Month: November 2020

Antiquities Coalition Mobilizes to Protect Cultural Heritage From Climate Change by Joining Climate Heritage Network

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The Antiquities Coalition is honored to announce that it has joined the Climate Heritage Network (CHN), which describes itself on its website as “a voluntary, mutual support network of arts, culture and heritage organisations committed to aiding their communities in tackling climate change and achieving the ambitions of the Paris Agreement.”

According to the United Nations Framework Convention on Climate Change (UNFCCC), the Paris Agreement is a legally binding international treaty on climate change that was adopted by 196 parties on December 12, 2015. It entered into force on November 4, 2016, with the goal of limiting global warming to “well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.” 

“Climate change is one of the most significant and fastest growing threats to people and their cultural heritage worldwide,” the CHN said in an October 22 press release. “The CHN aims to foreground the cultural dimensions of global climate action and to create a roadmap that will allow every arts, culture and heritage-related organization to do its part.”

The Antiquities Coalition’s membership with the CHN was approved on November 12 and announced on November 16.

Like the CHN, the Antiquities Coalition recognizes that climate change is a top global threat to all aspects of our world, including our shared cultural heritage. Our Think Tank recently tackled this subject in its seventh policy brief, in which conservation and climate change expert Terry Townshend examined the climate change-related risks facing cultural World Heritage Sites and made recommendations for how to assess and mitigate those risks.

We at the Antiquities Coalition look forward to working alongside the CHN to secure a lasting future for our shared cultural heritage.

Financial Crimes Task Force Discuss Gaps in U.S. Policy on the American Art Market at a Recent U.S. Government Accountability Office (GAO) Staff Briefing

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The Antiquities Coalition’s Financial Crimes Task Force Chairs John Byrne, Dennis Lormel, Michael Loughnane, and Tess Davis, in addition to Project Director Liz Fraccaro, spoke at a U.S. Government Accountability Office (GAO) Community of Practice Staff Briefing on November 10, 2020. The briefing was presented by an internal community of practice within GAO, which is a learning group aimed at information sharing for those working on matters pertaining to illicit finance. The audience consisted of analysts, methodologists, and general counsel from across GAO mission teams.

The chairs discussed the Antiquities Coalition’s nonpartisan, multi-stakeholder initiative, the Financial Crimes Task Force. The Task Force was convened to develop solutions to protect the art market from criminal misuse, and published its initial findings in a September report, Reframing U.S. Policy on the Art Market: Recommendations for Combating Financial Crimes. The report puts forward 44 concrete recommendations to combat financial crimes in the art market, aimed at the government, art market, financial sector, and international community.

Key takeaways include:

There are Documented Risks Facing the American Art Market: Money laundering, terrorist financing, sanctions violations, tax evasion, fraud, forgery, and related crimes are just some of the risks facing the $28.3 billion American art market. 

The Art Market’s Continuing Exemption from Standard Laws and Regulations is a Threat to National Security and Economic Integrity: Despite its size and value, the American art market is not yet subject to the Bank Secrecy Act (BSA), the United States’ primary anti-money laundering (AML) law. The BSA requires high-risk individuals and institutions to assist the U.S. government in detecting and preventing financial crimes. In addition to businesses one would expect, such as banks, the statute also applies to sellers of precious metals, stones, and jewels; sellers of automobiles, planes, and boats; casinos; real estate professionals; travel agencies; and pawn shops. This current art market exemption presents serious risks to our national security and economic integrity, and it is threatening the integrity of the legal art market and legitimate collectors.

The U.S. Government Must Take Action: The EU, UK, and Switzerland have all already taken action and strengthened their AML regimes, paying particular attention to the art market. If the U.S. doesn’t act, it may become more vulnerable and operate as a safe haven for criminals. Adding the AML infrastructure to the art market does more than just help identify and prevent money laundering—it would help with the full scope of financial crimes, such as sanction evasion.

To read the Financial Crimes Task Force Report—which calls for new policies, practices, and priorities for the United States to implement on its own and in conjunction with the private sector and international community—click here.

Financial Crimes Task Force Chairs Discuss Safeguarding National Security and Economic Integrity at Recent Bipartisan House Foreign Affairs Committee Staff Briefing

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The Antiquities Coalition’s Financial Crimes Task Force Chairs John Byrne, Michael Loughnane, Angel Swift, and Tess Davis spoke at a House Foreign Affairs Committee Staff Briefing on November 6, 2020. The chairs discussed the documented risks facing the U.S. art market from money laundering, terrorist financing, sanctions violations, tax evasion, fraud, forgery, and related crimes. Most importantly, they discussed concrete recommendations that Congress can spearhead to fight back.

Key takeaways include:

The American Art Market’s Continuing Exemption from Standard Laws and Regulations Threatens National Security and Gives Bad Actors a Backdoor into the U.S. Economy: In July 2020, a U.S. Senate report exposed how the art market’s continuing exemption from standard laws and regulations had gifted Russian oligarchs Arkady and Boris Rotenberg with an easy backdoor into the world’s biggest economy, evading U.S. sanctions on Vladimir Putin’s inner circle. The report, and many others, refer to the $28.3 billion American art market as the largest unregulated industry in the United States—and, arguably, the world. It is not yet subject to the Bank Secrecy Act (BSA), the United States’ primary anti-money laundering (AML) law. The BSA requires high-risk individuals and institutions to assist the U.S. government in detecting and preventing financial crimes. Because AML regulations do not apply to the art market, the Rotenbergs were able to launder at least $18 million through leading New York auction houses and private dealers, and evade the sanctions meant to keep them out of the United States financial system.  The Rotenbergs are just one example among many of the dangers an unregulated art market poses to national security.

Congress Must Take Action: The EU, UK, and Switzerland have all already taken action and applied their AML regimes to the art market. U.S. dealers operating in Europe—which, given the art market’s global nature, are virtually innumerable—need to be thinking about these rules already. Unfortunately, if the U.S. doesn’t act, it may continue to be a safe haven for criminals like the Rotenbergs. Adding the AML infrastructure to the art market does more than just help identify and prevent money laundering—it would help with the full scope of financial crimes, such as sanction evasion. That said, this is just a first step—there is much more that the US government can be doing to work with the private sector to safeguard our national security, economic integrity, and the vast majority of responsible collectors, dealers, auction houses, and museums.

To view AC’s most recent story map on the Senate report, click here.

To read the Financial Crimes Task Force Report—which calls for new policies, practices, and priorities for the United States to implement on its own and in conjunction with the private sector and international community—click here.

Art Market Actors Can Be Held Liable for Facilitating Sanctions Evasion, U.S. Treasury Warns

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The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued an advisory targeting art market actors on October 30, warning them that doing business with individuals on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List)—even unwittingly—may render them civilly liable for facilitating sanctions evasion.

This “Advisory and Guidance on Potential Sanctions Risks Arising from Dealings in High-Value Artwork” noted that the art market features “a lack of transparency and a high degree of anonymity and confidentiality”—often manifesting in the form of shell companies and intermediaries that obscure the identities of buyers and sellers alike. Art itself, the advisory added, is generally mobile, concealable, and subjective in value, making it the ideal pawn for financial criminals.

The OFAC advisory named several examples of criminals previously suspected of using the U.S. art market to evade sanctions, including Russian construction and energy magnates Arkady and Boris Rotenberg—who, according to a 150-page report released by the U.S. Senate’s Permanent Subcommittee on Investigations in July, laundered no less than $18 million using high-value artwork.

“U.S. persons are generally prohibited from engaging in transactions, directly or indirectly, with persons on the SDN List, other blocked persons, and those covered by comprehensive country or region embargoes,” the OFAC advisory warned, stressing that civil penalties could be imposed on the basis of “strict liability”—that is, regardless of whether or not the art market actor in question knew that the transaction he or she was engaging in was prohibited.

While the Berman Amendment to the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) generally exempts the import or export of artwork from regulation, the OFAC advisory clarified that this exemption does not go so far as to free art market actors from the responsibility of ensuring that they are not engaging in a transaction that helps an individual on the SDN List evade sanctions, emphasizing that OFAC “will apply IEEPA- and TWEA-based sanctions to transactions involving artworks in which a blocked person, including a person on the SDN List, has an interest, to the extent the artwork functions primarily as an investment asset or medium of exchange.”

“U.S. persons involved in the high-value artwork trade should be mindful of this sanctions risk, and OFAC strongly cautions that any U.S. person considering a transaction with a blocked person involving high-value artwork should seek guidance or a license from OFAC,” the OFAC advisory concluded.

The International Consortium of Investigative Journalists published an article about the OFAC advisory on November 4. In preparing “Secretive high-end art world can be vehicle for dirty money, US Treasury warns,” reporter Spencer Woodman—who previously covered financial crimes in the art world when the FinCEN Files made headlines in September—spoke with Antiquities Coalition Executive Director Tess Davis.

“The advisory serves as another reminder that the $28.3 billion American art market is the largest unregulated industry in the United States,” Davis told ICIJ in an email.

That being said, as Woodman observed, the OFAC advisory “does not carry the force of law” — a fact that has led Davis to emphasize that “more action is needed.”

“If the US doesn’t act, we do risk our jurisdiction continuing to be a safe haven for criminals,” Davis said.

In order to encourage the United States to take decisive action against financial crimes in the U.S. art market, the Antiquities Coalition’s nonpartisan think tank convened the Financial Crimes Task Force. This diverse group of experts worked to create 44 recommendations for the U.S. government, the U.S. financial industry, the U.S. art and antiquities sector and the international community. The policies, practices and priorities it released on September 24—including a call for Congress to explicitly apply the BSA to dealers in cultural property—can be implemented to protect the American art market from money laundering, terrorist financing, sanctions violations, tax evasion, fraud, forgery, and related crimes.

For more information about the Financial Crimes Task Force and its recent report, click here.