury issues a final rule.<\/span><\/p>\n